[Federal Register Volume 77, Number 9 (Friday, January 13, 2012)]
[Rules and Regulations]
[Pages 2135-2224]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-33199]



[[Page 2135]]

Vol. 77

Friday,

No. 9

January 13, 2012

Part II





Commodity Futures Trading Commission





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17 CFR Part 45





Swap Data Recordkeeping and Reporting Requirements; Final Rule

Federal Register / Vol. 77 , No. 9 / Friday, January 13, 2012 / Rules 
and Regulations

[[Page 2136]]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 45

RIN 3038-AD19


Swap Data Recordkeeping and Reporting Requirements

AGENCY: Commodity Futures Trading Commission.

ACTION: Final rule.

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SUMMARY: The Commodity Futures Trading Commission (``Commission'' or 
``CFTC'') is adopting rules to implement the Commodity Exchange Act 
(``CEA'' or ``Act'') relating to swap data recordkeeping and reporting 
requirements. These sections of the CEA were added by the Dodd-Frank 
Wall Street Reform and Consumer Protection Act (``Dodd-Frank Act''). 
The rules being adopted apply to swap data recordkeeping and reporting 
requirements for swap data repositories, derivatives clearing 
organizations, designated contract markets, swap execution facilities, 
swap dealers, major swap participants, and swap counterparties who are 
neither swap dealers nor major swap participants. The recordkeeping and 
reporting requirements of this rule further the goals of the Dodd-Frank 
Act to reduce systemic risk, increase transparency and promote market 
integrity within the financial system.

DATES: The effective date of this rule is March 13, 2012. Compliance 
dates: (1) Swap execution facilities, designated contract markets, 
derivatives clearing organizations, swap data repositories, swap 
dealers, and major swap participants shall commence full compliance 
with this part with respect to credit swaps and interest rate swaps on 
the later of: July 16, 2012; or 60 calendar days after the publication 
in the Federal Register of the later of the Commission's final rule 
defining the term ``swap'' or the Commission's final rule defining the 
terms ``swap dealer'' and ``major swap participant. '' (2) Swap 
execution facilities, designated contract markets, derivatives clearing 
organizations, swap data repositories, swap dealers, and major swap 
participants shall commence full compliance with this part with respect 
to equity swaps, foreign exchange swaps, and other commodity swaps on 
or before 90 days after the compliance date for credit swaps and 
interest rate swaps. (3) Non-SD/MSP counterparties shall commence full 
compliance with this part with respect to all swaps on or before 90 
days after the compliance date applicable to swap execution facilities, 
designated contract markets, derivatives clearing organizations, swap 
data repositories, swap dealers, and major swap participants with 
respect to equity swaps, foreign exchange swaps, and other commodity 
swaps.

FOR FURTHER INFORMATION CONTACT: David Taylor, Associate Director, 
Division of Market Oversight, (202) 418-5488, dtaylor@cftc.gov, or Anne 
Schubert, Economist, Division of Market Oversight, (202) 418-5436, 
aschubert@cftc.gov; Commodity Futures Trading Commission, Three 
Lafayette Centre, 1155 21st Street NW., Washington, DC 20851.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background
    A. Introduction
    B. Swap Data Provisions of the Dodd-Frank Act
    C. International Considerations
    D. Consultations With Other U.S. Financial Regulators
    E. Summary of the Proposed Part 45 Rule
    1. Fundamental Goal
    2. Swap Recordkeeping
    3. Swap Data Reporting: Creation Data and Continuation Data
    4. Unique Identifiers
    6. Third-Party Facilitation of Reporting
    7. Reporting a Swap to a Single SDR
    8. Reporting Swaps in an Asset Class Not Accepted by Any SDR
    9. Data Standards
    10. Reporting Errors and Omissions in Previously Reported Data
    F. Overview of Comments Received
II. Part 45 of the Commission's Regulations: The Final Rules
    A. Recordkeeping Requirements--Sec.  45.2
    1. Proposed Rule
    2. Comments Received
    3. Final Rule: Sec.  45.2
    B. Swap Data Reporting: Creation Data--Sec.  45.3
    1. Proposed Rule
    2. Comments Received
    3. Final Rule: Sec.  45.3
    C. Swap Data Reporting: Continuation Data--Sec.  45.4
    1. Proposed Rule
    2. Comments Received
    3. Final Rule: Sec.  45.4
    D. Summary of Creation Data and Continuation Data Reporting--
Sec. Sec.  45.3 and 45.4
    F. Unique Swap Identifiers--Sec.  45.5
    1. Proposed Rule
    2. Comments Received
    3. Final Rule: Sec.  45.5
    G. Legal Entity Identifiers--Sec.  45.6
    1. Proposed Rule
    2. Comments Received
    3. Final Rule: Sec.  45.6
    H. Unique Product Identifiers--Sec.  45.7
    1. Proposed Rule
    2. Comments Received
    3. Final Rule: Sec.  45.7
    I. Determination of Which Counterparty Must Report--Sec.  45.8
    1. Proposed Rule
    2. Comments Received
    3. Final Rule: Sec.  45.8
    J. Third-Party Facilitation of Swap Data Reporting--Sec.  45.9
    1. Proposed Rule
    2. Comments Received
    3. Final Rule: Sec.  45.9
    K. Reporting to a Single Swap Data Repository--Sec.  45.10
    1. Proposed Rule
    2. Comments Received
    3. Final Rule: Sec.  45.10
    L. Data Reporting for Swaps in a Swap Asset Class Not Accepted 
by Any Swap Data Repository--Sec.  45.11
    1. Proposed Rule
    2. Comments Received
    3. Final Rule: Sec.  45.11
    M. Voluntary Supplemental Reporting--Sec.  45.12
    1. Proposed Rule
    2. Comments Received
    3. Final Rule: Sec.  45.12
    N. Required Data Standards--Sec.  45.13
    1. Proposed Rule
    2. Comments Received
    3. Final Rule: Sec.  45.13
    O. Reporting of Errors and Omissions in Previously Reported 
Data--Sec.  45.14
    1. Proposed Rule
    2. Comments Received
    3. Final Rule: Sec.  45.14
III. Related Matters
    A. Regulatory Flexibility Act
    B. Paperwork Reduction Act
    1. Introduction
    2. Proposed Information Collection
    3. Comments on Proposed Information Collection
    4. Revised Information Collection Estimates
    C. Consideration of Costs and Benefits
    1. Introduction
    2. General Cost-Benefit Comments Received
    3. Recordkeeping
    4. Swap Data Reporting
    5. Unique Identifiers
IV. Compliance Dates
    A. Proposed Rule
    B. Comments Received
    1. Initial Compliance Date
    2. Phasing in the Start of Reporting
    C. Determination of Compliance Dates
    1. Initial Compliance Dates
    2. Phasing in the Start of Reporting
    3. Compliance Dates
Final Rules

I. Background

A. Introduction

    On July 21, 2010, President Obama signed into law the Dodd-Frank 
Act.\1\ Title VII of the Dodd-Frank Act \2\ amended the CEA \3\ to 
establish a comprehensive new regulatory framework for swaps and 
security-based

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swaps. The legislation was enacted to reduce systemic risk, increase 
transparency, and promote market integrity within the financial 
system by, among other things: Providing for the registration and 
comprehensive regulation of swap dealers (``SDs'') and major swap 
participants (``MSPs''); imposing clearing and trade execution 
requirements on standardized derivative products; creating rigorous 
recordkeeping and data reporting regimes with respect to swaps, 
including real time reporting; and enhancing the Commission's 
rulemaking and enforcement authorities with respect to, among 
others, all registered entities, intermediaries, and swap 
counterparties subject to the Commission's oversight.
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    \1\ See Dodd-Frank Wall Street Reform and Consumer Protection 
Act, Pub. L. 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.
    \2\ Pursuant to Section 701 of the Dodd-Frank Act, Title VII may 
be cited as the ``Wall Street Transparency and Accountability Act of 
2010.''
    \3\ 7 U.S.C. 1, et seq.
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B. Swap Data Provisions of the Dodd-Frank Act

    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), which requires all swaps, whether cleared 
or uncleared, to be reported to swap data repositories 
(``SDRs''),\4\ which are new registered entities created by section 
728 of the Dodd-Frank Act to collect and maintain data related to 
swap transactions as prescribed by the Commission, and to make such 
data electronically available to regulators.\5\ New section 21(b) of 
the CEA, added by section 728 of the Dodd-Frank Act, directs the 
Commission to prescribe standards for swap data recordkeeping and 
reporting. Specifically, CEA section 21(b)(1)(A) provides that:

    \4\ See also CEA section 1a(40)(E).
    \5\ Regulations governing core principles and registration 
requirements for, and the duties of, SDRs are the subject of part 49 
of this chapter.
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    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.

    These standards are to apply to both registered entities and 
counterparties involved with swaps.
    CEA section 21(b)(1)(B) provides that:

    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.

    CEA section 21 also directs the Commission to prescribe data 
standards for SDRs. Specifically, CEA section 21(b)(2) provides that:

    The Commission shall prescribe data collection and data 
maintenance standards for swap data repositories.

    These standards are to be comparable to those for clearing 
organizations. CEA section 21(b)(3) provides that:

    The [data] standards prescribed by the Commission under this 
subsection shall be comparable to the data standards imposed by the 
Commission on derivatives clearing organizations in connection with 
their clearing of swaps.

    In addition, CEA section 21(c)(3) provides that, once the data 
elements prescribed by the Commission are reported to an SDR, the SDR 
shall:

Maintain the data [prescribed by the Commission for each swap] in 
such form, in such manner, and for such period as may be required by 
the Commission.

    Section 727 of the Dodd Frank Act, which added to the CEA new 
section 2(a)(13), provides that ``Each swap (whether cleared or 
uncleared) shall be reported to a registered swap data repository.'' 
\6\ 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 repository will accept the swap). 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 these provisions should be interpreted as complementary to one 
another to assure consistency between them, stating that: ``All swap 
trades, even those which are not cleared, would still be reported to 
regulators, a swap data repository, and subject to the public reporting 
requirements under the legislation.'' \7\
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    \6\ CEA section 2(a)(13)(G).
    \7\ Senator Blanche Lincoln, ``Wall Street Transparency and 
Accountability Act,'' Congressional Record, July 15, 2010, at S5905.
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    CEA section 4r 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 an SD, the SD is required to 
report the swap. If one counterparty is an 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.\8\
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    \8\ See CEA section 4r(a)(3).
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    In addition, CEA section 4r provides for reporting to the 
Commission of swaps neither cleared nor 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 regulators if requested 
to do so.\9\ 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.\10\ Such reports must 
be as comprehensive as the data required to be collected by SDRs.\11\
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    \9\ CEA section 4r(c)(2) requires individuals or entities that 
enter into a swap transaction that is neither cleared nor 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.
    \10\ CEA sections 4r(a)(1)(B) and 4r(c).
    \11\ CEA section 4r(d).
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C. International Considerations

    Section 752 of the Dodd-Frank Act directs the Commission to consult 
and coordinate with foreign regulatory authorities regarding 
establishment of consistent international standards for the regulation 
of swaps and swap entities. The Commission is committed to a 
cooperative international approach to swap recordkeeping and swap data 
reporting, and has consulted extensively with various foreign 
regulatory authorities in the process of promulgating both its proposed 
and final part 45 rules. During this process, the Commission has served 
as Co-Chair of the Committee on Payment and Settlement Systems 
(``CPSS'') and the International Organization of Securities Commissions 
(``IOSCO'') Task Force that has prepared a Report on OTC Derivatives 
Data Reporting and Aggregation Requirement for presentation to the 
Financial Stability Board (``FSB'') in December 2011. The Commission 
also served as a member of the organizing committee for the FSB Legal 
Entity Identifier Workshop held in Basel, Switzerland in September 
2011. In the course of preparing the proposed and final part 45 rules, 
Commission staff met with financial regulatory authorities from 
Argentina, Australia, Brazil, Canada, China, Dubai (United Arab 
Emirates), France, Germany, Hong Kong, Indonesia, India, Italy, Japan, 
Korea, Mexico, the Netherlands, Portugal, Russia, Saudi Arabia, 
Singapore, Spain, Sweden, Switzerland, Turkey, and the United Kingdom. 
Staff also met with representatives of FSB, IOSCO, CPSS, the 
International Monetary Fund, the FSB Data Gaps and Systemic Linkages 
Group, the Bank for International Settlements, the Committee on the 
Global Financial System, the OTC Derivatives Regulatory Forum, the OTC 
Derivatives Supervisors Group, the European Central Bank, the European 
Commission, the European Union, the

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Commission of European Securities Regulators, the European Systemic 
Risk Board, the International Organisation for Standardisation 
(``ISO''), and the Association of National Numbering Agencies 
(``ANNA'').
    In September 2009, the G-20 \12\ leaders made a number of 
commitments regarding OTC derivatives, including the statement that:

    \12\ The G-20 include leaders and representatives of the core 
members of the G-20 major economies, which comprises 19 countries 
and the European Union which is represented by its two governing 
bodies, the European Council and the European Commission.

    All standardized OTC derivative contracts should be traded on 
exchanges or electronic trading platforms, where appropriate, and 
cleared through central counterparties by end-2012 at the latest. 
OTC derivative contracts should be reported to trade 
repositories.\13\
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    \13\ Leaders' Statement, Pittsburgh Summit, September 25, 2009, 
at 9; available at http://www.g20.org/Documents/pittsburgh_summit_leaders_statement_250909.pdf.

The Commission's part 45 rules, if adopted by the Commission, which 
requires reporting of swap data to SDRs to begin in mid-2012, may be 
the first set of regulatory requirements in the world to fulfill this 
commitment.

D. Consultations With Other U.S. Financial Regulators

    In developing the swap data recordkeeping and reporting rule, 
Commission staff has also engaged in extensive consultations with U.S. 
domestic financial regulators. The agencies and institutions consulted 
include the Federal Reserve Board of Governors (``Federal Reserve'') 
(including the Federal Reserve Bank of New York), the Federal Deposit 
Insurance Corporation (``FDIC''), the Office of Financial Research 
(``OFR''), the Office of the Comptroller of Currency (``OCC''), the 
Securities and Exchange Commission (``SEC''), and the Department of the 
Treasury.

E. Summary of the Proposed Part 45 Rule

1. Fundamental Goal
    The fundamental goal of the part 45 Notice of Proposed Rulemaking 
(``NOPR'') was to ensure that complete data concerning all swaps 
subject to the Commission's jurisdiction is maintained in SDRs, where 
it would be available to the Commission and other financial regulators 
for fulfillment of their various regulatory mandates, including 
systemic risk mitigation, market monitoring, and market abuse 
prevention.
2. Swap Recordkeeping
    The NOPR called for registered entities and swap counterparties to 
keep records relating to swaps throughout the existence of each swap 
and for five years following final termination or expiration of the 
swap. These records would be required to be readily accessible during 
the life of the swap and for two years thereafter, and retrievable from 
storage within three business days during the remaining three years of 
the retention period. The NOPR would require that data in SDRs be 
readily accessible to the Commission throughout the retention period as 
required by the Dodd-Frank Act.\14\
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    \14\ The proposed rule also cross-referenced the detailed 
recordkeeping requirements specific to DCMs, SEFs, DCOs, SDs, and 
MSPs included in rulemakings specific to those entities and 
counterparties.
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3. Swap Data Reporting: Creation Data and Continuation Data
    In order to ensure that complete data concerning swaps is 
maintained in SDRs and available to the Commission and other 
regulators, the NOPR called for reporting of swap data from each of two 
important stages of 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.
    a. Creation data reporting. To ensure timeliness, accuracy, and 
completeness with respect to data, the NOPR required reporting of two 
types of data relating to the creation of a swap: the primary economic 
terms of the swap verified or matched by the counterparties at or 
shortly after the time of execution; and all of the terms of the swap 
included in the legal confirmation of the swap. To ensure inclusion of 
primary economic terms necessary for regulatory purposes, the rule 
specified minimum data elements that must be reported for swaps in each 
asset class.
    b. Continuation data reporting. The NOPR provided that continuation 
data reporting for credit and equity swaps would follow the life cycle 
approach, and required reporting of all life cycle events affecting the 
terms of a swap. The NOPR directed reporting of continuation data for 
interest rate, currency, and other commodity swaps to follow the state 
or snapshot approach, and required reporting of a daily snapshot of all 
primary economic terms of a swap including any changes to such terms 
occurring since the previous snapshot. For all asset classes, the NOPR 
called for continuation data reporting to include specified valuation 
data.
4. Unique Identifiers
    The NOPR called for use of three unique identifiers in connection 
with swap data reporting: a unique swap identifier (USI), a unique 
counterparty identifier (UCI), and a unique product identifier (UPI). 
The Commission proposed requiring use of these unique identifiers 
because they would be crucial regulatory tools for linking data 
together and enabling data aggregation by regulators across 
counterparties, transactions, and asset classes, to fulfill the 
systemic risk mitigation, market manipulation prevention, and other 
important purposes of the Dodd-Frank Act. The Commission also noted 
that such identifiers would have great benefits for financial 
transaction processing, internal recordkeeping, compliance, due 
diligence, and risk management by financial entities.
    The NOPR called for the USI to be created at the time a swap is 
executed, shared with all registered entities and counterparties 
involved with the swap, and used to track that particular swap over its 
life. The UCI would identify the legal entity that is a counterparty to 
a swap. Pursuant to the NOPR, the Commission would require use of UCIs 
in all swap data reporting, selecting an internationally-developed 
legal entity identifier system for this purpose if one meeting the 
Commission's requirements is available prior to the compliance date 
when swap data reporting begins, or imposing a system created by the 
Commission if that were needed. Confidential reference data concerning 
the corporate or company affiliations of the legal entity involved 
would allow regulators to monitor swap exposures. The UPI would 
categorize or describe swaps with respect to the underlying products 
referenced in them, allowing regulators to aggregate, analyze, and 
report swap transactions by product type, and also enhancing position 
limit enforcement and real time reporting.
5. Who Reports
    In general, the NOPR called for reporting by the registered entity 
or counterparty having the easiest, fastest, and cheapest access to the 
data in question, and most likely to have automated systems suitable 
for reporting. Swap execution facilities (``SEFs'') or designated 
contract markets (``DCMs'') would report primary economic terms data 
(``PET data'') for swaps executed on a trading facility, and DCOs would 
report confirmation data for cleared swaps. Counterparty reporting 
would follow the hierarchy outlined in the statute, giving SDs or MSPs 
the duty to report when possible,

[[Page 2139]]

and limiting reporting by non-SD/MSP counterparties to situations where 
there is no SD or MSP counterparty. Where both counterparties have the 
same hierarchical status, the proposed rule would require them to agree 
as one term of their swap which of them is to report, in order to avoid 
reporting delays.
6. Third-Party Facilitation of Reporting
    The NOPR would explicitly permit third-party facilitation of data 
reporting, without removing the reporting responsibility from the 
appropriate registered entity or counterparty.
7. Reporting a Swap to a Single SDR
    To avoid fragmentation of data for a given swap across multiple 
SDRs, the NOPR would require that all data for a particular swap must 
be reported to the same SDR.
8. Reporting Swaps in an Asset Class Not Accepted by Any SDR
    As required by the section 729 of the Dodd-Frank Act, the NOPR 
provided that if there were an asset class for which no SDR currently 
accepted data, registered entities or counterparties required to report 
concerning swaps in such an asset class would be required to report the 
same data to the Commission at a time and in a form and manner 
determined by the Commission.
9. Data Standards
    The NOPR would require SDRs to maintain data and transmit it to the 
Commission in the format required by the Commission. It would permit an 
SDR to allow those reporting data to it to use any data standard 
acceptable to the SDR, so long as the SDR remains able to provide data 
to the Commission in the Commission's required format.
10. Reporting Errors and Omissions in Previously Reported Data
    Finally, the NOPR provided that registered entities and 
counterparties required to report swap data must also report to the SDR 
any errors or omissions in data previously reported, using the same 
format used in the previous report. Non-reporting counterparties 
discovering an error or omission would be required to notify the 
reporting counterparty, for reporting to the SDR by the reporting 
counterparty.

F. Overview of Comments Received

    The comment period for the NOPR closed on February 7, 2011, but was 
reopened pursuant to the Commission's Order Reopening and Extension of 
Comment Periods for Rulemakings Implementing the Dodd-Frank Wall Street 
Reform and Consumer Protection Act, dated May 4, 2011. The reopened 
comment period closed on June 3, 2011. Seventy-five comment letters 
submitted to the Commission addressed the proposed part 45 swap data 
recordkeeping and reporting rule.\15\ Comments were provided by a broad 
range of interested persons, including: Existing trade repositories, 
DCMs, and DCOs; providers of various third party services related to 
swaps; financial data and data management services and providers of 
various types of identifiers; both buy side and sell side swap 
counterparties of various types and sizes; trade associations involving 
securities, futures, and foreign exchange markets and firms; banks and 
mortgage lenders; managed funds and investment advisors; swap dealers; 
swap ``end users''; energy producers; and non-profit

[[Page 2140]]

associations. Commission staff also held three public roundtables 
relating to swap data reporting, on September 14, 2010, January 28, 
2011, and June 6, 2011, which provided input from a broad cross-section 
of industry and private sector experts concerning the issues addressed 
in the NOPR. While many commenters expressed support for the proposed 
part 45 rules, many also offered suggestions regarding swap data 
recordkeeping and reporting, as well as recommendations for 
clarification or modification of specific provisions of the proposed 
rule. Comments are addressed as appropriate in connection with the 
discussion below of the final rule provision or provisions to which 
they relate. Some comments received by the Commission requested further 
clarification relating to definitions provided in the NOPR, or 
regarding the application of NOPR provisions in various contexts. 
Definitions included in the final rule are provided for clarification 
and do not impose new substantive obligations.
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    \15\ All comment letters are available on the Commission Web 
site at http://comments.cftc.gov/PublicComments/CommentList.aspx?id=920. Specific comment letters are identified by 
CL and the submitter. Comments addressing the NOPR were received 
from: (1) ACM Capital Management (``ACM'') June 15, 2011 (``CL-
ACM''); (2) Alice Corporation (``Alice'') June 1, 2011 (``CL-
Alice''); (3) American Bankers Association and the ABA Securities 
Association (``ABA/ABASA'') June 3, 2011 (``CL-ABA/ABASA''); (4) 
American Benefits Council (``ABC'') February 7, 2011 (``CL-ABC''); 
(5) American Benefits Council (``ABC'') and Committee on Investment 
of Employee Benefit Assets (``CIEBA'') February 7, 2011 (``CL-ABC/
CIEBA I''); (6) ABC and CIEBA March 25, 2011 (``CL-ABC/CIEBA II''); 
(7) American Gas Association (``AGA'') February 3, 2011 (``CL-AGA 
I''); (8) AGA June 3, 2011 (``CL-AGA II''); (9) Asset Management 
Group (``AMG'') and Securities Industry and Financial Markets 
Association (``SIFMA'') February 7, 2011 (``CL-AMG/SIFMA''); (10) 
Japanese Banking Organizations--Bank of Tokyo-Mitsubishi UFJ, Ltd. 
(``BTMU''), Mizuho Corporate Bank (``MHCB''), and Sumitomo Mitsui 
Banking Corporation (``SMBC'') May 5, 2011 (``CL-Japanese Banks''); 
(11) Better Markets, Inc. (``Better Markets'') February 7, 2011 
(``CL-Better Markets I''); (12) Better Markets June 3, 2011 (``CL-
Better Markets II''); (13) BlackRock, Inc. (``BlackRock'') June 3, 
2011 (``CL-BlackRock I''); (14) BlackRock June 3, 2011 (``CL-
BlackRock II''); (15) Bloomberg, LP (``Bloomberg'') June 3, 2011 
(``CL-Bloomberg''); (16) Chatham Financial Corporation (``Chatham 
Financial'') February 7, 2011 (``CL-Chatham Financial''); (17) Chris 
Barnard (``Barnard'') May 17, 2011 (``CL-Barnard''); (18) Citadel, 
LLC (``Citadel'') June 3, 2011 (``CL-Citadel''); (19) CME Group, 
Inc. (``CME'') February 7, 2011 (``CL-CME I''); (20) CME June 3, 
2011 (``CL-CME II''); (21) Coalition of Derivatives End-Users 
(``CDEU'') February 25, 2011 (``CL-CDEU''); (22) Coalition of 
Physical Energy Companies (``COPE'') February 7, 2011 (``CL-COPE 
I''); (23) COPE June 3, 2011 (``CL-COPE II''); (24) Committee on 
Capital Markets Regulation June 13, 2011 (``CL-Committee on Capital 
Markets Regulation I''); (25) Committee on Capital Markets 
Regulation June 24, 2011 (``CL-Committee on Capital Markets 
Regulation II''); (26) Committee on Futures and Derivatives 
Regulation, Bar Association of the City of New York June 13, 2011 
(``CL-Committee on Futures and Derivatives Regulation''); (27) 
Committee on the Investment of Employee Benefit Assets (``CIEBA'') 
June 3, 2011 (``CL-CIEBA''); (28) Commodity Markets Council 
(``CMC'') February 6, 2011 (``CL-CMC I''); (29) Commodity Markets 
Council (``CMC'') February 7, 2011 (``CL-CMC II''); (30) Congressman 
James Renacci (``Renacci'') June 10, 2011 (``CL-Renacci''); (31) 
CUSIP Global Services (``CUSIP'') February 7, 2011 (``CL-CUSIP''); 
(32) Customer Data Management Group (``CDMG'') April 1, 2011 (``CL-
CDMG''); (33) DC Energy, LLC (``DC Energy'') June 3, 2011 (``CL-DC 
Energy''); (34) Dominion Resources, Inc. (``Dominion Resources'') 
February 7, 2011 (``CL-Dominion Resources''); (35) The Depository 
Trust & Clearing Corporation (``DTCC'') February 7, 2011 (``CL-DTCC 
I''); (36) DTCCC June 3, 2011 (``CL-DTCC II''); (37) Edison Electric 
Institute (``EEI'') June 3, 2011 (``CL-EEI''); (38) Edison Electric 
Institute Electric Power Supply Association (``EPSA'') February 7, 
2011 (``CL-EPSA''); (39) Encana Marketing (USA), Inc. (``Encana'') 
February 7, 2011 (``CL-Encana''); (40) Eris Exchange, LLC (``Eris 
Exchange'') June 3, 2011 (``CL-Eris''); (41) Futures Industry 
Association (``FIA''), The Financial Services Roundtable (``FSR''), 
Institute of International Bankers (``IIB''), Insured Retirement 
Institute (``IRI''), International Swaps and Derivatives Association 
(``ISDA''), Securities Industry and Financial Markets Association 
(``SIFMA''), and U.S. Chamber of Commerce, (``Chamber of Commerce'') 
June 1, 2011 (``CL-Chamber of Commerce''); (42) Foreign Banking 
Organizations--Barclays, BNP Paribas, Deutsche Bank, Royal Bank of 
Canada, The Royal Bank of Scotland Group, Societe Generale, Credit 
Suisse, HSBC, UBS, Nomura Securities International, Inc., Rabobank 
Nederland (``Foreign Banks'') January 11, 2011 (``CL-Foreign Banks 
I''); (43) Foreign Banks February 17, 2011 (``CL-Foreign Banks 
II''); (44) Freddie Mac February 7, 2011 (``CL-Freddie Mac''); (45) 
The Federal Home Loan Banks (``FHLB'') February 7, 2011 (``CL-
FHLB''); (46) Global Foreign Exchange Division (``Global Forex'') 
February 7, 2011 (``CL-Global Forex''); (47) Green Exchange, LLC 
(``GreenEx'') June 3, 2011 (``CL-GreenEx''); (48) GS1 US (``GS1'') 
February 7, 2011 (``CL-GS1''); (49) Intercontinental Exchange, Inc. 
(``ICE'') February 7, 2011 (``CL-ICE''); (50) International Energy 
Credit Association (``IECA'') February 7, 2011 (``CL-IECA''); (51) 
International Swaps and Derivatives Association, Inc. (``ISDA'') 
June 2, 2011 (``CL-ISDA''); (52) ISDA SIFMA February 7, 2011 (``CL-
ISDA SIFMA''); (53) Kansas City Board of Trade Clearing Corporation 
(``KCBT'') February 7, 2011 (``CL-KCBT''); (54) Managed Funds 
Association (``MFA'') February 7, 2011 (``CL-MFA''); (55) Markit 
June 3, 2011 (``CL-Markit''); (56) MarkitSERV June 3, 2011 (``CL-
MarkitSERV I); (57) MarkitSERV June 3, 2011 (``CL-MarkitSERV II''); 
(58) Minneapolis Grain Exchange (``MGEX'') June 3, 2011 (``CL-
MGEX''); (59) Not-For-Profit Electric End User Coalition consisting 
of the National Rural Electric Cooperative Association, American 
Public Power Association, Large Public Power Council, Edison 
Electric Institute Electric Power Supply Association, (``Electric 
Coalition'') February 7, 2011 (``CL-Electric Coalition I''); (60) 
Electric Coalition June 3, 2011 (``CL-Electric Coalition II''); (61) 
Noble Energy, Inc. (``Noble Energy'') July 7, 2011 (``CL-Noble 
Energy''); (62) Office of the Comptroller of the Currency July 1, 
2011 (``CL-Office of the Comptroller of the Currency''); (63) REGIS-
TR February 7, 2011 (``CL-REGIS-TR''); (64) Reval.com, Inc. 
(``Reval'') January 24, 2011 (``CL-Reval''); (65) Shell Energy North 
America (US), L.P. (``Shell Energy'') June 3, 2011 (``CL-Shell 
Energy I''); (66) Shell Energy June 21, 2011 (``CL-Shell Energy 
II''); (67) Society for Worldwide Interbank Financial 
Telecommunication SCRL (``SWIFT'') February 14, 2011 (``CL-SWIFT''); 
(68) SunGard Energy & Commodities (``SunGard'') February 7, 2011 
(``CL-Sungard''); (69) Thomson Reuters February 7, 2011 (``CL-
Thomson Reuters''); (70) TradeWeb Markets, LLC (``TradeWeb'') June 
3, 2011 (``CL-TradeWeb''); (71) TriOptima February 7, 2011 (``CL-
TriOptima''); (72) Senator Sherrod Brown (``Brown'') June 13, 2011 
(``CL-Brown''); (73) Vanguard February 7, 2011 (``CL-Vanguard''); 
(74) Working Group of Commercial Energy Firms (``WGCEF'') February 
7, 2011 (``CL-WGCEF I''); (75) WGCEF June 3, 2011 (``CL-WGCEF II'').
---------------------------------------------------------------------------

II. Part 45 of the Commission's Regulations: The Final Rules

    New part 45 contains provisions governing swap data recordkeeping 
and reporting. Definitions are set forth in Sec.  45.1. Section 45.2 
establishes swap recordkeeping requirements for registered entities and 
swap counterparties. Sections 45.3 and 45.4 establish swap data 
reporting requirements. Reporting of required swap creation data (the 
data association with the creation or execution of a swap) is addressed 
in Sec.  45.3, while reporting of required swap continuation data (the 
data associated with the continued existence of a swap until its final 
termination) is addressed in Sec.  45.4. Required use of unique 
identifiers in swap data recordkeeping and reporting is addressed in 
Sec.  45.5, which sets forth requirements regarding unique swap 
identifiers (``USIs''); Sec.  45.6, which sets forth requirements 
regarding legal entity identifiers (``LEIs''); and 45.7, which sets 
forth requirements regarding unique product identifiers (``UPIs''). 
Determination of which counterparty must report swap data for each swap 
is established by Sec.  45.8. Third-party facilitation of swap data 
reporting is addressed by Sec.  45.9. Section 45.11 establishes 
requirements for reporting all data concerning a swap to a single SDR. 
Section 45.11 addresses data reporting for swaps in a swap asset class 
not accepted by any SDR. Section 45.12 sets forth requirements 
concerning voluntary supplemental reporting of swap data to SDRs. 
Section 45.13 establishes required data standards for swap data 
reporting. Finally, Sec.  45.14 sets forth requirements for reporting 
concerning errors and omissions in previously reported swap data.

A. Recordkeeping Requirements--Sec.  45.2

1. Proposed Rule
    The NOPR provided that all SEFS, DCMs, DCOs, SDs, and MSPs must 
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, including, 
without limitation, records of all data required to be reported in 
connection with any swap. All such records would be required to be kept 
throughout the existence of the swap and for five years following final 
termination of the swap. Records would be required to be readily 
accessible by the registered entity or counterparty in question via 
real time electronic access throughout the life of the swap and for two 
years following the final termination of the swap, and retrievable 
within three business days through the remainder of the required 
retention period.
    The NOPR proposed lesser recordkeeping requirements for non-SD/MSP 
counterparties, calling for them to keep full, complete, and systematic 
records, including all pertinent data and memoranda, with respect to 
each swap in which they are a counterparty (as opposed to all 
activities relating to the business of such entities with respect to 
swaps), in a way that makes the records retrievable by the counterparty 
within three business days during the required retention period.
    The NOPR provided that all records required to be kept by SDRs must 
be kept by the SDR both: (a) throughout the existence of the swap and 
for five years following final termination or expiration of the swap, 
during which time the records must be readily accessible by the SDR and 
available to the Commission via real time electronic access; and (b) 
thereafter, for a period determined by the Commission, in archival 
storage from which they are retrievable by the SDR within three 
business days. This provision was intended to make effective the 
statutory mandate that SDRs must ``provide direct electronic access to 
the Commission (or any designee of the Commission including another 
registered entity).'' \16\
---------------------------------------------------------------------------

    \16\ CEA section 21(c)(4)(A).
---------------------------------------------------------------------------

    As proposed, part 45 would also require that all records required 
to be kept pursuant to the regulations must be open to inspection upon 
request by any representative of the Commission, the Department of 
Justice, or the SEC, or by any representative of a prudential regulator 
as authorized by the Commission.
2. Comments Received
    The Commission received comments concerning the proposed 
recordkeeping provisions from both market participants who anticipated 
that they could be SDs and MSPs and market participants who anticipated 
that they could be non-SD/MSP counterparties. Many commenters asked 
that non-SD/MSP counterparties be allowed to keep fewer records and to 
keep records in paper form. Commenters suggested that required record 
retention periods should be shortened, and that retrievability 
requirements should be somewhat relaxed. Other commenters suggested 
that recordkeeping requirements for non-SD/MSP counterparties should be 
phased in.
    a. Records required. American Gas Association (``AGA'') and Edison 
Electric Institute (``EEI'') asked the Commission to specify more 
precisely the information that non-SD/MSP counterparties will be 
required to retain, defining in particular the meaning of ``all 
pertinent data and memoranda,'' with examples. Arguing that non-SD/MSP 
counterparties should not be required to keep records of swap terms 
other than the final terms of the swap, EEI suggested that non-SD/MSP 
counterparties be required to retain only ``master or bespoke 
agreements, long or short-form confirmations, amendments and associated 
swap transaction data stored in an end-user's trade capture system.'' 
The Committee on the Investment of Employee Benefit Assets (``CIEBA'') 
suggested that a non-SD/MSP counterparty should only be required to 
retain the final confirmation of any swap where the other counterparty 
is an SD or MSP, and (presumably where no SD or MSP is involved) should 
only be required to retain swap creation or continuation data that the 
non-SD/MSP is required to report. The Working Group of Commercial 
Energy Firms (``WGCEF'') asked that non-SD/MSP counterparties to 
physical commodity swaps (or at least energy swaps) be excused from 
recordkeeping requirements altogether, arguing that the final rule 
should recognize ``the unique operational characteristics and abilities 
of different participants in swap markets for physical commodities,'' 
since such counterparties may not presently have the necessary 
technology, and the benefits of implementing it would not justify the 
costs imposed. The Not-for-Profit Electric End User Coalition 
(``Electric Coalition'') contended that the

[[Page 2141]]

rule should allow non-SD/MSP counterparties to keep records in paper 
form.
    b. Record retention periods. The International Swap Dealers 
Association (``ISDA'') and the Securities Industry and Financial 
Markets Association (``SIFMA'') suggested that the Commission should 
analyze this requirement further before it is implemented. AGA argued 
that record retention for the life of the swap plus five years would 
impose substantial costs on non-SD/MSP counterparties such as gas 
utilities, and asked that the record retention period for non-SD/MSP 
counterparties be reduced to the life of the swap plus three years. 
WGCEF commented that there would be no benefit to record retention 
beyond five years following termination of a swap. Taking an opposite 
view, Chris Barnard recommended that all registered entities and swap 
counterparties should be required to keep records indefinitely.
    c. Record retrievability. ISDA and SIFMA commented that current 
recordkeeping practice for their members would normally mean 
accessibility within a reasonable period of time, such as two working 
days, and argued that instant access is impracticable to achieve.\17\ 
The Global Foreign Exchange Division of SIFMA (``Global Forex'') 
suggested that after termination of the swap, real time access should 
only be required for an additional 30 days. With respect to retrieval 
by non-SD/MSP counterparties, AGA argued that the three-business-day 
retrievability requirement is too onerous, and would preclude off-site 
storage of business records, forcing end users to maintain on-site 
record storage. The Electric Coalition suggested that the retrieval 
period for non-SD/MSP counterparties be extended to 20 business days.
---------------------------------------------------------------------------

    \17\ WGCEF asked the Commission to confirm that real time 
accessibility refers to access by the counterparty, not the 
Commission, and asked that the requirement be changed to require 
record retrieval by the close of business the day following a 
request.
---------------------------------------------------------------------------

    d. Phasing in recordkeeping requirements for non-SD/MSP 
counterparties. The Electric Coalition suggested that recordkeeping 
requirements for non-SD/MSP counterparties be phased in. The Electric 
Coalition also suggested that the Commission define two sub-categories 
of non-SD/MSPs, namely financial and non-financial non-SD/MSPs, and 
that it delay the beginning of compliance with recordkeeping 
requirements even further for non-financial non-SD/MSP counterparties. 
Dominion Resources commented that recordkeeping should focus first on 
swaps involving platform execution or clearing, or involving SDs and 
MSPs.
3. Final Rule: Sec.  45.2
    a. Records required. The Commission believes that the final rule 
should largely maintain the NOPR provisions regarding required records. 
Those provisions call for recordkeeping with respect to swaps that 
parallels the Commission's existing recordkeeping requirements with 
respect to futures and options.\18\ Under those existing requirements, 
all DCMs, DCOs, futures commission merchants (``FCMs''), introducing 
brokers (``IBs''), and members of contract markets are generally 
required to keep full and complete records, together with all pertinent 
data and memoranda, of all activities relating to the business of the 
entity or person that is subject to the Commission's authority. The 
Commission believes that the rationale for requiring futures 
registrants and counterparties subject to its jurisdiction to keep full 
and complete records must also govern recordkeeping with respect to 
swaps. Such records are essential to carrying out the regulatory 
functions of not only the Commission but all other financial 
regulators, and for appropriate risk management by registered entities 
and swap counterparties themselves.\19\
---------------------------------------------------------------------------

    \18\ Recordkeeping requirements relating to futures and options 
are found in CEA sections 5(b) and 5(d); Sec. Sec.  1.31 and 1.35 of 
this chapter; Appendix B to Part 38 of the Commission's Regulations, 
Core Principle 17, Recordkeeping; and Appendix A to Part 39 of the 
Commission's Regulations, Core Principle K, Recordkeeping.
    \19\ The need for such records is also recognized 
internationally. As CPSS has noted: ``it should be clear that the 
data recorded in a TR [trade repository] cannot be a substitute for 
the records of transactions at original counterparties. Therefore, 
it is important that even where TRs have been established and used, 
market participants maintain their own records of the transactions 
that they are a counterparty to and reconcile them with their 
counterparties or TRs on an ongoing basis (including for their own 
risk management purposes).'' Committee on Payment and Settlement 
Systems, Considerations for Trade Repositories in OTC Derivatives 
Markets, May 2010, at 1.
---------------------------------------------------------------------------

    The Commission notes that the NOPR placed narrower recordkeeping 
obligations on non-SD/MSP counterparties subject to the Commission's 
jurisdiction, requiring them to keep full, complete, and systematic 
records, including all pertinent data and memoranda, with respect to 
each swap to which they are a counterparty, rather than with respect to 
their entire business relating to swaps. This narrower requirement was 
designed to effectuate a policy choice made by the Commission to place 
lesser burdens on non-SD/MSP counterparties to swaps, where this can be 
done without damage to the fundamental systemic risk mitigation, 
transparency, standardization, and market integrity purposes of the 
legislation.
    The Commission does not believe that it should further define or 
reduce the records required to be kept. The Commission's existing 
recordkeeping regulations in the futures context call for maintenance 
of ``full and complete records.'' Complete records regarding each swap 
should be required from all counterparties, including non-SD/MSP 
counterparties to physical commodity swaps and other swaps, because 
such records are essential for effective market oversight and 
prosecution of violations by the Commission and other regulators. 
Experience with recordkeeping requirements in the context of futures 
suggests that all market participants are able to retain such records. 
The Commission also does not believe that it should specifically 
delineate the meaning of ``all pertinent data and memoranda.'' This 
phrase is not further defined in the Commission's existing futures 
regulations.
    With respect to paper recordkeeping, the Commission agrees with the 
comment suggesting that non-SD/MSP counterparties should be permitted 
to keep required records in paper form, since this could serve to 
reduce burdens on some such counterparties while still ensuring that 
essential records are available.\20\ The final rule provides that non-
SD/MSP counterparties may keep records in either electronic or paper 
form, so long as they are retrievable, and information in them is 
reportable, as required by part 45. Because SEFS, DCMs, DCOs, SDs, and 
MSPs are more likely to have automated systems suitable for electronic 
recordkeeping, and because electronic production of records is 
important to the Commission's enforcement functions, the final rule 
will permit such registrants to keep records in paper form only if they 
are originally created and exclusively maintained in paper form.
---------------------------------------------------------------------------

    \20\ Although the final rule requires data reporting in 
electronic form, a non-SD/MSP counterparty could achieve this by 
entering information from paper records into a web interface 
provided by an SDR.
---------------------------------------------------------------------------

    b. Record retention periods. The Commission has determined that the 
final rule should maintain the NOPR provision calling for required 
records to be retained for the life of the swap plus five years. A swap 
can continue to exist for a substantial period of time prior to its 
final termination or expiration. During this time, which in some cases 
can extend for many years, the key economic terms of the swap can 
change. Thus, recordkeeping requirements with

[[Page 2142]]

respect to a swap must necessarily cover the entire period of time 
during which the swap exists, as well as an appropriate period 
following final termination or expiration of the swap. A five-year 
retention period following termination of the swap will ensure document 
retention consistent with the information that the Commission and other 
regulators need to carry out their oversight and enforcement 
responsibilities. It will also parallel the Commission's existing five-
year record retention requirement in the context of futures. Finally, 
this five-year period is consistent with the Commission's final part 49 
rules regarding SDR registration.
    With respect to record retention by SDRs, the Commission has 
determined that SDRs must retain all required records both: (a) 
Throughout the existence of the swap and for five years following final 
termination or expiration of the swap, during which time the records 
must be readily accessible by the SDR and available to the Commission 
via real time electronic access, as provided in the NOPR; and (b) 
thereafter, for an archival storage period of ten additional years, 
during which they must be retrievable by the SDR within three business 
days. The Commission believes that extended retention of SDR records 
will assist regulators in discharging their systemic risk and market 
monitoring responsibilities, and aid market analysis. However, after a 
substantial period of time has passed following final termination of a 
swap, the data storage burden of retaining SDR records concerning the 
swap could outweigh the remaining benefit involved, and accordingly the 
Commission does not agree with the comment suggesting indefinite record 
retention. The Commission may review the ten-year archival storage 
requirement for SDRs at a future time, after experience with its 
operation is available.
    c. Record retrievability. The Commission does not believe that it 
should reduce record retrievability requirements for SEFS, DCMs, DCOs, 
SDs, and MSPs. The requirement that records be readily accessible for 
the life of the swap plus two years parallels the Commission's 
retrievability requirement during the first two years of the five-year 
retention period for futures-related records.\21\ The Commission has 
routinely interpreted ``readily accessible'' to mean retrievable in 
real time or at least on the same day as the records are requested. 
Moreover, Commission Regulation 1.31 requires records maintained 
electronically to be produced immediately upon request. FCMs routinely 
comply with this requirement, and the Commission does not believe that 
SDs and MSPs should be unable to do so as well.
---------------------------------------------------------------------------

    \21\ See Sec.  1.31 of this chapter.
---------------------------------------------------------------------------

    With respect to record retrievability for non-SD/MSP 
counterparties, the Commission accepts the comments suggesting that 
retrieval from off-site storage within three business days could 
possibly involve additional costs or limit off-site storage options for 
some smaller non-SD/MSP counterparties. In order to lessen any burden 
on non-SD/MSP counterparties while maintaining necessary accessibility 
of pertinent records, the final rule will only require retrievability 
of non-SD/MSP counterparty records within five business days throughout 
the record retention period. The Commission believes that this will not 
unduly compromise its ability to conduct investigations and carry out 
its enforcement responsibilities.
    d. Phasing in recordkeeping requirements for non-SD/MSP 
counterparties. The Commission does not believe that it is necessary to 
provide any phasing treatment with respect to recordkeeping 
requirements for non-SD/MSP counterparties beyond the phasing by 
counterparty type provided in the final rule with respect to compliance 
dates. As noted above, the final rule provides less onerous 
recordkeeping requirements and less onerous retrievability requirements 
for non-SD/MSP counterparties, in order to ameliorate recordkeeping 
burdens for them. Excusing non-SD/MSP counterparties from all 
recordkeeping for an extended period could interfere with the ability 
of the Commission and other regulators to carry out their oversight and 
enforcement responsibilities. As previously noted, experience with 
recordkeeping requirements in the context of futures suggests that all 
market participants do retain records and that such recordkeeping is 
essential for effective oversight and prosecution of violations.

B. Swap Data Reporting: Creation Data--Sec.  45.3

1. Proposed Rule
    a. What creation data should be reported. In order to ensure 
timeliness, accuracy, and completeness with respect to the swap data 
available to regulators, the proposed rule called for reporting of swap 
data from each of two important stages of 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 NOPR required 
reporting of two sets of data generated in connection with the swap's 
creation: primary economic terms data, and confirmation data.
    The NOPR defined primary economic terms as including all of the 
terms of the swap verified or matched by the counterparties at or 
shortly after the execution of the swap. In order to ensure that the 
array of primary economic terms reported to an SDR for a swap is 
sufficient in each case for regulatory purposes and is comparable 
enough to permit data aggregation, the NOPR required that the primary 
economic terms reported for each swap must include, at a minimum, all 
of the data elements listed by the Commission in the asset class-
specific tables of minimum data elements appended to the NOPR. The 
tables were designed to include data elements reflecting the basic 
nature and essential economic terms of the product involved.
    The NOPR defined confirmation as the full, signed, legal 
confirmation by the counterparties of all of the terms of a swap, and 
defined confirmation data as all of the terms of a swap matched and 
agreed upon by the counterparties in confirming the swap. The NOPR 
required reporting of confirmation data, in addition to the earlier 
reporting of primary economic terms data, in order to help ensure the 
completeness and accuracy of the data maintained in an SDR with respect 
to a swap. Reporting of the terms of the confirmation, which has the 
assent of both counterparties, also provides a means of fulfilling the 
statutory directive that an SDR ``shall confirm with both 
counterparties to the swap the accuracy of the data that was 
submitted.'' \22\
---------------------------------------------------------------------------

    \22\ CEA section 21(c)(2).
---------------------------------------------------------------------------

    b. Who should report creation data. The NOPR's swap data reporting 
provisions were designed to streamline and simplify the data reporting 
approach, by calling for reporting by the registered entity or 
counterparty that the Commission believes has the easiest, fastest, and 
cheapest access to the data in question. As recognized in the NOPR, 
such entities and counterparties are also the most likely to have 
automated systems suitable for reporting.
    Because the Commission anticipated that swap contract certification 
process for swaps listed by SEFs and DCMs would define all or most of 
the primary economic terms of a swap, the NOPR called for SEFs or DCMs 
to report PET data for swaps executed on a trading platform, as soon as 
technologically practicable after execution, with reporting 
counterparties reporting only PET data that for any reason was not

[[Page 2143]]

available to the SEF or DCM. For off-facility swaps, where PET data is 
created by the counterparties' verification of the primary economic 
terms of the swap, the NOPR provided for the reporting counterparty (as 
defined) to report the required PET data for the swap. The NOPR called 
for this report to be made promptly, but in no event later than: 15 
minutes after execution of a swap for which execution and verification 
of primary economic terms occur electronically; 30 minutes after 
execution of a swap which is not executed electronically but for which 
verification of primary economic terms occurs electronically; or, in 
the case of a swap for which neither execution nor verification of 
primary economic terms occurs electronically, within a time after 
execution to be determined by the Commission.
    For cleared swaps, where confirmation data will be generated by 
DCOs in the course of the normal clearing process, the NOPR called for 
DCOs to report confirmation data, doing so as soon as technologically 
practicable following clearing. For non-cleared swaps, where 
confirmation will be done by the counterparties, the NOPR required the 
reporting counterparty to report confirmation data, making this report 
promptly following confirmation, but in no event later than: 15 minutes 
after confirmation of a swap for which confirmation occurs 
electronically; or, in the case of a swap for which confirmation was 
done manually rather than electronically, within a time after 
confirmation to be determined by the Commission.
    The NOPR did not explicitly assign the right to select the SDR to 
which a swap is reported, but it effectively determined who will make 
this choice, through the interaction of two key aspects of the rule. 
First, in order to prevent fragmentation of data for a single swap 
across multiple SDRs, which would seriously impair the ability of the 
Commission and other regulators to view or aggregate all of the data 
concerning the swap, the proposed rule provided that, once an initial 
data report concerning a swap is made to an SDR, all data reported for 
that swap thereafter must be reported to that same SDR.\23\ Second, in 
order to ensure that PET data concerning the swap is reported as soon 
as technologically practicable following execution--in part to 
facilitate real time reporting--the proposed rule required the SEF or 
DCM to make the initial PET data report for swap executed on such a 
facility, and required the reporting counterparty (in the majority of 
cases, an SD or MSP) to make the initial report for an off-facility 
swap. Because subsequent reports must go to the SDR that received the 
initial report, in practice this meant that the SEF or DCM would select 
the SDR for platform-executed swaps, and the reporting counterparty 
would choose the SDR for off-facility swaps.
---------------------------------------------------------------------------

    \23\ This requirement received universal approbation in both 
comments and roundtables as appropriate and necessary.
---------------------------------------------------------------------------

    c. Deadlines for creation data reporting. The NOPR established 
reporting deadlines for creation data reporting, including both PET 
data reporting and confirmation data reporting, determined by whether 
the swap is platform-executed and/or cleared, whether verification 
(matching) of primary economic terms by the counterparties occurs 
electronically, and whether the reporting counterparty is an SD or MSP 
on the one hand or a non-SD/MSP counterparty on the other. The 
resulting deadlines were as shown in the following tables.

                                Proposed Rule--Reporting Counterparty: SD or MSP
----------------------------------------------------------------------------------------------------------------
      Execution and clearing                Report                Reporter                Reporting time
----------------------------------------------------------------------------------------------------------------
SEF or DCM, DCO...................  PET data.............  SEF or DCM...........  As soon as technologically
                                                                                   practicable following
                                                                                   execution.
                                    Any PET data not       SD or MSP............  After execution:
                                     reported by SEF or                           * 15 minutes if execution and
                                     DCM.                                          verification electronic.
                                                                                  * 30 minutes if execution non-
                                                                                   electronic but verification
                                                                                   electronic.
                                                                                     * 24 hours if neither
                                                                                      execution nor verification
                                                                                      electronic.
                                    Confirmation data....  DCO..................  As soon as technologically
                                                                                   practicable following
                                                                                   clearing.
SEF, Not cleared..................  PET data.............  SEF..................  As soon as technologically
                                                                                   practicable following
                                                                                   execution.
                                    Any PET data not       SD or MSP............  After execution:
                                     reported by SEF.                             * 15 minutes if execution and
                                                                                   verification electronic.
                                                                                  * 30 minutes if execution non-
                                                                                   electronic but verification
                                                                                   electronic.
                                                                                     * 24 hours if neither
                                                                                      execution nor verification
                                                                                      electronic.
                                    Confirmation data....  SD or MSP............  After confirmation:
                                                                                  * 15 minutes if confirmation
                                                                                   electronic.
                                                                                  * 24 hours if confirmation non-
                                                                                   electronic.
No platform, DCO..................  PET data.............  SD or MSP............  After execution:
                                                                                  * 30 minutes if verification
                                                                                   electronic.
                                                                                  * 24 hours if verification non-
                                                                                   electronic.
                                    Confirmation data....  DCO..................  As soon as technologically
                                                                                   practicable following
                                                                                   clearing.
No platform, Not cleared..........  PET data.............  SD or MSP............  After execution:
                                                                                  * 30 minutes if verification
                                                                                   electronic.
                                                                                  * 24 hours if verification non-
                                                                                   electronic.
                                    Confirmation data....  SD or MSP............  After confirmation:
                                                                                  * 15 minutes if confirmation
                                                                                   electronic.
                                                                                  * 24 hours if confirmation non-
                                                                                   electronic.
----------------------------------------------------------------------------------------------------------------


                                Proposed Rule--Reporting Counterparty: Non-SD/MSP
----------------------------------------------------------------------------------------------------------------
      Execution and clearing                Report                Reporter                Reporting time
----------------------------------------------------------------------------------------------------------------
SEF or DCM, DCO...................  PET data.............  SEF or DCM...........  As soon as technologically
                                                                                   practicable following
                                                                                   execution.

[[Page 2144]]

 
                                    Any PET data not       Non-SD/MSP...........  After execution:
                                     reported by SEF or                           * 15 minutes if execution and
                                     DCM.                                          verification electronic.
                                                                                  * 30 minutes if execution non-
                                                                                   electronic but verification
                                                                                   electronic.
                                                                                     * 24 hours if neither
                                                                                      execution nor verification
                                                                                      electronic.
                                    Confirmation data....  DCO..................  As soon as technologically
                                                                                   practicable following
                                                                                   clearing.
SEF, Not cleared..................  PET data.............  SEF..................  As soon as technologically
                                                                                   practicable following
                                                                                   execution.
                                    Any PET data not       SD or MSP............  After execution:
                                     reported by SEF.                             * 15 minutes if execution and
                                                                                   verification electronic.
                                                                                  * 30 minutes if execution non-
                                                                                   electronic but verification
                                                                                   electronic.
                                                                                     * 24 hours if neither
                                                                                      execution nor verification
                                                                                      electronic.
                                    Confirmation data....  Non-SD/MSP...........  After confirmation:
                                                                                  * To be determined by the
                                                                                   Commission prior to final
                                                                                   rule.
No platform, DCO..................  PET data.............  Non-SD/MSP...........  After execution:
                                                                                  * 30 minutes if verification
                                                                                   electronic.
                                                                                  * 24 hours if verification non-
                                                                                   electronic.
                                    Confirmation data....  DCO..................  As soon as technologically
                                                                                   practicable following
                                                                                   clearing.
No platform, Not cleared..........  PET data.............  Non-SD/MSP...........  After execution:
                                                                                  * 30 minutes if verification
                                                                                   electronic.
                                                                                  * 24 hours if verification non-
                                                                                   electronic.
                                    Confirmation data....  Non-SD/MSP...........  After confirmation:
                                                                                  * To be determined by the
                                                                                   Commission prior to final
                                                                                   rule.
----------------------------------------------------------------------------------------------------------------

    d. Reporting for multi-asset swaps and mixed swaps. As noted in the 
NOPR, a mixed swap is in part a security-based swap subject to SEC 
jurisdiction, and in part a swap subject to CFTC jurisdiction.\24\ 
Multi-asset swaps are those that do not have one easily identifiable 
primary underlying asset, but instead involve multiple underlying 
assets belonging to different asset classes that are all within CFTC's 
jurisdiction. One way of stating the distinction between these two 
types of swaps is that SEC and CFTC will each have jurisdiction over 
part of a mixed swap, but only CFTC will have jurisdiction over the 
different parts of a multi-asset swap. The NOPR requested comment on 
how multi-asset and mixed swaps should be reported.
---------------------------------------------------------------------------

    \24\ 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).'' Dodd-Frank Sec.  
721(21), CEA section 1a(47)(D).
---------------------------------------------------------------------------

2. Comments Received
    The Commission received numerous comments from a variety of 
commenters concerning the proposed rule's provisions addressing 
creation data reporting. The broad themes of these comments addressed 
what should be included in required primary economic terms data, who 
should make the initial creation data report, what deadlines should be 
set for making creation data reports, and how creation data should be 
reported with respect to multi-asset swaps, mixed swaps, and 
international swaps.
    a. What should be included in required PET data. Comments 
concerning various aspects of required minimum PET data are discussed 
below.
    Clarification of the catch-all PET data category. The tables of 
minimum PET data for each asset class appended to the NOPR included a 
field for reporting ``any other primary economic terms of the swap 
matched by the counterparties in verifying the swap.'' ISDA and SIFMA 
commented that the Commission should clarify or provide examples of 
what this requirement means.
    Clarification of particular PET data terms for other commodity 
swaps. Electric energy providers including EEI, the Electric Power 
Supply Association (``EPSA''), the Coalition of Physical Energy 
Companies (``COPE''), and Dominion Resources suggested that the terms 
``timestamp,'' ``settlement method,'' ``grade,'' and ``total quantity'' 
should be clarified or else should not be included in the minimum PET 
data for other commodity swaps. They asserted that timestamps are not 
typically recorded under current energy market practice. They argued 
that the settlement method field implies a swap potentially involving 
physical delivery, whereas they believe that swaps are not agreements 
intended to be physically settled. They also argued that the ``total 
quantity'' of a commodity in a swap is not a term typically captured by 
swap counterparties, who instead typically express the size of a swap 
in terms of the quantity aligned with a settlement period.
    Elimination or clarification of calculation and reporting of 
futures equivalents. The NOPR called for minimum PET data reporting to 
include futures contract equivalents and futures contract equivalent 
units of measure. Better Markets expressed support for required 
reporting of futures equivalents. However, the Depository Trust & 
Clearing Corporation (``DTCC'') commented that OTC derivatives cannot 
be mapped readily to futures contracts, and thus this data will not 
necessarily be able to be aggregated in a meaningful fashion. Global 
Forex asked the Commission to provide guidance on how to report futures 
equivalents for swaps whose tenor sits between two futures contracts 
dates; guidance on the case where multiple futures contracts exist for 
the same underlying product; and guidance on products for which no 
corresponding futures contracts exist.
    Clarification of creation data reporting in the context of 
structured transactions. ISDA and SIFMA commented that ``execution,'' 
``affirmation,'' and ``confirmation'' may have somewhat different 
meanings in different asset classes, and requested clarification of the 
application of these terms with respect to creation data

[[Page 2145]]

reporting. More specifically, Global Forex requested clarification of 
creation data in the context of structured transactions, noting that 
the meaning given these terms under prevalent foreign exchange market 
conventions, which frequently involve structured transactions, may 
differ from their application in other contexts.
    Clarifications regarding foreign exchange transactions. Contending 
that cross-currency swaps should be classified as interest rate swaps 
rather than foreign exchange swaps, Global Forex argues that cross-
currency swaps in fact are interest rate products with multi-payment 
schedules, that they are most often traded by interest rate desks with 
interest rate participants, and that they are captured and managed in 
interest rate systems and infrastructure using interest rate 
conventions. Global Forex notes that foreign exchange swaps are 
products traded by distinct foreign exchange desks with market 
participants and internal and external systems infrastructure that are 
different from the participants and infrastructure involved in cross-
currency swaps. Existing trade repositories including TriOptima and 
DTCC also suggest that the Commission classify cross-currency swaps as 
interest rate swaps.
    Global Forex notes that foreign exchange swaps consist of a near 
and a far leg, and that the foreign exchange swap market currently 
lacks market conventions that suggest how to select a reporting 
counterparty responsible for reporting both legs, in situations where 
both parties have the same hierarchical level (e.g., two SDs). Global 
Forex also notes that current trade capture systems differ in how they 
handle foreign exchange swaps, and that some may book a foreign 
exchange swap as a single trade, but split it in back-office systems 
into two trades with separate trade identifiers. Global Forex does not 
advocate reporting both legs separately; it simply points out this 
potential issue in light of current, differing market practices.
    Combining all PET data and confirmation data reporting in a single 
report. Several comments suggest consolidating the requirements to 
report both PET data and confirmation data. Dominion Resources and 
Global Forex suggest a single report providing PET data plus 
confirmation status (rather than all terms confirmed). ISDA and SIFMA 
suggest replacing all creation data reporting with end-of-day snapshot 
reporting (including the first-day report). The Kansas City Board of 
Trade (``KCBT'') suggests that for swaps that are platform-executed and 
cleared, the DCO's clearing report should replace confirmation 
reporting. \25\ DTCC suggests creation data reporting for fully-
electronic trades should be limited to confirmation reporting, in the 
belief that fully electronic trades can be confirmed within 15 minutes. 
Thomson Reuters believes that creation data reporting should be limited 
to confirmation reporting for all swaps whether platform executed or 
voice executed. The Managed Funds Association (``MFA'') suggests 
defining ``time of execution'' to mean 24 hours after manual 
confirmation of the swap, arguing that the benefits of data reporting 
within minutes of execution as presently defined do not outweigh either 
the infrastructure costs or error risks involved.
---------------------------------------------------------------------------

    \25\ KCBT also suggests that DCOs should be allowed to report a 
day's cleared swaps in a single daily data file, rather than 
individually.
---------------------------------------------------------------------------

    Harmonizing the data fields require for real time and regulatory 
reporting. ISDA, SIFMA, WGCEF, and Dominion Resources recommended 
harmonizing the Commission's required PET data fields and real time 
reporting data fields. The Electric Coalition suggested a need to 
coordinate these two types of reporting with respect to reporting 
triggers and the words used to define them (e.g. verification or 
confirmation), and requested clarification concerning the data elements 
required by the real time reporting rule and the swap data reporting 
rule.
    Allowing non-SD/MSP counterparties to report less data. The NOPR 
requires the same minimum PET data fields to be reported for each swap 
in an asset class, regardless of the nature of the reporting entity or 
counterparty. Various energy producers commented concerning potential 
burdens for non-SD/MSP counterparties in this regard. AGA suggested the 
rule should minimize the burdens of reporting for non-SD/MSP 
counterparties, and EEI supported the principle that responsibility for 
reporting should rest with those having the best technology, such as 
SEFs, DCMs, SDs and MSPs.\26\ EEI, EPSA, and COPE suggested limiting 
data reporting for non-SD/MSP counterparties in physical energy to data 
they already maintain under current data capture practices, limiting 
their reporting of confirmation data to the confirmation information 
currently captured in their systems, rather than requiring them to 
report all confirmation terms. The International Energy Credit 
Association (``IECA'') suggested exempting physical energy 
counterparties from reporting requirements entirely, or at least 
imposing ``lesser'' reporting requirements for them. The Electric 
Coalition suggested that non-SD/MSP counterparties be subject only to a 
``CFTC Lite'' reporting regime.
---------------------------------------------------------------------------

    \26\ The NOPR takes this approach, calling for SEFs and DCMs to 
report all creation data in their possession for on-facility swaps, 
and making SDs and MSPs the reporting counterparties when they are 
involved.
---------------------------------------------------------------------------

    Miscellaneous aspects of PET data. The NOPR specifies minimum PET 
data fields for each asset class. The SEC's proposed data reporting 
rule for swaps under the SEC's jurisdiction, i.e., security-based swaps 
in the credit and equity asset classes, sets out categories of required 
data rather than specific data fields. ISDA and SIFMA suggested that 
the Commission should adopt the SEC's approach, and expressed concern 
that the Commission's approach could negatively affect FpML development 
and result in some products not being adequately described. Eris 
Exchange suggested that the Commission determine where prescriptive 
rules are absolutely necessary to address systemic risk, and the 
Commodity Markets Council suggested that the Commission avoid a 
prescriptive regulatory model which would create detailed reporting 
requirements and thus require different reporting methods.
    SunGard Energy & Commodities (``SunGard'') suggested that for swaps 
executed on SEFs and DCMs, having the SEF or DCM report position 
changes to each account, instead of reporting individual swap 
transactions, would be more efficient and more advantageous for 
monitoring of positions and of risk.\27\
---------------------------------------------------------------------------

    \27\ SunGard suggested that such position reports could be 
accompanied by a reference to the primary economic terms of the 
contract, rather than by data reflecting all primary economic terms.
---------------------------------------------------------------------------

    b. Who makes the initial creation data report and selects the SDR. 
The NOPR did not explicitly assign the right to select the SDR to which 
a swap is reported, but it effectively determined who will make this 
choice, through the interaction of two key aspects of the proposed 
rule. First, in order to prevent fragmentation of data for a single 
swap across multiple SDRs, which would seriously impair regulators' 
ability to view or aggregate all of the data concerning the swap, the 
NOPR provided that, once an initial data report concerning a swap is 
made to an SDR, all data reported for that swap thereafter must be 
reported to that same SDR.\28\ Second, in order to ensure that PET data 
concerning the swap is reported as soon as practicable following 
execution--in part to facilitate real time reporting--the NOPR required 
the SEF or DCM to make the initial PET data report for swap

[[Page 2146]]

executed on such a facility, and required the reporting counterparty 
(in the majority of cases, an SD or MSP) to make the initial report for 
an off-facility swap. Because subsequent reports must go to the SDR 
that received the initial report, in practice this meant that the SEF 
or DCM would select the SDR for platform-executed swaps, and the 
reporting counterparty would choose the SDR for off-facility swaps.
---------------------------------------------------------------------------

    \28\ This requirement received universal approbation in both 
comments and roundtables as appropriate and necessary.
---------------------------------------------------------------------------

    The Commission received a number of comments concerning who should 
select the SDR to which a swap is reported. WGCEF, COPE, EEI, and EPSA 
supported the NOPR approach of giving reporting obligations to SEFs, 
DCMs, and DCOs, arguing that this approach simplifies reporting and 
eases burdens on counterparties, which is especially important in the 
case of non-SD/MSP counterparties. EEI and EPSA emphasized that the 
rules should ensure that SDR selection by a SEF, DCM, SD, or MSP does 
not result in costs or burdens for non-SD/MSP counterparties. WGCEF 
also suggested that DCOs should make the initial report for cleared 
swaps executed off-platform, since (in WGCEF's view) execution 
technically will not occur until such a swap is accepted for clearing. 
Global Forex observed that if a platform makes the initial report and 
thus selects the SDR, other entities or counterparties with reporting 
obligations during the life of the swap would need to ensure that they 
can connect to the chosen SDR. ABC and CIEBA suggested that for swaps 
involving a benefit plan as a counterparty, the SDR selection should 
always be made by the plan. ISDA and SIFMA suggested that the reporting 
counterparty should always select the SDR, arguing that this would 
permit the market to determine and follow the most efficient manner of 
reporting. REGIS-TR opposed having reporting obligations assigned based 
on platform execution or clearing.
    DTCC and ICE recommended that the reporting counterparty--an SD or 
MSP in the majority of cases--should always select the SDR, even for 
platform-executed swaps. ICE also suggested that if a SEF or DCM makes 
the first report and thus selects the SDR for a swap that is to be 
cleared, the SEF or DCM should be permitted to select a DCO that is 
also registered as an SDR as both the DCO that will clear the swap and 
the SDR to which the swap is reported. Going further in this direction, 
CME contended that the final rule should require the initial report for 
each cleared swap to be made to a DCO that is also registered as an SDR 
or an SDR chosen by such a DCO. CME argued that the structure and 
wording of the Dodd-Frank Act demonstrate that this was Congress's 
intent, and that limiting reporting for cleared swaps to DCOs that are 
dually registered as SDRs or to SDRs chosen by a DCO would involve the 
lowest cost and least burden. The Commodity Markets Council echoed 
CME's cost-benefit argument, asserting that DCOs are the ``natural 
choice'' to act as SDRs for cleared trades, and that it would be 
costly, inefficient and unnecessary to require industry to establish a 
redundant set of expensive connections with non-DCO SDRs for the 
purpose of making regulatory reports for cleared trades.
    c. Creation data reporting deadlines and deadline phasing.
    Extended creation data reporting deadlines. The Commission received 
a number of comments recommending extended deadlines for both PET data 
reporting and confirmation data reporting. The Electric Coalition 
commented that the NOPR reporting deadlines are far too short if the 
reporting party is a non-financial entity, because such an entity would 
need to manually extract reportable data elements from a customized 
swap.
    Several commenters urged the Commission to extend deadlines for PET 
data reporting, particularly in the case of non-SD/MSP counterparties. 
EEI suggested a PET data report deadline of T+1 (i.e., by the close of 
business on the business day following the day of execution) in the 
case of either electronic or manual verification. CIEBA asked that the 
24-hour deadline for PET data reporting where both execution and 
verification are non-electronic include only business days. COPE 
concurred that the 24-hour deadline where verification is non-
electronic is too short for non-SD/MSP counterparties, and asked the 
Commission not to set a deadline in the final rule, but to determine 
the deadline through ongoing consultations with industry following 
issuance of the final rule.
    Commenters also urged extension of the deadlines for confirmation 
data reporting. AGA asked that the confirmation data reporting deadline 
for non-SD/MSP counterparties be set at T+1 for swaps electronically 
confirmed, and at T+2 (i.e., by the close of business on the second 
business day following the day of execution) for swaps not 
electronically confirmed. The Federal Home Loan Banks (``FHLB'') 
suggested a deadline of 24 hours following confirmation for reporting 
confirmation of a swap electronically confirmed, and a deadline of five 
business days following confirmation for a swap manually confirmed. 
DTCC suggested that a 15-minute deadline for reporting confirmation of 
an electronically executed swap would require a level of straight-
through processing not yet available, and that for similar reasons a 
somewhat longer deadline would be needed where the swap was not 
electronically executed but electronically cleared. DTCC recommended 
setting the initial deadline for confirmation data reporting for 
electronically executed swaps at 30 minutes, setting the deadline for 
swaps not electronically executed but electronically cleared at two 
hours, and phasing in confirmation data reporting deadlines. For 
manually confirmed swaps, DTCC advocated a confirmation data reporting 
deadline of five days after execution.
    Streamlined regulatory and real time reporting. The Commission also 
received comments from DTCC and from roundtable participants suggesting 
that it consider minimizing the number of swap creation data reports to 
be required of any given registered entity or swap counterparty, either 
by combining PET data reporting and confirmation data reporting in a 
single report, or by allowing a single PET data report to fulfill both 
regulatory reporting requirements under part 45 and real time reporting 
requirements under part 43.
    Phasing in reporting deadlines. DTCC suggested that the Commission 
consider phasing in creation data reporting deadlines where possible.
    d. Reporting of multi-asset swaps and mixed swaps. As noted in the 
preamble of the NOPR, generally, a mixed swap is in part a security-
based swap subject to SEC jurisdiction, and in part a swap belonging to 
an asset class subject to CFTC jurisdiction.\29\ Multi-asset swaps are 
those that do not have one easily identifiable primary underlying 
notional item, but instead involve multiple underlying notional items 
belonging to different asset classes that are all within CFTC's 
jurisdiction. One way of stating the distinction between these two 
types of swaps is that SEC and CFTC will each have jurisdiction over 
part of a mixed

[[Page 2147]]

swap, but only CFTC will have jurisdiction over the different parts of 
a multi-asset swap. The NOPR requested comment on how multi-asset and 
mixed swaps should be reported, but did not directly address such 
reporting in the text of the proposed rule.
---------------------------------------------------------------------------

    \29\ 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).'' Dodd-Frank Sec.  
721(21), CEA section 1a(47)(D).
---------------------------------------------------------------------------

    Commenters provided differing views concerning reporting of mixed 
swaps and multi-asset swaps. Better Markets suggested that the 
different legs of mixed swaps and multi-asset swaps should be reported 
separately. ISDA and SIFMA suggested that multi-asset swaps should not 
be decomposed into their underlying asset classes but should be 
reported to an SDR that accepts swaps in the most significant asset 
class component of the swap, as determined by the reporting 
counterparty (in practice, usually the asset class of the desk that 
trades the swap). DTCC suggested that swaps in asset classes subject to 
joint SEC-CFTC regulation could be reported to an SDR registered with 
both Commissions (except in cases where no such SDR is available), or 
that a practicable reporting regime for mixed swaps and multi-asset 
swaps may be to have the reporting counterparty for a mixed swap or 
multi-asset swap report the swap to an SDR serving each asset class, 
including the USI assigned in the context of the report to the first 
SDR in the report made to the second SDR.
    i. Reporting of international swaps. As noted above, the Dodd-Frank 
Act directs the Commission to consult and coordinate with foreign 
regulatory authorities regarding establishment of consistent 
international standards for the regulation of swaps and swap entities. 
The Commission is committed to a cooperative international approach to 
swap recordkeeping and swap data reporting, and has consulted 
extensively with various foreign regulatory authorities in the process 
of preparing this final rule. International regulators consulted by the 
Commission have urged the Commission to include provisions in its final 
swap data reporting rules concerning ``international swaps,'' i.e., 
those swaps that may be required by U.S. law and the law of another 
jurisdiction to be reported both to an SDR registered with the 
Commission and to a different trade repository registered with the 
other jurisdiction.
3. Final Rule: Sec.  45.3
    a. What should be included in required PET data.
    Clarification of the catch-all PET data category. The Commission's 
purpose in including in the tables of minimum PET data a field for 
reporting ``any other primary economic terms of the swap matched by the 
counterparties in verifying the swap'' is to provide a ``catch all'' 
category necessary to (1) ensure reporting of all price-forming terms 
agreed on at the time of swap verification, including any such terms 
not listed in the minimum PET data tables for the asset class in 
question, and (2) keep pace with market innovation and new varieties of 
swaps for which the Commission has not enumerated all relevant data 
fields. To clarify that this field is intended to include all terms 
agreed on at the time of swap verification, the final rule eliminates 
the words ``primary economic'' from the field description, specifies 
reporting of ``any other terms of the swap matched by the 
counterparties in verifying the swap,'' and adds some possible examples 
of such terms. This aligns the field description with the NOPR and 
final rule definition of ``primary economic terms'' as meaning ``all of 
the terms of a swap matched or affirmed by the counterparties in 
verifying the swap.''
    Clarification of particular PET data terms for other commodity 
swaps.
    The Commission disagrees with comments suggesting that execution 
date and time should not be required to be reported for certain types 
of other commodity swaps. The Commission believes that the date and 
time of the execution of a swap constitute a basic primary economic 
term and a fundamental audit trail component for all swaps. This 
information is essential to the ability of the Commission and other 
regulators to fulfill their obligations to supervise swap markets and 
prosecute abuses. For swaps executed on a SEF or DCM, and for off-
facility swaps executed via an automated system, a timestamp will be 
created automatically by the system involved. For off-facility swaps 
executed manually, counterparties can and must manually record and 
report the date and time of execution. Where current market practice 
does not include recording the date and time of execution of a swap, 
adjustment will be necessary.
    While the Commission notes that the parameters of what constitutes 
a swap will be provided by the final definition of ``swap'' issued 
jointly by the Commission and the SEC, the Commission believes that 
``settlement method'' should be retained as a PET data field. The 
definition of a swap in CEA section 1a(47) could include options that 
potentially could require physical delivery of a commodity. Thus, while 
certain transactions that require delivery of a commodity, e.g., 
forward contracts or spot transactions that are excluded from the 
definition of a swap, may not constitute swaps (as commenters argue), 
other derivative transactions involving delivery would be required to 
be reported as swaps.
    The Commission believes that ``grade'' should also be retained as a 
PET data field for other commodity swaps. ``Grade'' would typically be 
applicable as a defining characteristic of the swap for both physically 
delivered and cash settled transactions, in that this term is intended 
to identify the quality and other characteristics of the commodity that 
underlies the swap. For a cash settled swap, the Commission believes 
that separately accounting for grade in the terms reported is also 
necessary as a means of classifying and identifying the quality 
characteristics of the commodity underlying the swap. The Commission 
recognizes that in certain cases--electricity being one example--a 
grade may not exist. The final rule will indicate that where a 
particular PET data field does not apply to a given swap, the reporting 
entity or counterparty should report ``Not applicable'' for that field.
    As noted in the comments, some commodity swap counterparties use 
the convention of identifying the notional amount of a swap by 
specifying the quantity in terms of dollars or units of the commodity, 
whichever is used to calculate settlement period payment obligations. 
However, other counterparties account for the size of a swap by 
referring to the total quantity involved in a swap over its entire 
existence. Because a single convention does not apply in all cases, the 
final minimum PET data tables will retain the terms ``Quantity'' and 
``Total quantity, '' but will also add the terms ``Quantity units'' and 
``Notional quantity.'' Notional quantity will be defined as the amount 
of the underlying commodity that is used to calculate periodic 
settlement payments during the life of the swap. Quantity units will be 
defined as the units in which the notional quantity is expressed, e.g., 
bushels, gallons, barrels, pounds, or tons.
    Elimination or clarification of calculation and reporting of 
futures equivalents. The NOPR provision for reporting of futures 
contract equivalents was intended to assist the Commission in 
monitoring the positions of traders for the purpose of enforcing 
position limits mandated by the Dodd-Frank Act. However, in July 2011, 
subsequent to publication of the NOPR, the Commission adopted new 
reporting requirements for physical commodity swaps and swaptions. Part 
150 of this chapter now requires routine position reports from clearing 
organizations, clearing members and swap dealers, and

[[Page 2148]]

also applies to reportable swap trader positions. It also provides 
guidelines on how swaps should be converted into futures equivalents. 
The new regulations were issued in part to cover the period between the 
present, when the date by which SDRs registered with the Commission 
will be operational in all asset classes is not yet certain, and a 
future time when the Commission may be able to obtain swap position 
data by aggregating data across SDRs.\30\ Accordingly, the final part 
45 rule will drop ``futures contract equivalent'' and ``futures 
contract equivalent unit of measure'' from its minimum PET data tables. 
The Commission may revisit possible reporting of futures equivalents at 
a later time, after Commission staff has had an opportunity to evaluate 
the Commission's experience in collecting futures equivalent data under 
the new part 150 regulations.
---------------------------------------------------------------------------

    \30\ An SDR would be able to report position data to the 
Commission only if it were the single SDR for an entire asset class.
---------------------------------------------------------------------------

    Clarification of creation data reporting in the context of 
structured transactions. In response to comments requesting 
clarification of creation data reporting in the context of structured 
transactions, the Commission provides the following explanation.
    As discussed below in the context of who reports creation data, for 
swaps executed on a SEF or DCM, the final rule requires the SEF or DCM 
to report all required swap creation data, as soon as technologically 
practicable after execution, in a single report that includes all 
primary economic terms data and all confirmation data for the swap. 
This will address some of the concerns raised in these comments for 
swaps executed on a SEF or DCM.
    For off-facility swaps, the final rule requires the reporting 
counterparty to report both (1) all primary economic terms data, within 
specified times following execution, and (2) all confirmation data, 
within specified times following confirmation by the 
counterparties.\31\ The final rule requires both a PET data report and 
a confirmation data report in recognition that the elapsed time between 
execution and verification of primary economic terms on the one hand, 
and confirmation of all terms of the swap on the other, may differ for 
a given swap depending on context.
---------------------------------------------------------------------------

    \31\ The final rule will further provide that if an off-facility 
swap is accepted for clearing within the applicable deadline for PET 
data reporting by the reporting counterparty, and before the 
reporting counterparty reports any primary economic terms data, then 
the reporting counterparty will be excused from reporting creation 
data, and the DCO will report all required creation data in a single 
report that includes both confirmation data and PET data. The final 
rule will also define ``confirmation'' as the consummation of 
legally binding documentation memorializing the agreement of the 
parties to all terms of the swap.
---------------------------------------------------------------------------

    The Commission understands that a major concern underlying these 
comments reflects uncertainty as to what reporting the final rule 
requires (a) in situations where give-up arrangements or block trade 
details may not be entirely finalized as of the time the counterparties 
verify primary economic terms, or (b) in the case of structured 
transactions, where the counterparties may negotiate primary economic 
terms in stages over a period of time before reaching agreement on 
their entire deal. The Commission therefore wishes to clarify that for 
off-facility swaps where execution and confirmation are not 
simultaneous, the final rule requires PET data reporting when execution 
has occurred and verification of primary economic terms is completed, 
even though details such as give-ups may still be in process. It also 
wishes to clarify that PET data reporting is to follow agreement on all 
primary economic terms of the complete transaction, and is not required 
or desired after each stage of negotiating a structured transaction or 
after agreement on some but not all of the primary economic terms of 
the swap.
    Clarifications regarding foreign exchange transactions. The 
Commission has considered and agrees with comments suggesting that 
cross-currency swaps should be classified and reported as interest rate 
swaps, in line with prevailing market practice concerning the trading 
of such swaps. The final rule provides for reporting of cross-currency 
swaps as interest rate swaps. The Commission has also considered 
comments noting differences in current foreign exchange market practice 
concerning the booking of the near and far legs of some foreign 
exchange transactions. The Commission understands that a firm's 
financial statements will address both legs of a foreign exchange swap, 
and that confirmation is performed with respect to the whole swap 
rather than separately for each leg. The final rule provides for 
reporting of foreign exchange swaps as a single transaction by a single 
reporting counterparty selected as provided in Sec.  45.8. The 
Commission notes that foreign exchange market conventions may need to 
adjust to this requirement.\32\
---------------------------------------------------------------------------

    \32\ The Commission also notes that the final rule addresses the 
reporting of ``foreign exchange instruments,'' defined as 
instruments that are both defined as a swap in part 1 of this 
chapter and included in the foreign exchange asset class. The 
definition specifies that instruments in the foreign exchange asset 
class include: any currency option, foreign currency option, foreign 
exchange option, or foreign exchange rate option; any foreign 
exchange forward as defined in CEA section 1a(24); any foreign 
exchange swap as defined in CEA section 1a(25); and any non-
deliverable forward involving foreign exchange. This definition and 
this approach to reporting are required by the fact that the Dodd-
Frank Act defines the term ``foreign exchange swap,'' and the fact 
that foreign exchange swaps as so defined are only a subset of the 
foreign exchange instruments that will be defined as swaps.
---------------------------------------------------------------------------

    Combining all PET data and confirmation data reporting in a single 
report. The Commission has considered the numerous comments suggesting 
that the final rule should provide for PET data and confirmation data 
reporting to be combined in a single report. The Commission agrees with 
these comments with respect to swaps executed on a SEF or DCM. As noted 
above, the final rule provides that for swaps executed on a SEF or DCM, 
a single report by the SEF or DCM, made as soon as technologically 
practicable after execution, will fulfill all creation data reporting 
that would otherwise be required of reporting counterparties.
    The Commission disagrees with these comments as they apply to off-
facility swaps. The NOPR requirements for both PET data reporting and 
confirmation data reporting are designed to ensure both (a) timeliness 
of reporting, served by the initial PET data report, and (b) data 
accuracy and completeness, served by confirmation data reporting.\33\ 
In addition, as noted above, the NOPR requirement for both a PET data 
report and a confirmation data report recognizes that the elapsed time 
between verification of primary economic terms and confirmation of all 
terms may differ in different contexts, and in some cases may be 
substantial. In a number of cases, delaying the initial data report for 
a swap until confirmation has occurred could prevent regulators from 
seeing a current picture of the entire swap market in the data present 
in SDRs. As provided in the NOPR and the final rule, reporting 
counterparties for off-facility swaps will be free to contract with 
third-party services providers to fulfill either or both of these 
reporting obligations, which could reduce costs associated with making 
these reports. The Commission notes that, for off-facility swaps not 
accepted for clearing within the applicable deadline for the reporting 
counterparty to report PET data, the reporting counterparty can avoid 
the

[[Page 2149]]

need for a separate confirmation data reporting by confirming the swap 
within the applicable deadline for PET data reporting, and reporting 
both PET data and confirmation data in a single report.
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    \33\ The Commission notes that it is working to align the 
timeframes for regulatory swap data reporting pursuant to this part 
and the dissemination delays for real time swap data reporting 
pursuant to part 43, in order to permit a reporting entity or 
counterparty to fulfill both obligations by making a single report, 
should the reporting entity or counterparty choose to do so.
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    Harmonizing the data fields required for real time and regulatory 
reporting. The Commission agrees in principle with comments suggesting 
harmonization of the data fields required for real time reporting 
pursuant to part 43 and those required for regulatory reporting 
pursuant to this part. While registered entities and reporting 
counterparties subject to the Commission's jurisdiction will remain 
responsible for complying with both part 43 and part 45, the Commission 
is working to substantially align the minimum PET data fields required 
by this part and the real time reporting data fields required by part 
43, in order to reduce reporting burdens to the extent possible.
    Allowing non-SD/MSP counterparties to report less data. The 
Commission disagrees with comments suggesting that it should require 
less data to be reported for a swap with respect to which a non-SD/MSP 
counterparty is the reporting counterparty. The Commission believes 
that fulfilling the purposes of the Dodd-Frank Act requires that 
regulators have access to the same information for all swaps reported 
to SDRs. To address commenters' concerns to the extent possible, the 
final rule will lessen burdens on non-SD/MSP counterparties by phasing 
in their reporting--which will begin as of a compliance date later than 
the compliance dates for other registered entities and counterparties--
and by providing extended deadlines for their reporting once it begins.
    Miscellaneous aspects of PET data. The Commission disagrees with 
comments suggesting that the final rule should only provide categories 
of data to be reported, rather than minimum PET data fields. The 
Commission believes the approach taken by the NOPR in this respect is 
appropriate. It is designed to ensure uniformity of essential data 
concerning swaps across all of the asset classes over which the 
Commission has jurisdiction, and across different SDRs, and to ensure 
that the Commission has the necessary information to characterize and 
understand the nature of reported swaps. Commission staff have 
consulted with SEC staff regarding data reporting for swaps in the 
credit and equity asset classes where the Commission and the SEC share 
jurisdiction, and the Commission has substantially aligned its data 
requirements in those asset classes with the data sought by the SEC. As 
a result, the Commission does not believe that SDRs and security-based 
SDRs will have difficulty in collecting the data needed by the two 
Commissions. The inclusion in minimum PET data of all terms of the swap 
matched by the counterparties in verifying the swap provides an avenue 
for reporting for newly-developed swap products. The Commission will 
also have the ability to amend its tables of required minimum PET data 
at futures times when this is desirable.
    The Commission disagrees with the comment suggesting that SEFs and 
DCMs should report positions rather than swap transactions. The Dodd-
Frank Act requires ``each swap'' to be reported to an SDR, and does not 
address position reporting to an SDR. In addition, unlike most current 
futures exchanges, SEFs and DCMs will not necessarily have access to 
all of the transactions of a given counterparty in a particular 
product, and thus would be unable to report positions.
    b. Who makes the initial creation data report and selects the SDR. 
The Commission has considered the various comments received concerning 
who should make the initial creation data report for a swap, and by 
operation of the various parts of the rule thus select the SDR to which 
the swap is reported. The Commission has determined that the final rule 
should maintain the NOPR's approach, calling for initial creation data 
reporting by the registered entity or reporting counterparty that the 
Commission believes has the easiest and fastest access to the data 
required, and requiring that, once an initial data report concerning a 
swap is made to an SDR, all data reported for that swap thereafter must 
be reported to that same SDR. Cumulatively, these provisions prevent 
fragmentation of swap data that would impair the ability of the 
Commission and other regulators to use the swap data in SDRs for the 
purposes of the Dodd-Frank Act. Under this approach, competition may 
lead SEFs and DCMs to establish connections to multiple SDRs, and 
result in lower SDR fees charged, not only to SEFs and DCMs for swaps 
executed on such facilities, but also to reporting counterparties for 
off-facility swaps. The Commission believes that requiring that all 
cleared swaps be reported only to DCOs registered as SDRs or to SDRs 
chosen by a DCO would create a non-level playing field for competition 
between DCO-SDRs and non-DCO SDRs. The Commission also believes that it 
would make DCOs collectively, and could in time make a single DCO-SDR, 
the sole recipient of data reported concerning cleared swaps. On the 
other hand, the Commission believes that giving the choice of the SDR 
to the reporting counterparty in all cases could in practice give an 
SDR substantially owned by SDs a dominant market position with respect 
to swap data reporting within an asset class or even with respect to 
all swaps. The Commission believes that the rule as proposed favors 
market competition, avoids injecting the Commission into a market 
decision, and leaves the choice of SDR to be influenced by market 
forces and possible market innovations. The rule as proposed also 
addresses the major substance of the concerns expressed by non-SD/MSP 
counterparties, since it calls for the initial data report to be made 
by a non-SD/MSP counterparty only in the case of an off-facility swap 
between two non-SD/MSP counterparties.
    c. Creation data reporting deadlines and deadline phasing.
    Extended creation data reporting deadlines. The Commission 
continues to believe, as it stated in the NOPR, that in order to 
fulfill the purposes of the Dodd-Frank Act while minimizing burdens for 
registered entities and swap counterparties, particularly including 
non-SD/MSP counterparties, the final rule should establish a swap data 
reporting regime calling for reporting by the registered entity or 
counterparty that has the easiest, fastest, and cheapest access to the 
set of data in question. The Commission has also considered and 
evaluated the comments it has received regarding ways that reporting 
burdens could be reduced, either by allowing a single report to serve 
different required functions or by extending and phasing in reporting 
deadlines. The Commission has determined that the reporting regime 
established by the final rule should maintain many fundamental aspects 
of the reporting called for in the NOPR, while adjusting other aspects 
of that regime to streamline reporting and minimize reporting burdens 
where possible, while continuing to ensure that swap data for all swaps 
is reported to SDRs in a manner that ensures the ability of the 
Commission and other regulators to fulfill the systemic risk 
mitigation, market transparency, position limit monitoring and market 
surveillance objectives of the Dodd-Frank Act.
    Streamlined regulatory and real time reporting. The Commission 
agrees with comments suggesting that, where possible, the number of 
swap creation data reports should be minimized and streamlined by 
combining PET data reporting and confirmation data reporting in a 
single report.

[[Page 2150]]

    The Dodd-Frank Act does not specify the timeframes for reporting of 
swap data to SDRs for regulatory purposes. However, to further the 
objectives of the Dodd-Frank Act, the Commission believes it is 
important that swap data be reported to SDRs either immediately 
following execution of the swap or within a short but reasonable time 
following execution. The Commission does not believe that PET data 
reporting can wait until it is possible to report confirmation data in 
all cases, because in an appreciable number of instances confirmation 
of a swap can occur days, weeks, or even months after execution.
    Where execution and confirmation are simultaneous or nearly so, 
however, the Commission agrees with commenters' suggestion that 
reporting both PET data and confirmation data in a single report would 
reduce reporting burdens without impairing regulatory purposes. The 
Commission is working to adopt final rules for SEFs and DCMs, and final 
rules with respect to straight-through processing, providing that 
execution of a swap on a SEF or DCM will constitute confirmation of all 
of the terms of the swap. This final part 45 rule requires that the 
terms of such contracts must include all of the minimum PET data 
required by part 45 for a swap in the asset class in question. The 
final rule therefore provides for a single creation data report, 
including both PET data and confirmation data, in the case of swaps 
executed on or pursuant to the rules of a SEF or DCM. Accordingly, no 
counterparty will be required to report creation data for a swap 
executed on or pursuant to the rules of a SEF or DCM.
    The Commission agrees with commenters that a reporting regime that, 
to the extent possible and practicable, permits reporting entities and 
counterparties to comply with the regulatory data reporting 
requirements of part 45 and the real time reporting requirements of 
part 43 by making a single report can reduce reporting burdens while 
still ensuring fulfillment of the purposes for which the Dodd-Frank Act 
requires such reporting. The Commission is working to align the 
reporting deadlines in this final rule with the public dissemination 
delays provided in the final part 43 real time reporting rule, to the 
extent possible and practicable, in order to achieve this goal.
    The Commission's final clearing rules in part 39 of this chapter 
provide that acceptance of the swap for clearing by a DCO constitutes 
confirmation of all of the terms of the swap. This final part 45 rule 
provides that the terms of such contracts must include all of the 
minimum PET data required by part 45 for a swap in the asset class in 
question. Because acceptance for clearing constitutes confirmation, the 
final rule provides that if an off-facility swap is accepted for 
clearing within the reporting deadlines applicable to the reporting 
counterparty, the reporting counterparty shall be excused for creation 
data reporting for the swap, and the DCO shall report all creation data 
report, including both PET data and confirmation data, in a single 
report made as technologically practicable after clearing. In such 
cases, reporting will be further streamlined, and burdens for 
counterparties will be further reduced.
    Phasing in and extending reporting deadlines. As noted above, 
counterparties will not be required to report creation data for swaps 
executed on a SEF or DCM, or for swaps accepted for clearing by a DCO 
within the applicable reporting deadlines. After considering comments 
advocating the extension and phasing in of counterparty reporting 
deadlines, the Commission has decided to extend and phase in such 
deadlines in the final rule with respect to off-facility swaps not 
accepted for clearing within such deadlines.
     PET data reporting deadlines for SD or MSP reporting 
counterparties will be phased in over two years.
     PET data reporting deadlines for non-SD/MSP reporting 
counterparties will be extended and phased in over three years, and 
will exclude weekend days and legal holidays. For example, while the 
NOPR set the non-SD/MSP reporting counterparty PET data reporting 
deadline for an uncleared swap at 24 hours, the final rule calls for 
reporting no later than 48 business hours after execution (during the 
first year of reporting), 36 business hours after execution (during the 
second year of reporting), or 24 business hours after execution 
(thereafter).
     To reduce possible burdens on small non-SD/MSP 
counterparties entering into a swap with an SD or MSP, if the non-
reporting counterparty is a non-SD/MSP counterparty that is not a 
financial entity, and if primary economic terms are not verified 
electronically, PET data reporting deadlines for the SD or MSP 
reporting counterparty will be further extended and phased in over 
three years, and will exclude weekend days and legal holidays.
     Confirmation data reporting deadlines for SD or MSP 
reporting counterparties where confirmation is non-electronic will be 
extended, and will exclude weekend days and legal holidays.
     Confirmation data reporting deadlines for non-SD/MSP 
reporting counterparties will be extended and phased in over three 
years, and will exclude weekend days and legal holidays. The final rule 
calls for such counterparties to report confirmation data no later than 
48 business hours after confirmation (during the first year of 
reporting), 36 business hours after confirmation (during the second 
year of reporting), or 24 business hours after confirmation 
(thereafter).
     For off-facility, uncleared swaps, during the first six 
months following the applicable compliance date, while PET data will 
have to be reported electronically with data normalized in data fields, 
reporting counterparties for whom reporting confirmation data 
normalized in data fields is not yet technologically practicable may 
report required confirmation data by transmitting an image of all 
documents recording the confirmation. This will allow needed additional 
time for development of schemas for data reporting and implementation 
by non-SD/MSP counterparties. Electronic reporting of all confirmation 
data normalized in data fields will be required after this six month 
period.
    Charts showing the final rule reporting requirements with respect 
to both creation data reporting and continuation data reporting can be 
seen below at pages 70 and71.
    Reporting burden reductions for non-SD/MSP reporting 
counterparties. As a result of the streamlined reporting regime and 
extended, phased-in reporting deadlines noted above, the final rule 
eliminates all reporting obligations for non-SD/MSP reporting 
counterparties in many cases, and phases in or reduces them in 
virtually all other cases. Non-SD/MSP reporting counterparties must 
report data only for the small minority of swaps in which both 
counterparties are non-SD/MSP counterparties. Even within this small 
minority of swaps, a non-SD/MSP reporting counterparty will have no 
reporting obligations for on-facility, cleared swaps, or for off-
facility swaps accepted for clearing within the applicable deadline for 
PET data reporting. If an off-facility swap is accepted for clearing 
after the PET data reporting deadline, the non-SD/MSP reporting 
counterparty is excused from reporting confirmation data and 
continuation data, which instead will be reported by the DCO. For on-
facility, uncleared swaps, a non-SD/MSP reporting counterparty's 
reporting obligations are limited to reporting continuation data during 
the existence of the swap. For off-facility, uncleared

[[Page 2151]]

swaps, creation data reporting deadlines for a non-SD/MSP reporting 
counterparty have been extended and phased in as noted above, and no 
longer include weekend days or holidays. The deadline for a non-SD/MSP 
reporting counterparty to report changes to primary economic terms over 
the life of the swap has been lengthened from reporting on the day such 
a change occurs to reporting by the end of the second business day 
following the date of such a change; and a non-SD/MSP reporting 
counterparty will be required to report valuation data on only a 
quarterly rather than a daily basis.
    d. Allocations. As set forth more fully below in the discussion of 
USIs, the Commission received and has considered comments and industry 
requests for clarification concerning USI creation and swap creation 
data reporting in the case of swaps involving allocation by an agent to 
its clients who are the actual counterparties on one side of the swap. 
In response to these requests, the final rule will address both USI 
creation and creation data reporting for swaps involving allocation, as 
set forth in the discussion of USIs below.
    e. Reporting of multi-asset swaps and mixed swaps. After 
considering comments concerning how multi-asset swaps and mixed swaps 
should be reported, the Commission has determined that the final rule 
should provide for mixed swaps to be reported to both an SDR registered 
with CFTC and an SDR registered with SEC.\34\ Reporting to a dual-
registered SDR would satisfy this requirement, but would not be 
required. To ensure regulatory ability to track mixed swaps and 
aggregate data concerning them, the final rule will add a ``mixed 
swap'' checkbox field to the tables of minimum primary economic terms. 
To avoid double-counting of mixed swaps, the final rule requires the 
reporting entity or counterparty to obtain a USI for the swap from the 
first SDR to which the swap is reported, and to include that USI in the 
data concerning the swap reported to the second SDR to which the swap 
is reported.
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    \34\ Such dual reporting would avoid any need for an SDR 
accepting swaps only in a CFTC-regulated asset class to dual-
register with the SEC merely because it might receive a report for a 
mixed swap in part subject to SEC jurisdiction.
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    For multi-asset swaps, the final rule requires reporting to a 
single SDR accepting swaps in the asset class determined by the 
registered entity or counterparty reporting the swap to be the first or 
primary asset class involved in the swap. To ensure regulatory ability 
to track the swap in all asset classes involved, the final rule will 
add two data fields to the tables of minimum primary economic terms, 
one for indication of the first or primary asset class involved in the 
swap (which must be an asset class accepted by the SDR), and the second 
for indication of the other asset class or classes involved in the 
swap.
    f. Reporting of international swaps. The Commission agrees with 
international regulators with whom the Commission has consulted who 
have suggested that it is important for the final rule to include a 
mechanism that enables the Commission and other regulators to identify 
international swaps reported to multiple repositories, so that such 
swaps are not double-counted by regulators. The Commission is mindful 
of the fact that the Dodd-Frank Act directs the Commission to consult 
and coordinate with foreign regulatory authorities regarding 
establishment of consistent international standards for the regulation 
of swaps and swap entities. The Commission also believes that providing 
an accurate picture of the swap market to regulators is one of the 
fundamental purposes of the Dodd-Frank Act. For these reasons, and in 
order to clarify its intent concerning swap data reporting in this 
context, the Commission has determined that the final rule will address 
the reporting of ``international swaps,'' defined for clarity as those 
swaps that may be required by U.S. law and the law of another 
jurisdiction to be reported both to an SDR registered with the 
Commission and to a different trade repository registered with the 
other jurisdiction.\35\ In order to help provide for international 
swaps the consistent international standards sought by the Dodd-Frank 
Act, the final rule provides that for each international swap that is 
reported to both a U.S.-registered SDR and a foreign trade repository, 
the reporting counterparty shall report to the U.S.-registered SDR, as 
soon as practicable, the identity of the foreign trade repository, and 
the swap identifier used by that foreign trade repository to identify 
that swap.\36\ If necessary, the reporting counterparty shall obtain 
this information from the non-reporting counterparty. The Commission 
believes that these provisions are a logical outgrowth of the swap data 
reporting provisions of the NOPR and of the statutory call for 
international consultation and consistent international standards.
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    \35\ This definition does not add a new requirement for the 
reporting of swaps not otherwise required to be reported.
    \36\ Under the final rule provisions in Sec.  45.6 of this part 
concerning unique swap identifiers, the non-reporting counterparty 
will receive the USI for the swap from the SDR, and thus will be 
able to provide it to the non-U.S. trade repository on request.
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C. Swap Data Reporting: Continuation Data--Sec.  45.4

1. Proposed Rule
    As noted above, in order to ensure timeliness, accuracy, and 
completeness with respect to the swap data available to regulators, the 
proposed rule called for reporting of swap data from each of two 
important stages of 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. During the continued existence of the swap, 
the NOPR required reporting of three types of continuation data: (a) 
Either life cycle event data or state data (depending on the reporting 
method involved) that reflects all changes to the swap; (b) contract-
intrinsic data, meaning scheduled, anticipated events that do not 
change the contractual terms of the swap, such as an anticipated rate 
adjustment; and (c) valuation data that reflects the current value of 
the swap, such as the daily mark-to-market.
    As proposed, the rule specified the reporting method to be used in 
each asset class for reporting all changes to the swap. For credit 
swaps and equity swaps, the NOPR called for reporting life-cycle 
events--meaning any event resulting in a change to data previously 
reported in connection with the swap, such as an assignment or 
novation, a partial or full termination of the swap, or a change in the 
cash flows originally reported--on the day that such an event occurs. 
For foreign exchange transactions, interest rate swaps, and other 
commodity swaps, the NOPR called for a daily report of state data--
meaning all data necessary to provide a daily snapshot view of the 
primary economic terms of the swap, including any changes since the 
last snapshot.
    For cleared swaps, the NOPR required daily valuation data reporting 
by the DCO, daily valuation data reporting by SD or MSP reporting 
counterparties, and valuation data reporting by non-SD/MSP reporting 
counterparties at intervals to be determined prior to issuance of the 
final rule.
2. Comments Received
    The Commission received several comments from a variety of 
commenters concerning the proposed rule's continuation data reporting 
provisions. These comments addressed reporting with respect to changes 
to the terms of the swap, contract intrinsic events,

[[Page 2152]]

valuation, and master agreements and collateral.
    a. Reporting changes to a swap. The broad themes of the comments 
received concerning reporting changes to a swap addressed the reporting 
method--life cycle or snapshot--to be used, the timing and frequency of 
reports, and the choice of who should make the required reports.
    Reporting method. As noted above, the NOPR prescribed the data 
reporting method to be used in each asset class to report changes to 
the primary economic terms of the swap. TriOptima and the Electric 
Coalition agreed that the rule should specify the method used in each 
asset class, and supported the NOPR's choices in that respect. ICE 
recommended adopting the lifecycle method rather than the snapshot 
method for the other commodity asset class. ISDA, SIFMA, REGIS-TR, and 
DTCC recommended having the rule not make the choice between the 
lifecycle and the snapshot reporting method for each asset class, but 
rather allowing SDRs to decide whether to accept data by either or both 
methods. SunGard recommended that the Commission delegate the choice to 
a self-regulatory organization or standards board.
    Timing for reporting changes. Various non-SD/MSPs involved in 
energy markets, including AGA, COPE, EEI, EPSA, and the Electric 
Coalition, argued that daily snapshot reporting would be unduly 
burdensome for non-SD/MSP reporting counterparties. COPE, EEI, and EPSA 
advocated requiring a snapshot only when a change to primary economic 
terms has occurred. AGA suggested reporting a monthly snapshot, while 
the Electric Coalition advocated a quarterly snapshot.
    Change reporting for cleared swaps. ICE, a number of non-SD/MSPs 
involved in energy markets including WGCEF, EEI, EPSA, and Chris 
Barnard recommended having continuation data reporting for cleared 
swaps done solely by DCOs. WGCEF noted that counterparties to swaps 
that are both platform-executed and cleared, the counterparties may not 
know each other's identity, which could make determination of the 
reporting counterparty difficult.
    Reporting of contract-intrinsic events. ISDA and SIFMA suggested 
that the Commission should not require reporting of contract-intrinsic 
events, i.e., events that do not result in any change to the 
contractual terms of the swap. These commenters noted that the SEC's 
proposed data reporting rule for security-based swaps does not include 
such a requirement, and argued that reporting of such events is 
unnecessary if they are in the public domain. At a minimum, ISDA and 
SIFMA suggested limiting reporting of such events to reporting along 
with the next required life cycle event report.
    Reporting corporate events of the non-reporting counterparty. For 
non-cleared swaps, ISDA and SIFMA requested that the final rule allow 
additional time for the reporting counterparty to report corporate 
events of the non-reporting counterparty, arguing that the reporting 
counterparty may not know of such events on the same day that they 
happen.
    b. Valuation data reporting. The themes of the comments received 
regarding valuation data reporting included: Who should report 
valuation data for cleared swaps; valuation data reporting by non-SD/
MSP reporting counterparties; what valuation data should be reported; 
requiring independent valuations; and acceptable valuation methods.
    Who should report valuation data for cleared swaps. A number of 
commenters, including ICE, WGCEF, EEI, EPSA, and Chris Barnard, 
recommended that all valuation data reporting for cleared swaps should 
be done by the DCO. COPE, EEI, EPSA, and the Electric Coalition 
suggested that non-SD/MSP reporting counterparties should not have to 
report valuation data for either cleared or uncleared swaps.
    Valuation data reporting by non-SD/MSP reporting counterparties. 
The NOPR required non-SD/MSP reporting counterparties to report 
valuation data for both cleared and non-cleared swaps, at intervals to 
be determined by the Commission prior to issuance of the final rule. 
FHLB and a number of commenters in the energy sector suggested that 
valuation reporting requirements for non-SD/MSP counterparties be 
either loosened or eliminated. FHLB recommended weekly valuation 
reporting by non-SD/MSP reporting counterparties, arguing that this 
should be sufficient for regulatory purposes and would avoid forcing 
end users to implement the costly infrastructure needed to generate 
daily valuation reports. AGA suggested monthly valuation reporting by 
non-SDs/MSPs, since daily reporting would be unduly burdensome for 
them. The Electric Coalition recommended quarterly reporting. Chatham 
Financial supported valuation reporting only when swap portfolios are 
reconciled, since (in their view) non-SD/MSP counterparties will lack 
the systems and staff necessary to produce valuations and thus would 
have to pay third-party service providers for them. As noted above, 
COPE, EEI, EPSA, and the Electric Coalition urged that non-SD/MSP 
reporting counterparties should not have to report valuation data at 
all.\37\
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    \37\ These commenters argued that valuation of swaps between 
non-SD/MSP counterparties did not cause the financial crisis and was 
not the target of the Dodd Frank Act, and contended that the Dodd-
Frank Act does not authorize requiring non-SD/MSP counterparties 
(especially those that are not financial entities) to report 
valuation data. They also contended that the value of standardized 
swaps is transparent from market data, while the value of illiquid, 
non-standard swaps is merely based on a business judgment.
---------------------------------------------------------------------------

    What valuation data should be reported. ISDA and SIFMA asked the 
Commission to note that valuation data for uncleared swaps will not be 
``same day,'' but will refer to portfolio valuation on the close of the 
preceding day, since these valuations are typically performed 
overnight. Reval urged required reporting of all data elements 
necessary to determine the market value of the swap, and suggested that 
independent valuation calculations by third parties such as SDRs should 
be required. Reval also suggested requiring that valuation data be 
reported on a portfolio basis rather than a transaction basis. ICE 
suggested that DCO valuation data reports should consist solely of 
daily price marks, and that SDRs should be required to calculate 
valuation amounts for each open trade. SunGard asked the Commission to 
provide guidance on acceptable methods of valuation for uncleared 
swaps, either in the final rule or by industry consensus.
    c. Possible reporting of master agreements or collateral. The NOPR 
required registered entities and swap counterparties to keep full and 
complete records concerning swaps, which would include records of 
master agreements. The NOPR did not require reporting the terms of such 
agreements to SDRs, but requested comment on whether a separate master 
agreement library system should be established as part of an SDR.
    Should a master agreement library system be established? Commenters 
disagreed on whether master agreement reporting should be required. 
Chatham Financial and the Coalition of Derivatives End-Users (``CDEU'') 
recommended that the Commission carefully consider the costs and 
benefits of master agreement reporting prior to instituting such a 
requirement. They noted that if such reporting went beyond submission 
of PDF copies of master agreements, market participants (especially end 
users) would find it labor intensive and tedious to extract legal terms 
from the documents. The Electric Coalition, American Benefits Council 
(``ABC''), and CIEBA also emphasized the need to minimize

[[Page 2153]]

burdens involved in any required master agreement reporting. ISDA and 
SIFMA recommended against a master agreement library, stating that a 
centralized effort to capture documentation would need to be much wider 
than master agreements; would be duplicative of existing industry 
investments; would not provide regulators with particularly meaningful 
data given the slow rate of change of these documents; and would not 
provide information above and beyond that which would be readily 
obtained from regulated firms. Reval suggested establishment of a 
separate SDR for master agreements and related credit support 
agreements, in order to enhance regulators' ability to measure systemic 
risk. ABC and CIEBA suggested that master agreements be reported once 
to a separate library at an SDR, with amendments reported to the same 
SDR. The Electric Coalition recommended limiting master agreement-
related reporting to the reporting of master agreement identifiers 
rather than of agreements themselves, in order to lessen reporting 
burdens.
    Should a collateral warehouse system be established? The NOPR 
required registered entities and swap counterparties to keep full and 
complete records concerning swaps, which would include records 
concerning collateral. It did not require reporting concerning 
collateral, but requested comment on whether a separate collateral 
warehouse system should be established as part of an SDR, to enable 
prudential regulators to monitor collateral management and gross 
exposure on a portfolio level. SunGard, ISDA, SIFMA, DTCC, and 
TriOptima recommended establishing a separate collateral repository, 
noting that collateral information is important for systemic risk 
management, but not possible in transaction-based reporting since 
collateral is dealt with at a portfolio level. They suggested that this 
would also provide a superior form of valuation information. Chatham 
Financial suggested that the benefits of a collateral warehouse and 
reporting concerning collateral may not outweigh the costs involved, 
due to the potential for highly customized terms and the complexity and 
difficulty of representing the terms of relevant agreements 
electronically.
3. Final Rule: Sec.  45.4
    The Commission has considered and evaluated these comments, and has 
made a number of changes in the final rule. Accordingly, the 
continuation data provisions of the final rule will include the 
following changes from the NOPR.
    a. Reporting changes to a swap.
    Reporting method. The Commission believes the general principle 
applicable to continuation data reporting should be that current 
information concerning all swaps must be available to regulators in 
SDRs in order to fulfill the purposes of the Dodd-Frank Act. Based on 
comments, meetings with market participants, roundtable discussions, 
and consultation with other regulators, the Commission has determined 
that the final rule can serve this principle without mandating one 
particular reporting method, whether life cycle or snapshot, for 
continuation data reporting. Accordingly, the final rule requires 
registered entities and reporting counterparties to report continuation 
data in a manner sufficient to ensure that the information in the SDR 
concerning the swap is current and accurate, and includes all changes 
to any of the primary economic terms of the swap. The final rule will 
leave to the SDR and registered entity and reporting counterparty 
marketplace the choice of the method, whether life cycle or snapshot, 
for reporting continuation data that is sufficient to meet this 
requirement. This approach could also help to address reporting time 
concerns raised by commenters, since reporting counterparties would not 
be required to report on a daily basis if the SDR in question accepts 
life cycle reporting.\38\
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    \38\ The flexibility of this approach should also ensure 
harmonization of the final rule with SEC rules in this respect: even 
if the SEC rules specify a reporting method for reporting to 
security-based swap data repositories, SDRs that accept mixed swaps 
will be free to accept reporting by any reporting method mandated by 
the SEC.
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    Timing for reporting changes. Given the regulatory importance of 
ensuring that information in SDRs is current, and, in the Commission's 
view, the availability of automated systems and staff to DCOs, SDs, and 
MSPs, the Commission believes it is necessary to require DCOs and SD or 
MSP reporting counterparties to make continuation data reports, by 
either reporting method, no later than the same day a relevant change 
occurs. The Commission has considered comments suggesting that same-day 
reporting could impose greater burdens on non-SD/MSP reporting 
counterparties than on SDs or MSPs, due to comparative differences in 
automated systems and staff, and the Commission is aware that swaps 
between non-SD/MSP counterparties are likely to constitute only a 
minority of all swaps. Accordingly, the final rule will call for non-
SD/MSP reporting counterparties to report continuation data no later 
than the end of the second business day following the date of a 
relevant change during the first year of reporting, and no later than 
the end of the first business day following the date of a relevant 
change thereafter. The Commission has determined that this approach 
will lighten burdens on non-SD/MSP reporting counterparties without 
unduly degrading the currency of the information available to 
regulators in SDRs.
    Change reporting for cleared swaps. The Commission has considered, 
and agrees with, commenters' suggestion that continuation data 
reporting will be best done by DCOs. For cleared swaps in all asset 
classes, the final rule will make DCOs the sole reporters of 
continuation data other than valuation data.
    Reporting of contract-intrinsic events. The Commission has 
considered the comments addressing reporting of contract-intrinsic 
events. In light of the fact that contract-intrinsic events do not 
involve changes to the primary economic terms of a swap, and that most 
such events are in the public domain, and in order to reduce reporting 
burdens to the extent this can be done without impairing the purposes 
for which the Dodd-Frank Act requires swap data reporting, the 
Commission has determined that the final rule will not require 
reporting of contract-intrinsic events.
    Reporting corporate events of the non-reporting counterparty. The 
Commission has considered the comments relating to the time when 
corporate events of the non-reporting counterparty must be reported, 
and has made a number of changes in the final rule. As noted above, the 
final rule requires reporting of changes to primary economic terms by 
SDs or MSPs on the day they occur, and (after a one-year phase in 
period) by non-SDs/MSPs by the end of the business day after they 
occur. With respect to reporting corporate events of the non-reporting 
counterparty, the final rule provides that SD and MSP reporting 
counterparties must report their own corporate events on the day they 
occur, and must report corporate events of the non-reporting 
counterparty by the end of the business day following the date when 
they occur. In order to further reduce related burdens for non-SD/MSP 
reporting counterparties, the rule requires non-SD/MSP reporting 
counterparties to report their own corporate events by the end of the 
business day after the date on which they occur, and to report 
corporate events of the non-reporting counterparty by the end of the 
second business day following the date on which they occur. In 
complying with the final rule, reporting counterparties should use due

[[Page 2154]]

diligence to ensure that the non-reporting counterparty notifies the 
reporting counterparty promptly of the non-reporting counterparty's 
corporate events affecting any primary economic term of the swap.\39\
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    \39\ Such due diligence could consist of requiring as one term 
of the swap agreement that the non-reporting counterparty notify the 
reporting counterparty promptly of corporate events of the non-
reporting counterparty.
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    b. Valuation data reporting for cleared swaps.
    Who should report valuation data for cleared swaps. After 
considering comments received, the Commission has determined that for 
cleared swaps where the reporting counterparty is a non-SD/MSP, a DCO's 
valuation is sufficient for regulatory purposes. The final rule 
therefore will not require non-SD/MSP reporting counterparties to 
report valuation data for cleared swaps. Because prudential regulators 
have informed the Commission that counterparty valuations are useful 
for systemic risk monitoring even where valuations differ, the final 
rule requires SD and MSP reporting counterparties to report the daily 
mark for each of their swaps, on a daily basis.\40\ The Commission 
notes that SDs and MSPs may choose, though they are not required, to 
provide to SDRs and to counterparties, in addition to the daily mark, 
methodologies and assumptions sufficient to independently validate the 
output from a model generating the daily mark, collectively referred to 
as the ``reference model. Provision of a ``reference model'' does not 
require an SD or MSP to disclose proprietary information.
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    \40\ The Commission notes that SDs and MSPs may choose, though 
they are not required, to provide to SDRs and to counterparties, in 
addition to the daily mark, methodologies and assumptions suffcient 
to validate the output from a model used to generate the daily mark, 
collectively referred to as the ``reference model.'' Non-SD/MSP 
counterparties may also choose, thought they are not required, to 
provide a ``reference model'' in connection with valuation data 
reporting. Provision of a ``reference model'' does not require an 
SD, MSP, or non-SD/MSP counterparty to disclose proprietary 
information.
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    Valuation data reporting by non-SD/MSP reporting counterparties. 
The Commission has considered the comments concerning valuation data 
reporting by non-SD/MSP counterparties. As noted above, the final rule 
will lessen valuation data reporting burdens for non-SD/MSP 
counterparties by eliminating the requirement that they report 
valuation data for cleared swaps. With respect to uncleared swaps 
between non-SD/MSP counterparties, the Commission has determined that 
the final rule should lessen valuation data reporting burdens for the 
non-SD/MSP reporting counterparty by requiring such reports less 
frequently than proposed, but should not eliminate such reporting 
entirely. While this category represents a minority of all swaps, the 
Commission believes that some valuation information should be present 
in SDRs for all swaps for regulatory purposes. The final rule requires 
non-SD/MSP reporting counterparties to report valuation data consisting 
of the current daily mark of the transaction as of the last day of each 
fiscal quarter, transmitting this report to the SDR within 30 calendar 
days of the end of each fiscal quarter. The Commission notes that non-
SD/MSP reporting counterparties may choose, though they are not 
required, to provide to SDRs and to counterparties, in addition to the 
daily mark, methodologies and assumptions sufficient to independently 
validate the output from a model generating the daily mark, 
collectively referred to as the ``reference model. Provision of a 
``reference model'' does not require a non-SD/MSP reporting 
counterparty to disclose proprietary information. The final rule will 
further provide that if a daily mark of the transaction is not 
available, the reporting counterparty satisfies the valuation data 
reporting requirement by reporting the current valuation of the swap 
recorded on its books in accordance with applicable accounting 
standards. The Commission believes that requiring valuation data 
reporting by non-SD/MSP reporting counterparties on a quarterly basis, 
when applicable law and accounting standards may require them to value 
their swaps for purposes of their own accounting, will minimize 
reporting burdens for such counterparties to the greatest extent 
commensurable with ensuring that valuation data essential for 
regulatory purposes is reported for such swaps.
    What valuation data should be reported. The Commission is aware, as 
comments noted, that valuations of swaps are typically performed 
overnight. Accordingly, the final rule provides that the appropriate 
daily mark to report when a valuation data report is required is the 
most current daily mark available. The Commission disagrees with 
comments suggesting required reporting of all data necessary for an 
independent valuation of each swap and required performance of such 
valuations by SDRs or other third parties, calling for portfolio-level 
valuation data reporting, or suggesting that the final swap data 
reporting rule should determine the acceptable methods for valuing 
uncleared swaps. The Commission believes valuation is fundamentally in 
the purview of the market. Prudential regulators have informed the 
Commission that counterparty valuations are useful for systemic risk 
monitoring even where such valuations represent the view of one party, 
and even where such valuations may differ. The Commission believes that 
daily mark to market, the valuation required by the final rule, is the 
valuation appropriate for reporting on a transaction basis.
    c. Possible reporting of master agreements or collateral.
    Should a master agreement library system be established? After 
considering relevant comments, the Commission has determined that it 
should not require master agreement reporting in its first swap data 
reporting final rule. As noted in the Joint Study on the Feasibility of 
Mandating Algorithmic Descriptions for Derivatives released by the CFTC 
and SEC in April 2011, at present the terms of such agreements are not 
readily reportable in an electronic format, as the industry has not 
developed electronic fields representing terms of a master 
agreement.\41\ The Commission also understands that reporting of master 
agreements could be initiated by the other regulators pursuant to 
separate and different regulatory authority. The Commission may choose 
to revisit this issue at some point in the future, if and when industry 
and SDRs develop ways to represent the terms of such agreements 
electronically.
---------------------------------------------------------------------------

    \41\ Commodity Futures Trading Commission and Securities and 
Exchange Commission, Joint Study on the Feasibility of Mandating 
Algorithmic Descriptions for Derivatives, April 7, 2011, available 
at http://www.sec.gov/news/studies/2011/719b-study.pdf.
---------------------------------------------------------------------------

    Should a collateral warehouse system be established? After 
considering relevant comments, the Commission has determined that it 
should not require establishment of a collateral warehouse or reporting 
concerning collateral in its first swap data reporting final rule. As 
is the case with respect to the terms of master agreements, the 
industry has not yet developed electronic fields suitable for 
representing the terms required to report collateral. The Commission 
also understands that reporting with respect to collateral could be 
initiated by other regulators pursuant to separate and different 
regulatory authority. The Commission may choose to revisit this issue 
at some point in the future, if and when industry and SDRs develop ways 
to represent electronically the terms required for reporting concerning 
collateral.

[[Page 2155]]

D. Summary of Creation Data and Continuation Data Reporting--Sec. Sec.  
45.3 and 45.4

    As discussed above, the Commission is responding to comments 
concerning creation data reporting by creating a streamlined reporting 
regime that requires reporting by the registered entities or swap 
counterparties that the Commission believes have the easiest, fastest, 
and cheapest data access and those most likely to have the necessary 
automated systems; that minimizes burdens and costs for counterparties 
to the extent possible; and that provides certainty to the market. The 
final rule provisions regarding creation data reporting obligations and 
deadlines for SD or MSP reporting counterparties, and for non-SD/MSP 
reporting counterparties, are summarized in the charts on the following 
two pages, respectively.
BILLING CODE 6351-01-P

[[Page 2156]]

[GRAPHIC] [TIFF OMITTED] TR13JA12.000


[[Page 2157]]


[GRAPHIC] [TIFF OMITTED] TR13JA12.001


[[Page 2158]]


BILLING CODE 6351-01-C

F. Unique Swap Identifiers--Sec.  45.5

1. Proposed Rule
    The NOPR required that each swap subject to the Commission's 
jurisdiction be identified in all swap recordkeeping and data reporting 
by a unique swap identifier (``USI''). The NOPR provided for a ``first-
touch'' approach to USI creation, with the USI created by SEFs and DCMs 
for facility-executed swaps, by SDs and MSPs for off-facility swaps in 
which they are the reporting counterparty, and by SDRs for off-facility 
swaps between non-SD/MSP counterparties (who may lack the requisite 
systems for USI creation).
2. Comments Received
    a. First-touch creation of USIs. Most comments concerning the USI 
received by the Commission via comment letters, roundtables, and 
meetings with industry and other regulators supported use of a USI that 
will enable regulators to track and aggregate all information 
concerning a single swap throughout its existence, and supported the 
NOPR's first-touch approach to USI creation. DTCC supported the first-
touch approach, while noting that SDRs could also create USIs and 
transmit them to the counterparties to the swap (as the NOPR provides 
for swaps between non-SD/MSP counterparties). WGCEF approved having 
USIs assigned when a swap is executed. Global Forex supported USI 
creation at the time the swap is executed, while pointing out that in 
the foreign exchange context, where some pre-trade allocation occurs 
and some firms book the trade upon receipt of a message that their 
price has been hit, it could be necessary in some cases to append the 
USI to an already-created record in a firm's automated systems.\42\ CME 
suggested that USIs should not be created and issued by a single 
coordinating registry, but should be created by market participants as 
provided in the NOPR, using common standards that can be applied free 
of charge. TriOptima indicated a preference for having SDRs create the 
USI, with reporting entities or counterparties using their own local 
trade identifiers in reporting to the SDR, which can map the local 
identifiers to the USI. ISDA, SIFMA, and CME asked the Commission to 
clarify further the purpose and intended use of USIs. Some roundtable 
participants suggested that one way to ensure the uniqueness of USI 
codes created by different registered entities would be for the 
registered entity creating a USI to use an appropriate random number 
generator.
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    \42\ Global Forex still preferred USI creation at the time of 
execution over creation at the point of order submission, since the 
latter would create a risk of cancelled and non-sequential USIs in 
the event a trade is cancelled.
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    b. Impact of allocation on USIs. TriOptima suggested that the 
Commission should clarify the creation and use of USIs in the context 
of allocation, observing that where allocation follows execution, it 
may not be obvious whether or not a new USI should be assigned. 
TriOptima suggested that rules addressing this issue are needed. Other 
market participants also requested clarification concerning USI 
creation and swap creation data reporting in the context of allocation.
    c. Impact of post-execution events on USIs. Thomson Reuters, 
TriOptima, and the WGCEF requested clarification regarding the impact 
on USI codes of events such as compression, assignments, partial 
terminations, changes to counterparty names, purchases, acquisitions, 
or deactivation. Thomson Reuters suggested that when multiple swaps are 
combined during their existence, the unique swap identifier should have 
alternative tracking numbers externally linked to the original USI.
    d. USIs for historical swaps. Although this issue pertains to part 
46 rather than part 45, TriOptima suggested in its part 45 comment that 
USIs should be assigned to historical swaps when they are first 
reported to an SDR. TriOptima noted that giving USIs only to swaps 
entered into after the applicable compliance date would create a long 
transition period during which there are live contracts with and 
without USIs, which TriOptima believed would be technologically 
problematic. TriOptima recognized that introducing USIs for existing 
transactions would be a large undertaking. It suggested that reporting 
entities create USIs for historical swaps using the name-space method 
(combining a code for the assigning entity and a USI code unique within 
that entity).
3. Final Rule: Sec.  45.5
    a. First-touch creation of USIs. After considering the comments 
received, the Commission has determined that, as provided in the NOPR, 
the final rule requires each swap subject to the Commission's 
jurisdiction to be identified in all recordkeeping and swap data 
reporting pursuant to this part by a USI, created through a first-touch 
approach. The Commission believes that USIs will benefit both 
regulators and counterparties, by facilitating aggregation of all data 
concerning a given swap (including creation data, continuation data, 
and error corrections, reported by execution platforms, clearing 
houses, and counterparties) into a single, accurate data record that 
tracks the swap over its duration. USIs are essential to giving 
regulators the ability to track swap transactions throughout their 
lives. In addition, USIs provide an efficient means of assuring that 
transactions are not double counted when producing summary reports. 
This is particularly important where transactions may be reported to 
multiple SDRs, for example where a counterparty may be required to 
report a transaction to a foreign SDR.
    Having the USI created when the swap is executed, i.e., at the 
earliest possible point, will best ensure that all market participants 
involved with the swap, from counterparties to platforms to 
clearinghouses to SDRS, will have the same USI for the swap, and have 
it as soon as possible. This will avoid confusion and potential 
errors.\43\ It will avoid delays in submitting an executed swap for 
clearing while waiting for receipt of a USI from creation at a later 
time, and will minimize to the extent possible the need to alter pre-
existing records concerning the swap in various automated systems to 
add the USI. As the sole exception to first-touch USI creation, 
designed to reduce burdens on non-SD/MSP reporting counterparties who 
may lack the technical sophistication or automated systems needed for 
USI creation, the final rule will maintain the NOPR provision calling 
for the USI for each swap between non-SD/MSP counterparties to be 
created by the SDR to which the swap is reported.
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    \43\ The Commission disagrees with TriOptima's suggestion that 
reporting entities should always use their own identifiers in 
reporting to SDRs during the life of a swap. This would require the 
SDR to match the entity's internal ID with the USI every time data 
is submitted, and is not the more efficient approach.
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    To ensure the uniqueness of USIs created by registered entities as 
provided in the final rule, the final rule will follow the NOPR in 
prescribing USI creation through what is known as the ``name space'' 
method. Under this method, the first characters of each USI will 
consist of a unique code that identifies the registered entity creating 
the USI, given to the registered entity by the Commission during the 
registration process.\44\ The remaining characters of the USI will 
consist of a code created by the registered entity that must be unique 
with respect to all other USIs created by that registered entity. While 
the

[[Page 2159]]

Commission will not prescribe the means for ensuring the uniqueness of 
each USI created by a registered entity, Commission staff may work with 
registered entities to identify random number generators sufficiently 
capable for this purpose.
---------------------------------------------------------------------------

    \44\ The registration paperwork established pursuant to the SEF, 
DCM, SD, MSP, and SDR registration rules will include provision of 
such a code to the registrant.
---------------------------------------------------------------------------

    b. Impact of allocation on USIs. The Commission has considered the 
comments and industry requests for clarification it received concerning 
USI creation and swap creation data reporting in the case of swaps 
involving allocation by an agent to its clients who are the actual 
counterparties on one side of the swap. In response to these requests, 
the final rule will address both USI creation and creation data 
reporting for swaps involving allocation.
    The Commission understands that in the allocation context, a firm 
acting as an agent enters into a swap, typically with an SD (or 
possibly an MSP), and then allocates its side of the swap to its 
clients on whose behalf it arranged the swap. The clients of the agent, 
who are the actual counterparties to the SD, must have pre-existing 
ISDA agreements or similar agreements with the SD in order for the 
transaction to take place. At the time of execution, the SD knows that 
the firm acting as agent as only an agent and is not the SD's actual 
counterparty for the swap, and it knows that the agent's clients are 
its actual counterparties; but it does not yet know for this particular 
swap the identity of the agent's clients that are its counterparties. 
The agent firm allocates its side of the swap within a relatively short 
time after execution, and the agent (or a third party service provider 
acting on its behalf) then informs the SD of the identities of its 
counterparties.\45\ Market participants have informed the Commission 
that allocation is not algorithmic, due to particular requirements of 
the agent's clients, and that it typically requires two or more hours 
but is always completed by the end of the business day on which the 
swap was executed. The result of allocation is that a single swap 
transaction created at the moment of execution is replaced by several 
swaps, for each of which the counterparties are the SD and one of the 
agent's clients.\46\
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    \45\ In the case of cleared swaps, allocation precedes 
submission to the DCO for clearing.
    \46\ This situation is distinct from cases where, for example, a 
hedge fund enters into a swap as a principal, and later enters into 
separate swaps with its own clients (who often are funds) to offset 
its risk from the first swap in which it was a principal.
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    To provide the clarification requested by commenters as noted 
above, the Commission has determined that the final rule should 
specifically address the creation of USIs and the reporting of required 
swap creation data in the context of allocation.\47\ Because real time 
reporting must occur as soon as technologically practicable after 
execution of a swap, and because it is important for the exposure of 
the reporting counterparty to be available to regulators in an SDR as 
soon as technologically practicable after execution, the Commission 
believes it is necessary for the original transaction between the SD 
and the agent to be reported. However, because the SD's actual 
counterparties are the clients of the agent and not the agent, the 
Commission believes it is also necessary for each individual swap 
between the SD and one of the agent's clients to also be reported. To 
avoid double-counting of swaps in the allocation context, it is 
necessary to be able to map together the original transaction and the 
post-allocation swaps.
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    \47\ The allocation provisions of the final rule do not create 
reporting requirements additional to those included in the NOPR, 
since the NOPR required, as mandated by CEA section 2(a)(13)(G), 
that all swaps must be reported.
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    Accordingly, the final rule provides that, in the context of 
allocation, the reporting counterparty must create a USI for the swap 
arranged between it and the agent, and report that swap to an SDR as 
soon as technologically practicable after execution. The PET data for 
such a swap will include an indication that the swap will be allocated, 
and include the LEI (or substitute identifier) of the agent, but not 
the LEIs of the clients who are the non-reporting counterparties, since 
they will not yet be known to the reporting counterparty.
    The final rule will also allow the agent to inform the reporting 
counterparty of the identities of its actual counterparties as soon as 
technologically practicable after execution, but not later than eight 
business hours after execution. The Commission understands that major 
firms acting as agents in the allocation context can allocate in a 
shorter time, but that smaller firms acting as agents typically 
allocate by the end of the business day. The Commission believes that a 
deadline of eight business hours will appropriately take into account 
the needs of such smaller firms.
    Finally, the final rule requires the reporting counterparty to 
create a USI for each of the individual swaps resulting from 
allocation, and to report each such swap as soon as technologically 
practicable after it is informed by the agent of the identities of its 
actual counterparties, the clients of the agent (which must occur as 
soon as technologically practicable after execution or at least within 
eight business hours of execution, as provided above). To prevent 
confusion or errors with respect to the data reported, and to avoid 
double-counting, the final rule requires that the report to the SDR for 
each post-allocation swap must include: An indication that the swap is 
a post-allocation swap; the USI of the original transaction; the USI of 
the post-allocation swap; the LEI of the actual counterparty; and the 
LEI of the agent. The final rule will also require the SDR to which the 
swaps are reported--which must be the same SDR to which the original 
transaction is reported--to map together the USIs of the original swap 
and of each of the post-allocation swaps.
    The Commission is adopting these USI and creation data reporting 
requirements in the context of allocation in response to comments 
seeking clarification on reporting in this context, as noted above, and 
in order to ensure that the Commission and other regulators can track 
the entire history of swaps in the context of allocation.
    c. Impact of post-execution events on USIs. The Commission has 
noted comments requesting that the final address the impact of post-
execution events on USIs. In response to these comments, the final rule 
provides that USI codes created at the time of execution using the 
first-touch approach will only be replaced where a new swap takes the 
place of an old swap, such as where a compression or full novation has 
occurred. Under the final rule, in such cases a new USI will be 
assigned to the new swap, and the SDR to which the swap has been 
reported will be required to map the new USI back to the USIs of the 
swaps from which the new swap originated, in a manner sufficient to 
allow the Commission and other regulators to follow the entire history 
and audit trail of each affected swap. In the case of events that do 
not result in the creation of a new swap, such as partial terminations 
or changes to counterparty names, the swap in question will retain the 
USI code originally assigned to it.
    d. USIs for historical swaps. The Commission agrees with the 
comment suggesting that it would undesirable and possibly 
technologically problematic to have live swaps both with and without 
USIs recorded in SDRs for an extended period. The Commission believes 
that for historical swaps, SDRs will be the best creators of USIs. The 
Commission will address this issue in its final part 46 rule for 
historical swaps.

[[Page 2160]]

G. Legal Entity Identifiers--Sec.  45.6

1. Proposed Rule
    The NOPR required that each counterparty to any swap subject to the 
Commission's jurisdiction be identified in all swap recordkeeping and 
data reporting by a legal entity identifier (``LEI'') (referred to in 
the NOPR as a unique counterparty identifier or ``UCI'') approved by 
the Commission. The NOPR established principles that an LEI must follow 
for it to be designated by the Commission as the LEI to be used in swap 
data recordkeeping and reporting pursuant to the Commission's 
Regulations.\48\ These principles included:
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    \48\ In this summary of the principles that were discussed in 
the NOPR preamble concerning Unique Counterparty Identifiers and set 
forth in Sec.  45.4(b) of the NOPR, paragraph headings that have 
come into common use in international discussions of principles for 
the LEI, but that do not change the substance of the principles 
stated in the NOPR, have been added for clarity.

     Uniqueness (one LEI per legal entity, never re-used).
     Neutrality (a single-field identifier format containing 
no embedded intelligence).
     Verifiability (a reliable method of verifying the 
identity of holders of LEIs, avoiding assignment of duplicate 
identifiers, and maintaining accurate reference data).
     Reliability (data protection and system safeguards).
     Open source (an open data standard and format capable 
of broad use, that enables data aggregation by regulators).
     Extensibility (capability of becoming the single 
international standard for unique identification of legal entities 
in the financial sector on a global basis).
     Persistence (each LEI remains permanently in the 
record, regardless of corporate events, while a new entity resulting 
from a corporate event receives a new LEI).
     Development and issuance acceptable to the Commission 
(development via an international voluntary consensus standards body 
such as the International Organisation for Standardisation, and 
issuance through such a body and an associated registration 
authority).
     Governance and funding acceptable to the Commission 
(ensuring LEI availability to all, on a royalty-free or reasonable 
royalty basis, through an LEI issuance system operated on a non-
profit basis).

    The NOPR also called for establishment of a confidential, non-
public LEI reference database, to which each swap counterparty 
receiving an LEI would be required to report reference data that would 
be associated with its LEI. Such reference data would include 
information sufficient to verify the identity of the counterparty 
receiving an LEI, both initially and at appropriate intervals 
thereafter (commonly called validation data or level one reference 
data).\49\ It would also include information concerning the corporate 
affiliations of the counterparty, in order to enable the Commission and 
other financial regulators to aggregate data concerning all swap 
transactions within the same ownership group (commonly called hierarchy 
data or level two reference data). As provided in the NOPR, data in the 
reference database would be available only to the Commission, and to 
other regulators via the same data access procedures applicable to data 
in SDRs.
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    \49\ As noted, the NOPR called for reference data including both 
(1) information sufficient to verify the identity of the 
counterparty receiving an LEI, both initially and on an ongoing 
basis, as set forth in section 45.4(b)(3)(iv) of the NOPR, and (2) 
information concerning the corporate affiliations and ownership 
group of the counterparty, as set forth in section 45.4(b)(2) of the 
NOPR. For clarity, the final rule uses the terms ``level one'' and 
``level two'' reference data, which have come into common 
international use in discussions of the LEI and LEI reference data, 
to refer to these two types of reference information addressed in 
the NOPR. These terms do not represent new data requirements beyond 
those proposed in the NOPR, but instead provide a succinct way to 
refer to the two types of reference data required in the NOPR.
---------------------------------------------------------------------------

    The NOPR stated the Commission's belief that optimum effectiveness 
of LEIs for achieving the systemic risk protection and transparency 
goals of the Dodd-Frank Act--goals shared by financial regulators 
world-wide, and repeatedly endorsed by the G-20 Leaders--would come 
from a global LEI created on an international basis through an 
international voluntary-consensus standards body such as ISO. The NOPR 
also announced the Commission's intention to have the final part 45 
rule prescribe use of such an international LEI in complying with the 
final rule, if an LEI meeting the principles established in the NOPR is 
available sufficiently prior to the compliance date on which swap data 
reporting will first begin pursuant to the final rule.
    Accordingly, the NOPR provided that the Commission would determine, 
prior to the initial compliance date, whether such an LEI is available. 
If it were, the NOPR called for the Commission to designate that LEI as 
the LEI approved by the Commission for use in complying with the final 
rule, and to publish notice of that designation to inform registered 
entities and swap counterparties where they can obtain LEIs for use 
pursuant to the final rule.\50\
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    \50\ The NOPR called for the Commission to make this 
determination at least 100 days prior to the initial compliance 
date, and to publish notice no later than 90 days prior to the 
initial compliance date, in order to give registered entities and 
swap counterparties subject to the final rule reasonable time in 
which to obtain LEIs for use as prescribed by the final rule.
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    In the event that the Commission were to find when it makes this 
determination that an LEI meeting the criteria set forth in the NOPR is 
not then available, the NOPR provided that until such time as the 
Commission determines that such an LEI is available, registered 
entities and swap counterparties should comply with the final rule by 
using a unique counterparty identifier created and assigned by an SDR 
as described in the NOPR.
2. Comments Received
    a. Endorsement of the LEI. The great majority of comments 
concerning the LEI received by the Commission via comment letters, 
roundtables, and meetings with both industry and other regulators 
strongly supported establishing an LEI to identify derivatives 
transaction counterparties and other financial firms involved in the 
world financial sector. Commenters supporting the LEI in comment 
letters included ISDA, SIFMA, Global Forex, GS1, Thomson Reuters, CME, 
ABC, Customer Data Management Group, CIEBA, and the Committee on 
Capital Markets Regulation.
    The Commission also received input from both U.S. and international 
financial regulators, international regulatory organizations, and world 
leaders endorsing creation of the LEI addressed in the NOPR. The CPSS-
IOSCO Report on OTC Derivatives Data Reporting and Aggregation 
Requirements recommends expeditious development of a global LEI, 
stating that:

    [A] standard system of LEIs is an essential tool for aggregation 
of OTC derivatives data. An LEI would contribute to the ability of 
authorities to fulfill the systemic risk mitigation, transparency, 
and market abuse protection goals established by the G20 commitments 
related to OTC derivatives, and would benefit efficiency and 
transparency in many other areas. As a universally available system 
for uniquely identifying legal entities in multiple financial data 
applications, LEIs would constitute a global public good. The Task 
Force recommends the expeditious development and implementation of a 
standard LEI that is capable of achieving the data aggregation 
purposes discussed in this report, suitable for aggregation of OTC 
derivatives data in and across TRs [trade repositories] on a global 
basis, and capable of eventual extension to identification of legal 
entities involved in various other aspects of the financial system 
across the world financial sector.\51\
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    \51\ Committee on Payment and Settlement Systems and Technical 
Committee of the International Organization of Securities 
Commissions, Report on OTC Derivatives Data Reporting and 
Aggregation Requirements. Issuance of this report by CPSS and IOSCO 
is anticipated during December 2012.


[[Page 2161]]


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    The LEI technical principles recommended in the Report, and the 
Report's statements concerning governance and funding for the LEI 
issuance system, closely parallel the LEI principles set forth in the 
NOPR, as do the principles set forth by the OFR in its Statement of 
Policy concerning the LEI,\52\ and those discussed in the SEC's 
proposed rule on data reporting for security-based swaps.\53\ Both the 
FSB Plenary and the G-20 Finance Ministers and Central Bank Governors 
have endorsed and supported creation and implementation of a global 
LEI.\54\ At the conclusion of their November 2011 meeting in Cannes, 
France, the G20 Leaders announced their strong support for the LEI, 
stating in the Cannes Summit Final Declaration that: ``We support the 
creation of a global legal entity identifier (LEI) which uniquely 
identifies parties to financial transactions.'' \55\ Following the 
meeting, the White House underscored President Obama's support for the 
LEI, stating that:
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    \52\ Department of the Treasury, Office of Financial Research, 
Statement on Legal Entity Identification for Financial Contracts, 
November 23, 2010, available at http://www.treasury.gov/initiatives/Documents/OFR_LEI_Policy_Statement-FINAL.PDF.
    \53\ See Securities and Exchange Commission, Proposed Regulation 
SBSR--Reporting and Dissemination of Security-Based Swap 
Information, 17 CFT part 240 (November 19, 2010).
    \54\ At its July 2011 meeting, the FSB Plenary ``welcomed the 
progress of financial regulators and industry to establish a single 
global system for uniquely identifying parties to financial 
transactions.'' FSB Press Release, July 18, 2011, available at 
https://www.financialstabilityboard.org/press/pr_110718.pdf. In 
their Communiqu[eacute] at the conclusion of their October 2011 
meeting, the Finance Ministers and Central Bank Governors of the G-
20 said, ``We underscored our support for a global legal entity 
identifier system which uniquely identifies parties to financial 
transactions with an appropriate governance structure representing 
public interest.'' Communiqu[eacute] of Finance Ministers and 
Central Bank Governors of the G-20, Paris, France, October 14-15, 
2011, available at http://www.g20.org/Documents2011/10/G20%20communiqu[eacute]%2014-15%20October%202011-EN.pdf.
    \55\ Cannes Summit Final Declaration, November 4, 2011, at 7, 
paragraph 31, available at http://www.g20.org/Documents2011/11/Cannes%20Declaration%204%20November%202011.pdf.

    The Legal Entity Identifier (LEI) initiative will support better 
understanding of true exposures and interconnectedness among and 
across financial institutions. We need such understanding to assess 
and reduce risks to the financial system.\56\
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    \56\ The White House, G-20: Fact Sheet on U.S. Financial Reform 
and the G-20 Leaders' Agenda, November 4, 2011, available at http://www.whitehouse.gov/the-press-office/2011/11/04/g-20-fact-sheet-us-financial-reform-and-g-20-leaders-agenda.

    b. LEI suggestions. Several comment letters received by the 
Commission also made specific suggestions and requests for 
clarification relating to the LEI. ISDA and SIFMA, Thomson Reuters, and 
AMG suggested that the unique counterparty identifier required by the 
final rule should be the same identifier as the legal entity identifier 
being developed under principles stated in the OFR policy statement 
concerning LEIs. Roundtable participants also suggested referring to 
the identifier as the LEI rather than the UCI, to avoid confusion. CME, 
Thomson Reuters, and most roundtable participants supported the NOPR 
principle calling for a neutral LEI with no embedded intelligence. 
WGCEF and TriOptima asked for guidance on how the LEI would relate to 
corporate events such as mergers and acquisitions. The Asset Management 
Group advocated assigning LEIs at the individual fund or account level 
rather than the legal entity level. ISDA, SIFMA and CME suggested that 
the LEI should be administered by a not-for-profit industry utility, 
and that an international directory of LEI holders should be available 
at no cost. CUSIP and GS1 suggested that they might be potential 
providers of a future LEI.
    c. LEI reference data. With respect to level two or hierarchical 
reference data for the LEI, CME suggested clarifying whether the LEI is 
intended to simply identify a specific counterparty or to establish a 
counterparty's relationship with other entities. Global Forex noted 
that data confidentiality law in different jurisdictions could raise 
issues regarding access to level two reference data. The Asset 
Management Group recommended that the definition of control for 
purposes of reporting level two reference data should require at least 
majority ownership. DTCC recommended that SDRs should have access to 
the non-public LEI reference database for use in the construction of 
reports to regulators, such as reports based on net or aggregated 
positions.
    d. Progress toward a global LEI. Since the Commission issued the 
proposed rule requiring use of LEIs in swap data reporting under CFTC 
jurisdiction, both international financial regulators and industry have 
made significant progress toward creation of the global LEI called for 
in the NOPR.
    Voluntary consensus body standard. In response to the Commission's 
preference, set forth in the NOPR as noted above, to have swap 
counterparties identified by a universally-available LEI created on an 
international basis through an international ``voluntary consensus 
standards body,'' the International Organisation for Standardisation 
has developed a new international technical standard for the LEI, ISO 
17442 Legal Entity Identifier (LEI). ISO is the world's principal 
voluntary consensus standards body, which includes 162 member 
countries. Through its Technical Committee 68 (``TC 68''), the expert 
committee for standardization in the field of banking, securities, and 
other financial services, ISO has published 48 key standards for the 
financial sector, ranging the international securities identification 
numbering (``ISIN'') code for securities, and the business 
identification code (``BIC'') for banking telecommunication messages to 
the codes for exchange and market identification (``MIC''), and for 
classification of financial instruments (``CFI'').\57\ The ISO 17442 
LEI standard received unanimous approval from TC 68 in June 2011, and 
it received unanimous support in the second round of voting by member 
countries in the ISO approval process that concluded on December 14, 
2011.\58\
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    \57\ During the process of developing ISO 17442, ISO determined 
that existing codes for other financial sector purposes, such as BIC 
codes and ISIN codes, were not suited by design to provide unique 
identification of legal entities across the world financial sector, 
and that a new standard was needed for this purpose.
    \58\ TC 68 will address comments received during the approval 
process in January 2012.
---------------------------------------------------------------------------

    Industry recommendations. Also in response to the NOPR's call for 
an international, universally-adopted LEI, in January 2011 a global 
coalition of financial sector trade associations and organizations came 
together to develop an industry consensus on requirements and standards 
for the LEI, and make a recommendation concerning formation of an LEI 
utility to issue LEIs and validate the identity of their holders.\59\

[[Page 2162]]

After extended discussions involving a broad cross-section of financial 
trade associations and both buy-side and sell-side firms from a wide 
range of countries, during the spring and summer of 2011 the global 
coalition issued a comprehensive set of requirements for a viable, 
international LEI; initiated a Solicitation of Interest process to 
identify one or more solution providers able to build, manage, and run 
an LEI utility to issue LEIs; evaluated formal responses from more than 
10 potential providers; and issued three recommendations concerning 
implementation of the global LEI system. First, the global coalition 
recommended that the international technical standard for the LEI code 
itself be the new international standard developed by ISO, ISO 17442 
Legal Entity Identifier (LEI). Second, the coalition recommended that 
the LEI utility that conducts LEI reference data collection and 
maintenance, LEI assignment, and quality assurance be operated as a 
joint venture including SWIFT (the Registration Authority selected by 
ISO for the ISO 17442 standard) and DTCC and its subsidiary AVOX 
Limited (to be the facilities manager for the LEI utility). Finally, 
the coalition recommended that the Association of National Numbering 
Agencies (``ANNA''), through its global network of national numbering 
agencies, be a partner in federated LEI issuance in the home countries 
of legal entities receiving LEIs. At the FSB LEI Workshop (discussed 
below) and elsewhere, the global coalition has stated its willingness 
to have the structure of the joint venture created to serve as the LEI 
utility include a governing board controlled by international financial 
regulators including the Commission, with authority over the operations 
of the joint venture sufficient to ensure that the LEI utility 
maintains compliance with the principles established for the LEI by 
international financial regulators, including the principles 
established by the Commission.
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    \59\ The global coalition included twelve trade association who 
endorsed the industry's Requirements for a Global Legal Entity 
Identifier (LEI) Solution, available at http://www.sifma.org/LEI-Industry-Requirements/. The included trade associations were the 
Association for Financial Markets in Europe, Asia Securities 
Industry and Financial Markets Association, British Bankers 
Association, Customer Data Management Group, The Clearing House 
Association L.L.C., Enterprise Data Management Council, Financial 
Services Roundtable, Futures Industry Association, Global Regulatory 
Identifier Steering Group, International Swaps and Derivatives 
Association, Investment Company Institute, and Securities Industry 
and Financial Markets Association. In addition, the following firms 
were party to the discussions leading to creation of Requirements 
for a Global Legal Entity Identifier (LEI) Solution: 
AllianceBernstein, Bank of America Merrill Lynch, Bank of New York 
Mellon-Pershing, Barclays Capital, Branch Banking & Trust Company, 
BlackRock, BNP Paribas, CIBC Wholesale Banking, Citi, Credit Suisse, 
Deutsche Bank, E*Trade Financial, Edward Jones, Federated 
Investments, Fidelity, GE Asset Management, GE Capital, Goldman 
Sachs, HSBC, Janney Montgomery Scott LLC, Jefferies, JP Morgan 
Chase, JWG, KeyBank, Loomis Sayles, Morgan Stanley, New York Life, 
Nomura, Northern Trust, Prudential, Royal Bank of Canada, Royal Bank 
of Scotland, R-Cube, Renaissance Technologies, Soci[eacute]t[eacute] 
G[eacute]n[eacute]rale, State Street, T Rowe Price, Tradeweb, UBS, 
and Wells Fargo.
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    The Commission understands that, in order to ensure as far as 
possible that LEIs can in fact be issued to swap counterparties subject 
to the Commission's jurisdiction prior to the initial compliance date 
for swap data reporting pursuant to this final rule, SWIFT, DTCC, AVOX, 
and ANNA are moving forward to cleanse already-available data 
sufficient to validate the identity of legal entities to receive an 
LEI; to collect and cleanse such validation data for other swap 
counterparties; and to issue temporary identifiers readily convertible 
into LEIs if their joint venture is designated by the Commission as the 
provider of LEIs to be used pursuant to this rule. They have also 
informed Commission staff that they anticipate being able to provide 
LEIs to swap counterparties by the summer of 2012 if they are so 
designated.
    International developments. In September 2011, the FSB convened an 
international LEI Workshop including over 50 private sector experts and 
over 60 representatives from the international financial regulatory 
community, including the Commission, to further educate participants 
and elicit their input concerning the LEI, and to guide preparation of 
a roadmap leading to recommendations concerning implementation of a 
global LEI system. Workshop participants discussed possible technical 
and governance principles for the LEI drawn from the CPSS-IOSCO Report 
on OTC Derivatives Data Reporting and Aggregation Requirements, which 
as noted above closely parallel those included in the NOPR. The 
Workshop revealed strong support for the LEI initiative from both 
private sector and official sector participants. Industry 
representatives emphasized the vital importance of support and 
leadership from the global regulatory community, and the many potential 
benefits of a global LEI that would only be realized if regulators 
support the LEI initiative. Presenters at the Workshop also supported 
the timely phasing of LEI implementation, likely to begin with use of 
the LEI in reporting OTC derivatives data to trade repositories.
    When the G-20 Leaders endorsed the LEI initiative following the 
Workshop, they stated that:

    We call on the FSB to take the lead in helping coordinate work 
among the regulatory community to prepare recommendations for the 
appropriate governance framework, representing the public interest, 
for such a global LEI by our next Summit.\60\
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    \60\ Cannes Summit Final Declaration, November 4, 2011, at 7, 
paragraph 31, available at http://www.g20.org/Documents2011/11/Cannes%20Declaration%204%20November%202011.pdf.

    Following the request from the G20, the FSB decided in December to 
create a time-limited, ad-hoc expert group of authorities, including 
the Commission, to carry forward work on key outstanding issues 
relevant to implementation of a global LEI, in order to fulfill the G-
20 mandate. The group held its first meeting on December 13 and 14, 
2011. The issues to be addressed by the expert group include: (1) The 
governance framework for the global LEI; (2) the operational model for 
the LEI system; (3) the scope of LEI reference data; (4) reference data 
access and confidentiality; (5) the funding model for the LEI system; 
and (6) global implementation and phasing of the LEI. It is anticipated 
that the expert group will deliver clear recommendations with respect 
to implementation of a global LEI system to the FSB Plenary for 
endorsement in April or May 2012. This process is designed to allow 
first-phase implementation of the LEI in OTC derivatives data reporting 
to trade repositories, including swap data reporting to SDRs pursuant 
to this final rule, to proceed, if possible, on the basis of globally 
agreed principles concerning governance, funding, and access to 
reference data.
3. Final Rule: Sec.  45.6
    a. Important factors in the Commission's decision. The Commission 
has considered and evaluated the comments and international input it 
has received concerning the LEI and the principles which should govern 
the LEI system, and has taken such comments and input into account in 
the LEI provisions of the final rule. It has also considered the 
progress made by the international financial regulatory community and 
industry toward creation of a global LEI, created on an international 
basis through an international voluntary consensus standards body, that 
meets the requirements provided in the NOPR, and is suitable for 
designation by the Commission for use in recordkeeping and swap data 
reporting pursuant to this final rule as set forth in the NOPR.
    Broad endorsement of the LEI. The Commission agrees with the 
recommendation of commenters, roundtable participants, industry, U.S. 
and international financial regulators, international regulatory 
organizations, and world leaders calling for creation of a global LEI. 
It also believes, as recommended by roundtable participants, the CPSS-
IOSCO Report on OTC Derivatives Data Reporting and Aggregation 
Requirements, and many FSB LEI Workshop participants, that the LEI 
should first be used for identification of swap counterparties in data 
reported to SDRs.
    LEI suggestions by commenters. The Commission accepts the 
suggestion of various commenters and roundtable participants that the 
unique

[[Page 2163]]

counterparty identifier required by the final rule should be the same 
identifier as the legal entity identifier (``LEI'') being developed by 
industry and international regulators as described above, and should be 
referred to as the LEI (rather than the UCI as in the NOPR) in order to 
avoid confusion. The Commission agrees with commenters that the 
neutrality principle set forth in the NOPR and elsewhere, calling for a 
neutral LEI with no embedded intelligence should be maintained. The 
persistence principle in the final rule addresses commenters' requests 
for guidance on how the LEI will relate to corporate events such as 
mergers and acquisitions.\61\ The Commission disagrees with the 
suggestion of one commenter that LEIs should be assigned at the 
individual fund or account level rather than the legal entity level, 
since LEIs by nature are legal entity identifiers. The Commission 
agrees with comments calling for the LEI to be administered by a not-
for-profit industry utility, and for an international directory of LEI 
holders to publicly available free of charge. The criteria for the 
Commission's designation of the LEI utility that will provide LEIs to 
be used in compliance with the rule are discussed below.
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    \61\ In determining whether a new entity requiring a new LEI has 
resulted from a corporate event, the LEI utility may consider 
whether the primary regulator (if any) of the entity or entities 
involved in the corporate event considers the result to be a new 
entity; whether market data vendors consider the result to be a new 
entity; or whether ownership has changed as a result of the 
corporate event.
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    LEI reference data considerations. The Commission believes that 
level one LEI reference data is essential to the ability of the issuer 
of LEIs to validate the identity of a legal entity receiving an LEI. As 
recognized by the participants in the FSB LEI Workshop, the Commission 
understands that such data by its nature is public, and presents no 
confidentiality or access issues. The Commission also believes, as also 
recognized by participants in the Workshop and in the CPSS-IOSCO Report 
on OTC Derivatives Data Reporting and Aggregation Requirements, that 
level two LEI reference data concerning the hierarchical relationships 
or company affiliations of legal entities is needed by regulators for 
use of the LEI as a tool to aggregate the data in trade repositories in 
order to enhance systemic risk mitigation and market supervision. The 
Commission understands, as recognized by Workshop participants, that 
some level two reference data is public and does not pose 
confidentiality concerns. However, the Commission is also aware, as 
pointed out by commenters and Workshop participants, that financial 
data confidentiality law in different jurisdictions could raise issues 
regarding access by regulators outside those jurisdictions, or by the 
public, to some level two reference data.\62\
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    \62\ The Commission has considered comments concerning the 
definition of control it should employ in connection with level two 
reference data, and concerning SDR access to level two reference 
data for the purpose of constructing reports for regulators.
---------------------------------------------------------------------------

    LEI standard. The Commission recognizes that ISO, the international 
voluntary consensus standards body cited in the NOPR, has developed an 
international standard for a global LEI, ISO 17442 Legal Entity 
Identifier (LEI).
    Industry recommendations. The Commission also recognizes that a 
global coalition of financial sector trade associations and 
organizations has developed a broad-based industry consensus on 
requirements and standards for the LEI, and has recommended that (1) 
the international standard for the LEI code itself should be ISO 
standard 17442; and (2) the LEI utility for LEI issuance, reference 
data collection and maintenance, and quality assurance should be 
operated as a joint venture including SWIFT, DTCC, AVOX, and ANNA. The 
Commission notes that the coalition has publicly stated its willingness 
for this joint venture to include a governing board controlled by 
international financial regulators including the Commission, with power 
to ensure that the LEI utility maintains compliance with the principles 
established for the LEI by international financial regulators, 
including the principles established by the Commission in this final 
rule.
    Timely availability of LEIs. The Commission understands that the 
recommended joint venture partners are moving forward to obtain and 
process the reference data necessary to validate the identity of legal 
entities to be identified by LEIs, so that if the joint venture is 
designated by the Commission as the issuer of LEIs to be used in swap 
data reporting, it can in fact be able to issue LEIs to swap 
counterparties subject to the Commission's jurisdiction prior to the 
commencement of swap data reporting pursuant to this final rule. At 
this time, the Commission is not aware of any other candidate to be the 
LEI utility designated to provide LEIs for use in compliance with this 
final rule that would in fact be able to provide the required LEIs on a 
timely basis.
    The Commission is aware that the ability of any LEI utility 
designated by the Commission to provide the LEIs to be used in 
compliance with this final rule to provide such LEIs when swap data 
reporting commences pursuant to this rule will depend in part on the 
Commission making such a designation, as called for in the NOPR, 
sufficiently prior to the commencement of swap data reporting to enable 
the LEI utility to issue the LEIs needed for compliance with this rule 
on a timely basis.
    Need for an internationally-established LEI. As stated in the NOPR, 
the Commission recognizes that optimum effectiveness of LEIs as a tool 
for achieving the systemic risk mitigation, transparency, and market 
protection goals of the Dodd-Frank Act--goals shared by financial 
regulators world-wide--would come from creation of a global LEI, on an 
international basis, that is capable of becoming the single 
international standard for unique identification of legal entities 
across the world financial sector. The Commission has participated in 
all of the work of the global financial regulatory community to date 
concerning implementation of a global LEI, and has carefully considered 
the results of this work. One reason the Commission has done so is that 
it recognizes the importance of having first-phase implementation of a 
global LEI follow principles that are forward-compatible with later 
phases of LEI implementation.\63\ The Commission welcomes, and is 
participating in, the work of the FSB-coordinated, ad-hoc expert group 
of authorities working to deliver clear recommendations on 
implementation of a global LEI system to the FSB Plenary for 
endorsement in April or May 2012. The Commission understands that an 
important purpose of FSB endorsement of these recommendations would be 
to allow first-phase implementation of the LEI, including its use in 
swap data reporting to SDRs pursuant to this final rule, to proceed, if 
possible, on the basis of globally agreed principles concerning 
governance and funding of the LEI and access to LEI reference data.
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    \63\ This is particularly true in light of the fact that, once 
industry builds or adapts automated systems for use in swap data 
reporting to include the LEI, it could be inadvisable to require 
registered entities and swap counterparties to incur the additional 
burden and cost that could come from changing the LEI system in ways 
that were not compatible with first-phase implementation of the LEI.
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    b. Final rule LEI provisions. In light of these considerations, the 
Commission has determined that Sec.  45.6 will include the following 
provisions.
    Standard for the LEI code. The LEI to be used in all recordkeeping 
and all swap data reporting required by this part, once the Commission 
has

[[Page 2164]]

designated the LEI utility that will provide the LEI to be used in 
complying with this part, as set forth below, must be issued under, and 
conform to, ISO Standard 17442, Legal Entity Identifier (LEI). This 
standard is the sole existing LEI standard created by a voluntary 
consensus standards body, and is the standard created by ISO, the 
voluntary consensus standards body cited in the NOPR as the optimum 
source for the LEI standard.
    LEI principles. The final rule includes both technical and 
governance principles that must be followed by the LEI used for 
compliance with the rule. These principles are based on those set forth 
in the NOPR, as complemented by the closely-parallel principles and 
governance considerations recommended in the CPSS-IOSCO Report on OTC 
Derivatives Data Reporting and Aggregation Requirements and the 
principles discussed at the FSB LEI Workshop.\64\ The final rule 
principles, set forth in detail in the text of section 45.6, are 
summarized below.
---------------------------------------------------------------------------

    \64\ As noted above, all of these principles closely parallel 
those set forth by the OFR in its Statement of Policy concerning the 
LEI, see footnote 52 above, and those discussed in the SEC's 
proposed rule on data reporting for security-based swaps, see 
footnote 53 above.
---------------------------------------------------------------------------

Technical Principles

     Uniqueness (one LEI per legal entity, never re-used).
     Neutrality (a single-field identifier format containing 
no embedded intelligence).
     Reliability (a reliable method of verifying the 
identity of holders of LEIs, based on reference data necessary for 
this purpose; as well as robust quality assurance practices and 
system safeguards, including the system safeguards applicable to 
SDRs under part 49 of this chapter).
     Open source (an open data standard and format capable 
of broad use, that enables data aggregation by regulators).
     Extensibility (capability of becoming the single 
international standard for unique identification of legal entities 
in the financial sector on a global basis).
     Persistence (each LEI remains permanently in the 
record, regardless of corporate events, while a new entity resulting 
from a corporate event receives a new LEI).

Governance Principles

     International governance (for operations, a governance 
structure for the LEI utility giving the Commission and other 
financial regulators requiring use of the LEI power to ensure that 
the LEI system adheres to these principles) (for compliance with ISO 
17442, governance by ISO).
     Reference data access (access to LEI reference data 
must enable use of the LEI as a public good, while respecting 
applicable law regarding data confidentiality).
     Non-profit operation and funding (funding and operation 
on a non-profit, reasonable cost-recovery basis, subject to 
international governance).
     Unbundling and non-restricted use (LEI issuance not 
tied to other services; no restrictions on use of the LEI; 
intellectual property consistent with open source principles).
     Commercial advantage prohibition (no commercial use by 
the utility of LEI reference data that is not available to the 
public free of charge).

    Designation of the LEI utility. As called for in the NOPR, the 
final rule provides for the Commission to designate the LEI utility 
that will provide the LEI to be used in complying with this rule, once 
the Commission determines that an LEI system satisfying the 
requirements of the rule is available, making this designation in a 
Commission order. In determining whether an LEI system satisfying the 
Commission's requirements is available, the Commission will consider, 
without limitation, the following factors:

     Whether the LEI provided by the utility is issued 
under, and conforms to, ISO Standard 17442, Legal Entity Identifier 
(LEI).
     Whether the LEI provided by the utility complies with 
all of the technical principles set forth in this rule.
     Whether the LEI utility complies with all of the 
governance principles set forth in this rule.
     Whether the LEI utility has demonstrated that it in 
fact can provide LEIs for identification of swap counterparties in 
swap data reporting commencing as of the compliance dates set forth 
in this rule.
     The acceptability of the LEI utility to industry 
participants required to use the LEI in complying with the rule.

    In making its determination, the Commission will consider all 
candidates meeting these criteria, but it will not consider any 
candidate that does not demonstrate that it in fact can provide LEIs 
for identification of swap counterparties in swap data reporting 
pursuant to this rule as of the compliance dates set forth in this 
rule.
    The Commission will make this determination and designate the LEI 
utility at a time sufficiently prior to the commencement of swap data 
reporting to enable the designated utility to issue LEIs far enough in 
advance of the compliance dates set forth in the rule to enable 
compliance with the rule.
    Reference data reporting. When an LEI utility has been designated 
by the Commission, the final rule requires reporting of both level one 
and level two reference data concerning the legal entity identified by 
an LEI. Level one reference data means the minimum information needed 
to identify, on a verifiable basis, the legal entity to which an LEI is 
assigned. Level two reference data means information concerning the 
corporate affiliations or company hierarchy relationships of the legal 
entity receiving an LEI. As provided in the NOPR, the final rule 
requires reporting of both types of reference data for each 
counterparty to any swap subject to the Commission's jurisdiction.
    The rule provides that level one reference data must be reported 
into a publicly-available level one reference database maintained by 
the issuer of the LEI designated by the Commission, at a time 
sufficient to ensure that the counterparty's legal entity identifier is 
available for inclusion in recordkeeping and swap data reporting as 
required by the rule. Such reference data is essential to verifying the 
identity of the legal entity receiving an LEI. Level one reference data 
can be reported into the database by the entity itself (self-
registration), or by another entity or organization such as a swap 
dealer reporting on behalf of its counterparties or a national number 
agency or data service provider reporting on behalf of its clients 
(third-party registration). Subsequent changes and corrections to level 
one reference data must also be reported.
    While the NOPR required reporting of level two reference data 
concerning all of a counterparty's corporate or company affiliation 
relationships, the Commission has determined that the final rule will 
reduce this requirement, and call for reporting of only a single piece 
of level two reference data, the identity of the counterparty's 
``ultimate parent'' as defined in the final rule. In making this 
determination, the Commission has taken into account comments 
suggesting that the Commission should coordinate with the SEC and 
international regulators to ensure where possible against material, 
substantive difference in reporting requirements, as well as comments 
suggesting that it should establish an ownership threshold for 
affiliations required to be reported, in order to reduce burdens for 
counterparties. The definitions of ``control,'' ``parent,'' and 
``ultimate parent'' adopted in the final rule are closely aligned with 
the SEC's definitions, including a 25% ownership threshold.\65\ These 
definitions are provided both to reduce burdens for counterparties, in 
relation to the full affiliation reporting proposed in the NOPR, and to 
provide clarity as to the

[[Page 2165]]

single affiliation required to be reported. The Commission believes 
that reporting of level two reference data consisting of the identity 
of a counterparty's ultimate parent is essential to the ability of the 
Commission and other regulators to aggregate swap data in order to 
fulfill the purposes of the Dodd-Frank Act. The Commission may revisit 
the issue of what additional level two reference data should be 
reported at a later time, when an international consensus concerning 
the reporting of additional level two reference data has had time to be 
developed.
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    \65\ The Commission disagrees with the 50% ownership threshold 
suggested by one commenter. The Commission believes that a 50% 
threshold would result in no ultimate parent being reported in a 
notable number of cases, and believes that the 25% threshold used by 
the SEC is more appropriate.
---------------------------------------------------------------------------

    Accordingly, the final rule also requires reporting of level two 
reference data, consisting of the identity of the counterparty's 
ultimate parent. Level two reference data must be reported to a level 
two reference database. All non-public level two reference data 
reported to the level two reference database will be available only to 
the Commission and other financial regulators in any jurisdiction 
requiring LEI use. Where applicable law forbids such reporting, the 
rule requires reporting that fact, and the citation of the law in 
question, in place of the data to which such law applies. The rule 
provides that the location of the level two database will be determined 
at a future time by a Commission order, and that the obligation to 
report level two reference data will not apply until that order is 
issued. The rule also provides that, once the order is issued, level 
two reference data must be reported at a time sufficient to ensure that 
it is included in the database when the counterparty's LEI is included 
in recordkeeping and swap data reporting as required by the rule. Level 
two reference data may also be reported via either self-registration or 
third-party registration. Changes and corrections must also be 
reported.
    Use of the LEI by registered entities and swap counterparties. The 
final rule provides that, when an LEI utility has been designated by 
the Commission, each registered entity and swap counterparty subject to 
the Commission's jurisdiction must use the LEI provided by the 
designated LEI utility in all recordkeeping and swap data reporting 
pursuant to this part.\66\
---------------------------------------------------------------------------

    \66\ The final rule provides a grace period until October 15, 
2012, for reporting counterparties whose systems are not yet 
prepared to include LEIs.
---------------------------------------------------------------------------

    Swap counterparty identification prior to LEI availability. 
Finally, the final rule provides that, before the LEI utility has been 
designated by the Commission, registered entities and swap 
counterparties subject to the Commission's jurisdiction shall use a 
substitute counterparty identifier created and assigned by an SDR, as 
provided in the final rule.
    c. Incorporation of international principles and recommendations. 
Because this final rule is being issued prior to completion of the work 
of the FSB-coordinated, ad-hoc expert group of authorities that will 
make recommendations to the FSB Plenary in April 2012 concerning LEI 
governance, funding, and reference data, it has been written, of 
necessity, to provide the principles and requirements that will apply 
to the LEI, when its use pursuant to this rule begins, in the absence 
of globally agreed principles for these aspects of the LEI system. As 
noted above, the Commission shares the goal of a global LEI capable of 
becoming the single international standard for unique identification of 
legal entities across the world financial sector. Therefore, if LEI 
principles that the Commission determines are forward-compatible with 
the principles set forth in this rule, or recommendations concerning 
LEI governance and funding and access to LEI reference data that are 
acceptable to the Commission, are endorsed by the FSB in April or May 
2012, the Commission may issue an interim final rule addressing LEI 
governance, funding, and reference data, that includes such principles 
and recommendations. Such an interim final rule, if issued, would 
replace affected provisions of this final rule, pending notice and 
comment and possible later adoption of the interim final rule by the 
Commission as a final rule.\67\
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    \67\ The Commission believes that the provisions of such an 
interim final rule must not impair the availability of LEIs for use 
in swap data reporting when such reporting commences pursuant to 
this rule. Accordingly, the Commission does not intend that such an 
interim final rule would alter the requirement for the LEI to be 
issued pursuant to ISO Standard 17442, or would alter the 
Commission's designation of the LEI utility once that designation 
has been made.
---------------------------------------------------------------------------

H. Unique Product Identifiers--Sec.  45.7

1. Proposed Rule
    The NOPR required that each swap subject to CFTC jurisdiction be 
identified in all swap recordkeeping and data reporting by a unique 
product identifier (``UPI'') and a product classification system, as 
determined by the Commission, for the purpose of categorizing swaps 
with respect to the underlying products referenced in them. The NOPR 
called for the UPI and product classification system to identify both 
the swap asset class and the subtype within that asset class to which 
the swap belongs, with sufficient specificity and distinctiveness (as 
determined separately for each asset class) to enable regulators to 
fulfill their regulatory responsibilities and to enhance real time 
reporting. As provided in the NOPR, UPIs would be assigned to swaps at 
a particular, asset class-specific level of the robust swap taxonomy 
used by the product classification system, and the use of UPIs and the 
classification system would enable regulators to aggregate and report 
swap activity at a variety of product type levels, and to prepare 
reports required by the Dodd-Frank Act regarding swap market activity.
2. Comments Received
    The majority of comments concerning the UPI received via comment 
letters, roundtables, and meetings with both industry and other 
regulators supported creation of a product classification system that 
provides a universally-accepted means of describing all swaps, whether 
standardized or bespoke, and permits creation of UPIs for sufficiently 
standardized swaps. As noted in the CPSS-IOSCO Report on OTC 
Derivatives Data Reporting and Aggregation Requirements, development of 
a standard product classification system is needed as a first step 
toward both a system of product identifiers for standardized 
derivatives products and an internationally-accepted semantic for 
describing non-standardized instruments. DTCC and Thomson Reuters 
pointed out that creation of a product taxonomy is a significant 
undertaking, and Thomson Reuters suggested that a pilot program for 
developing UPIs could be useful.
    An industry initiative to create a product classification system is 
being led by the creators of FpML, in cooperation with experts in FIX. 
The data subcommittee of the CFTC Technology Advisory Committee 
(``TAC'') has taken up this subject as well. Industry experts involved 
in the industry initiative and the TAC data subcommittee anticipate 
that it may be possible, once a product classification system is 
developed, to assign a UPI to approximately 80 to 95 percent of swaps 
(depending on the asset class involved), while approximately 5 to 20 
percent of swaps may be sufficiently bespoke that they can only be 
described rather than identified by a UPI. The CPSS-IOSCO Report on OTC 
Derivatives Data Reporting and Aggregation Requirements recommends 
CPSS-IOSCO and FSB support for timely development of a standard product 
classification system that can be used as a common basis for 
classifying and describing OTC derivatives products, and recommends 
that the FSB direct further international consultation and

[[Page 2166]]

coordination by financial and data experts from both regulators and 
industry concerning this work.
3. Final Rule: Sec.  45.7
    After considering the comments and input received concerning the 
UPI and product classification system, the Commission has determined 
that, as called for in the NOPR, the final rule provides that each swap 
subject to the Commission's jurisdiction must be identified in 
recordkeeping and swap data reporting pursuant to this part by means of 
a unique product identifier and product classification system 
acceptable to the Commission, when such an identifier and 
classification system are designated by the Commission for this 
purpose. The unique product identifier and product classification 
system will be required to identify and describe the swap asset class 
and the sub-type within that asset class to which the swap belongs, and 
the underlying product for the swap, with sufficient distinctiveness 
and specificity to enable the Commission and other financial regulators 
to fulfill their regulatory responsibilities.
    The final rule provides that the Commission will determine when a 
unique product identifier and product classification acceptable to the 
Commission and satisfying these requirements is available, and when it 
so determines will designate the unique product identifier and product 
classification system for use in compliance with this part, making this 
designation in a Commission order. The final rule requires registered 
entities and swap counterparties subject to the Commission's 
jurisdiction to use the unique product identifier and product 
classification system in compliance with this part when this 
designation is made. Prior to this designation, each registered entity 
and swap counterparty must use the internal product identifier or 
product description used by the SDR in all recordkeeping and swap data 
reporting pursuant to this part.

I. Determination of Which Counterparty Must Report--Sec.  45.8

1. Proposed Rule
    The NOPR followed the reporting counterparty hierarchy outlined in 
Sec.  4r(a)(3) of the CEA, which provides that where only one 
counterparty is an SD or MSP, the SD or MSP is the reporting 
counterparty, and where one counterparty is an SD and the other is an 
MSP, the SD is the reporting counterparty.\68\ The effect of this 
provision is to establish a 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 NOPR followed the statute in calling for them 
to select the counterparty obligated to report. In order to prevent 
confusion and delay concerning this choice, the NOPR provided a 
mechanism for counterparties to use in making this selection, by 
requiring counterparties at the same hierarchical level to agree as one 
term of their swap which counterparty will fulfill reporting 
obligations for that swap. In cases where only one counterparty is a 
U.S. person, the NOPR requires the U.S. person to be the reporting 
counterparty, in order to ensure compliance with reporting obligations 
in such situations.
---------------------------------------------------------------------------

    \68\ As stated in the NOPR, the Commission believes that, while 
CEA section 4r(a) applies explicitly to swaps not accepted for 
clearing by a DCO, the duty to report should be borne by the same 
counterparty regardless of whether the swap is cleared or uncleared, 
for the sake of uniformity and ease of applicability. This approach 
also effectuates a policy choice made by Congress in the Dodd-Frank 
Act to place lesser burdens on non-SD/MSP counterparties to swaps, 
where this can be done without damage to the fundamental systemic 
risk mitigation, transparency, standardization, and market integrity 
purposes of the legislation. The Commission believes it is 
appropriate for SDs and MSPs to have the responsibility of reporting 
with respect to the majority of swaps, because they are more likely 
than non-SD/MSP counterparties to have automated systems in place 
that can facilitate reporting. The Commission notes that the SEC 
followed the same approach in its proposed regulations for security-
based swap data reporting.
---------------------------------------------------------------------------

2. Comments Received
    The Commission received several comments concerning determination 
of the reporting counterparty. The two themes addressed in these 
comments were the need for a selection mechanism or deciding factor for 
cases where both counterparties are at the same hierarchical level, and 
who should be the reporting counterparty when only one counterparty is 
a U.S. person.
    a. Deciding factor between two counterparties at the same 
hierarchical level. Commenters asked the Commission to provide in the 
final rule a mechanism for determining which counterparty is the 
reporting counterparty in cases where both counterparties are at the 
same hierarchical level, and suggested various deciding factors for use 
in such cases. The Electric Coalition recommended that for swaps 
between two non-SD/MSP counterparties where only one counterparty is a 
``financial entity,'' the final rule should make the financial entity 
the reporting counterparty. AGA suggested that, between counterparties 
at the same hierarchical level, the entity that is the ``calculation 
agent'' under the applicable ISDA documentation should be the reporting 
counterparty, unless the parties agree otherwise. ICE suggested that 
the seller of the swap should be the reporting counterparty in such 
situations, arguing that there is too much uncertainty when parties are 
required to select the reporting counterparty, particularly for 
platform-executed swaps where counterparties are unknown to each other 
at the time of execution. WGCEF raised the issue of whether entities 
designated as SDs or MSPs for some but not all swaps should be treated 
as non-SDs/MSPs with respect to reporting counterparty determinations 
regarding swaps for which they are not designated as SDs or MSPs. WGCEF 
suggested that a ``limited'' SD or ``limited'' MSP should only be 
required to be the reporting counterparty for swaps within the 
particular asset class for which it is designated an SD or MSP. FHLB 
recommended that when an SD is transacting with a limited SD, the SD 
should be designated the reporting counterparty, because it would be 
burdensome for a limited SD to comply with requirements meant for 
entities for which swap dealing is a primary business. Where a limited 
SD is the reporting counterparty, FHLB asked that it be treated as a 
non-SD/MSP with respect to reporting deadlines.
    b. Non-U.S. counterparties. The Commission received a number of 
comments on which counterparty should be the reporting counterparty 
when only one counterparty is a U.S. person. The Foreign Banks, ISDA, 
SIFMA, DTCC, MarkitServ, Freddie Mac, Vanguard, EEI, Chatham Financial, 
ABC, CIEBA, and the Electric Coalition recommended requiring non-U.S. 
SDs or MSPs to be the reporting counterparty for swaps with U.S. non-
SD/MSP counterparties.\69\ The commenters pointed to the superior 
technology and technical expertise of SDs and MSPs, the benefits of a 
consistent approach to reporting, and concerns regarding whether U.S. 
non-SD/MSP counterparties would be discouraged from transacting with 
foreign SDs and MSPs if they were required to bear the burden of 
reporting. EEI and Vanguard suggested allowing the counterparties in 
this situation to agree on which of them will be the reporting 
counterparty, and MarkitServ suggested allowing non-SD/MSP 
counterparties to delegate the

[[Page 2167]]

reporting obligation to the non-U.S. SD counterparty.
---------------------------------------------------------------------------

    \69\ ABC and CIEBA argued that making a U.S. non-SD/MSP 
counterparty the reporting counterparty where the other counterparty 
is a foreign SD or MSP is contrary to Sec.  729 of the Dodd-Frank 
Act.
---------------------------------------------------------------------------

3. Final Rule: Sec.  45.8
    a. Deciding factor between two counterparties at the same 
hierarchical level. The Commission has considered comments calling for 
the final rule to provide a mechanism for determining which 
counterparty is the reporting counterparty in cases where both 
counterparties are at the same hierarchical level, and agrees that this 
would be beneficial where a deciding factor can be applicable for all 
swaps. The Commission has determined that the final rule provides that 
for swaps between non-SD/MSP counterparties where only one counterparty 
is a ``financial entity'' as defined in CEA section 2(h)(7)(C), the 
financial entity shall be the reporting counterparty. The Commission 
believes it is appropriate for financial entities, as defined by the 
Dodd-Frank Act, to have the responsibility of reporting in such cases, 
because, in the Commission's view, they are more likely than non-SD/MSP 
counterparties who are not financial entities to have automated systems 
in place that can facilitate reporting. The Commission has not found 
any other factor usable for automatic choice of the reporting 
counterparty between two counterparties at the same hierarchical level 
that applies across all markets and all asset classes.
    For off-platform swaps, the final rule retains the NOPR requirement 
that counterparties at the same hierarchical level agree, as one term 
of the swap, which of them is the reporting counterparty.
    For swaps executed on a SEF or DCM, determination of the reporting 
counterparty is necessary for purposes of continuation data reporting, 
despite the fact that the SEF or DCM will report all creation data for 
the swap under the streamlined reporting schema adopted in the final 
rule as discussed above. For on-facility swaps where counterparties at 
the same hierarchical level know the identity of the other 
counterparty, the final rule adopts the NOPR requirement that the 
counterparties agree as one term of the swap which of them is the 
reporting counterparty. For on-facility swaps where counterparties at 
the same hierarchical level do not know the identity of the other 
counterparty, the final rule provides that: (a) the SEF or DCM must 
transmit to each counterparty the LEI (or substitute identifier as 
provided in Sec.  45.6) of the other counterparty that is at the same 
hierarchical level;\70\ (b) the counterparties must agree which 
counterparty will be the reporting counterparty, after receiving such 
notice from the SEF or the DCM and before the end of the next business 
day following the date of execution of the swap; and (c) the reporting 
counterparty must report to the SDR to which the SEF or DCM has 
reported the swap that it is the reporting counterparty.
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    \70\ The SEF or DCM will know that both counterparties are at 
the same hierarchical level because the final rule requires the 
terms of the contract on the SEF or DCM to include all minimum PET 
data, and the tables of minimum PET data include an indication of 
whether a counterparty is an SD, an MSP, or a non-SD/MSP 
counterparty.
---------------------------------------------------------------------------

    b. Non-U.S. counterparties. The Commission has considered the large 
number of comments recommending that a non-U.S. SD or MSP in a swap 
with a U.S. counterparty at a lower hierarchical level should be the 
reporting counterparty despite its status as a non-U.S. person. The 
Commission has determined that, because non-U.S. SDs and MSPs will be 
required to register with the Commission in this connection, the 
Commission will have sufficient oversight and enforcement authority 
with respect to such counterparties. The Commission understands that 
the SEC has made a similar determination in the context of security-
based swap data reporting. Accordingly, the final rule provides that, 
with a single exception, the determination of the reporting 
counterparty in situations where only one counterparty is a U.S. person 
must be made by applying the normal counterparty determination 
procedure set forth in Sec.  45.8. The Commission believes this is 
appropriate because it places the burden of reporting on the 
counterparty that in the Commission's view is more likely to have 
automated systems suitable for reporting. In cases where both 
counterparties are non-SD/MSP counterparties and only one counterparty 
is a U.S. person, the final rule will adopt the NOPR provision 
requiring the U.S. person to be the reporting counterparty. This is 
necessary in such situations because the non-U.S. non-SD/MSP 
counterparty will not be required to register with the Commission. 
Where neither counterparty to a swap executed on a SEF or DCM, 
otherwise executed in the U.S., or cleared on a DCO is a U.S. person, 
the final rule applies the same hierarchical selection criteria as for 
other swaps.
    c. Reporting counterparty determination after a change of 
counterparty. In light of the various comments calling for clear 
direction from the Commission regarding determination of the reporting 
counterparty, and calling for the statutory preference for SD or MSP 
reporting counterparties where this is possible, the Commission has 
determined that the final rule provides for determination of the 
reporting counterparty in cases where, during the life of a swap, the 
reporting counterparty ceases to be a counterparty due to an assignment 
or novation. In such cases, the final rule provides for the reporting 
counterparty to be selected from the two current counterparties to the 
swap, as follows: If only one counterparty is an SD, the SD is the 
reporting counterparty; if neither counterparty is an SD and only one 
is an MSP, the MSP is the reporting counterparty; if both 
counterparties are non-SD/MSP counterparties and only one is a U.S. 
person, the U.S. person is the reporting counterparty; and in all other 
cases, the counterparty replacing the previous reporting counterparty 
is the reporting counterparty, unless otherwise agreed by the 
counterparties.

J. Third-Party Facilitation of Swap Data Reporting--Sec.  45.9

    1. Proposed Rule. The NOPR provided that registered entities and 
counterparties required to report pursuant to this part may contract 
with third-party service providers to facilitate reporting, but, 
nonetheless, remain fully responsible for reporting as required.
    2. Comments Received. Roundtable participants generally endorsed 
the NOPR provision permitting third-party facilitation of swap data 
reporting, and no comment letters suggested any changes to this 
provision.
    3. Final Rule: Sec.  45.9. The Commission recognizes, as stated in 
the NOPR, that while the various reporting obligations established in 
the final rule fall explicitly on registered entities and swap 
counterparties, efficiencies and decreased cost may in some 
circumstances be gained by engaging third parties to facilitate the 
actual reporting of information. The Commission believes that the use 
of such third-party facilitators, however, should not allow the 
registered entity or counterparty with the obligation to report to 
avoid its responsibility to report swap data in a timely and accurate 
manner. Accordingly, the Commission has adopted the regulation on 
third-party facilitation of swap data reporting as proposed.

[[Page 2168]]

K. Reporting to a Single Swap Data Repository--Sec.  45.10

    1. Proposed Rule. The NOPR required that all swap data for a given 
swap must be reported to a single SDR, which must be the SDR to which 
required primary economic terms data for that swap is first reported.
    2. Comments Received. Roundtable participants generally endorsed 
the NOPR provision requiring that all swap data for a given swap must 
be reported to a single SDR, and no comment letters suggested changing 
this requirement. Comments addressing who should make the first swap 
data report for a swap, and thus in effect choose the SDR, are 
discussed above in the section concerning creation data reporting.
    3. Final Rule: Sec.  45.10. The Commission believes that important 
regulatory purposes of the Dodd-Frank Act would be frustrated, and that 
regulators' ability to see necessary information concerning swaps could 
be impeded, if data concerning a given swap was spread over multiple 
SDRs. Accordingly, the final rule adopts the NOPR provision requiring 
that all swap data for a given swap must be reported to a single SDR, 
which shall be the SDR to which creation data for that swap is first 
reported.
    As discussed above, the Commission is responding to comments 
concerning creation data reporting by adopting in the final rule a 
streamlined reporting regime that requires reporting by the registered 
entities or swap counterparties with the easiest, fastest, and cheapest 
data access and those most likely to have the necessary automated 
systems; that minimizes burdens and costs for counterparties to the 
extent possible; and that provides certainty to the market. To 
effectuate this streamlined reporting regime, Sec.  45.3 and Sec.  
45.10 of the final rule provides that the initial report of creation 
data for a swap will be made as follows:

     For swaps executed on a SEF or DCM, the SEF or DCM 
reports all creation data to a single SDR, as soon as 
technologically practicable after execution.
     For off-facility swaps, the reporting counterparty 
reports all PET data to a single SDR, within the deadlines provided 
in the final rule.
     For off-facility swaps, if the reporting counterparty 
is excused from reporting, as provided in the final rule, because 
the swap is accepted for clearing before the reporting deadline and 
before any report made by the reporting counterparty, the DCO 
reports all creation data to a single SDR, as soon as 
technologically practicable after execution.

L. Data Reporting for Swaps in a Swap Asset Class Not Accepted by Any 
Swap Data Repository--Sec.  45.11

    1. Proposed Rule. As noted in the NOPR, CEA section 4r(a)(1)(B) 
recognizes that in some circumstances there may be no SDR that will 
accept swap data for certain swap transactions. This category of swaps 
should be limited, since the Commission's final part 49 regulations 
require an SDR that accepts swap data for any swap in an asset class to 
accept data for all swaps in that asset class. However, situations 
could arise where a novel product does not fit into any existing asset 
class, or where no SDR yet accepts swap data for any swap in an 
existing asset class. The NOPR provided that in such cases, the 
reporting counterparty must report to the Commission all swap data 
concerning that swap required by this part to be reported to an SDR, 
making this report at a time and in a form determined by the 
Commission.
    2. Comments Received. The Commission received no comments 
concerning this provision.
    3. Final Rule: Sec.  45.11. The Commission has determined to adopt 
the NOPR provision requiring that, should there be a swap asset class 
for which no SDR currently accepts swap data, each registered entity or 
swap counterparty required to report swap data for such a swap must 
report to the Commission all swap data required by this part to be 
reported to an SDR, making this report at times announced by the 
Commission and in an electronic file in a format acceptable to the 
Commission. The Commission has recently reorganized its divisional 
structure to facilitate discharge of its responsibilities under the 
Dodd Frank Act, and as part of that reorganization, the Commission's 
Chief Information Officer is responsible for all matters concerning 
data received by the Commission. Accordingly, the Commission has 
determined that the final rule will delegate to the Chief Information 
Officer the authority to determine the format, data standards, and 
electronic transmission standards and procedures acceptable to the 
Commission for such reporting, and the dates and times at which data 
for such swaps shall be reported to the Commission. The determinations 
made by the Commission through the Chief Information Officer in these 
respects will be published in the Federal Register and on the 
Commission's Web site.

M. Voluntary Supplemental Reporting--Sec.  45.12

    1. Proposed Rule. As discussed above, the Dodd-Frank Act provides 
for designation of one counterparty to a swap as the reporting 
counterparty for that swap. Neither the Dodd-Frank act nor the NOPR 
addresses additional, voluntary reporting of swap data to an SDR by the 
other counterparty to the swap. Nothing in the Dodd-Frank Act prohibits 
such additional, voluntary reporting.
    2. Comments Received. The Commission received several comments 
recommending that the final rule should confirm that voluntary data 
reporting by market participants not required to report is permitted, 
and should provide for such voluntary supplemental reporting. WGCEF 
asked the Commission to clarify that a market participant has the 
option to report any and all transaction data even where it is not 
required to report by Commission rules. REGIS-TR recommended that both 
counterparties be allowed to report a swap and confirm their PET data 
and confirmation data, via SDR systems that allow regulators to see 
which counterparty entered the information, and argued this would lower 
overall compliance costs. DTCC stated that voluntary reporting by 
participants not required to report is technologically feasible and 
would ensure greater data accuracy. ISDA and SIFMA observed that 
reporting by both counterparties is not essential to the accuracy of 
data in SDRs, since confirmations require the consent of both 
counterparties and the NOPR required confirmation data reporting. 
TriOptima suggested that both parties should be required to report some 
types of transaction data, such as that relating to systemic risk 
monitoring, arguing that one-party reporting can raise risks of 
inaccurate data. Most of the international regulators consulted by the 
Commission concerning the final rule have informed the Commission that 
they believe reporting by both counterparties is desirable, and that 
reporting regimes outside the U.S. are likely to require such dual 
reporting. Roundtable participants noted that some counterparties may 
prefer to report whether or not they are the reporting counterparty, in 
order to simplify their business processes, and have data concerning 
all their swaps present in a single SDR.
    3. Final Rule: Sec.  45.12. The Commission has considered these 
comments, and agrees that voluntary supplemental reporting by 
counterparties not designated as the reporting counterparty is

[[Page 2169]]

technologically feasible and may have benefits for both data accuracy 
and counterparty business processes. While the Dodd-Frank Act requires 
swap data reporting by only one counterparty and establishes a 
hierarchy for choosing the reporting counterparty, it does not prohibit 
voluntary swap data reporting to an SDR that supplements required 
reporting. The Commission also notes that its final part 49 rules 
permit counterparties to access to information in SDRs concerning their 
own swaps, and notes that nothing forbids swap counterparties to use an 
SDR as a provider of third-party services going beyond acceptance of 
required swap data reports for regulatory purposes. For these reasons, 
the Commission has determined that the final rule provides for 
voluntary supplemental reporting to any SDR by either counterparty of 
swap data that this part does not require that counterparty to report.
    The Commission has also determined that, to avoid double-counting 
of the same swap due to voluntary supplemental reports, and to ensure 
that data reported via a voluntary supplemental report (``VSR'') to the 
same SDR to which required data is reported is integrated into that 
SDR's record for the swap, each VSR must include minimum VSR 
information that ensures achievement of these purposes. This required 
VSR information includes: an indication that the report is a VSR; the 
USI for the swap that has been created as required by this part; the 
identity of the SDR to which all required creation data and 
continuation data is reported for the swap, if the VSR is made to a 
different SDR; the LEI (or substitute identifier) of the counterparty 
making the VSR; and if applicable, an indication that the VSR is made 
pursuant to the law of a jurisdiction outside the U.S. To avoid 
confusion and double-counting, and to ensure that each VSR includes the 
USI for the swap, the rule will also provide that a VSR may not be made 
until after the USI for the swap has been created as provided in Sec.  
45.5 and transmitted to the counterparty making the VSR.

N. Required Data Standards--Sec.  45.13

    1. Proposed Rule. CEA section 21(b)(2) directs the Commission to 
prescribe data collection and data maintenance standards for swap data 
repositories. The CEA also provides that SDRs shall maintain swap data 
reported to them ``in such form, in such manner, and for such period as 
may be required by the Commission,'' and directs SDRs to ``provide 
direct electronic access to the Commission.'' \71\ These requirements 
are designed to effectuate the fundamental purpose for the 
legislation's swap data reporting requirements: making swap data 
available to the Commission and other financial regulators so as to 
enable them to better fulfill their market oversight and other 
regulatory functions, increase market transparency, and mitigate 
systemic risk. Pursuant to these provisions, the NOPR required SDRs to 
be able to transmit data to the Commission using the data standards and 
formats required by Commission. The NOPR did not mandate use of a 
specific data standard for reporting to SDRs, but left SDRs free to 
make their own business decisions in this regard, so long as they 
remain able to transmit data to the Commission as required.
---------------------------------------------------------------------------

    \71\ CEA section 21(c)(3) and (4).
---------------------------------------------------------------------------

    2. Comments Received. DTCC and WGCEF both suggested that using 
existing standards and formats would facilitate implementation of Dodd-
Frank. DTCC also noted that SDRs will need to adapt to a changing 
marketplace, and therefore will need the flexibility to specify 
acceptable data formats, connectivity, and protocols for reporting to 
them. DTCC recommended that SDRs make their data formats publicly 
available, and develop application programming interfaces (``APIs'') to 
enable direct submission of data by participants. WGCEF argued that 
SDRs should be required to develop and use a common standard for data 
reporting, suggesting that this will reduce costs and opportunities for 
inaccuracy.
    3. Final Rule: Sec.  45.13. The Commission considered whether it 
would be preferable, as suggested by one commenter, to require that all 
swap data reporting to SDRs use a uniform reporting format or single 
data standard, but has decided not to impose such a requirement. Doing 
so would be likely to require changes to the existing automated systems 
of some entities and counterparties, which in some cases could impose 
additional burdens and costs. The Commission agrees with the comment 
suggesting that SDRs will need flexibility with respect to data 
standards used by them in receiving data. The Commission has been 
advised by existing trade repositories that they are able to accept 
data in multiple formats or data standards from different 
counterparties, and to map the data they receive into a common data 
standard within the repository, without undue difficulty, delay, or 
cost. The Commission notes that automated systems and data standards 
evolve over time, and that it may be desirable for regulations 
concerning data standards to avoid locking reporting entities, 
reporting counterparties, and SDRs into particular data standards that 
could become less appropriate in the future.\72\ In addition, the 
Commission anticipates that the degree of flexibility offered by SDRs 
concerning data standards for swap data reporting could become an 
element of marketplace competition with respect to SDRs. Accordingly, 
the final rule gives SDRs flexibility to use a variety of data 
standards to receive data reported to them, provided that they are able 
to transmit data to the Commission in a manner that meets the 
Commission's needs. This flexibility is designed to allow the most 
cost-effective application of both existing and evolving data 
standards.
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    \72\ CEA section 21(f)(4)(B) explicitly permits the Commission 
to ``take into consideration any evolving standard of the United 
States or the international community.''
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    The Commission also agrees with the comment suggesting that it 
would be beneficial for the data formats used by SDRs to be publicly 
available. The Commission encourages SDRs to make public the 
documentation of their data formats and any APIs or service interfaces 
they develop for reporting data.
    For the reasons discussed above, the Commission has determined to 
adopt the NOPR provisions regarding data standards in the final rule. 
The final rule requires an SDR to maintain all swap data reported to it 
in a format acceptable to the Commission, and to transmit all swap data 
requested by the Commission to the Commission in an electronic file in 
a format acceptable to the Commission. It requires reporting entities 
and counterparties to use the facilities, methods, or data standards 
provided or required by an SDR to which they report data, but also 
allows an SDR to permit reporting via various facilities, methods, or 
data standards, provided that its requirements in this regard enable it 
to maintain swap data and transmit it to the Commission as the 
Commission requires.
    As noted above, the Commission has recently reorganized its 
divisional structure to facilitate discharge of its responsibilities 
under the Dodd-Frank Act, and as part of that reorganization, the 
Commission's Chief Information Officer is responsible for all matters 
concerning data received by the Commission. Accordingly, the Commission 
has determined that the final rule will delegate to the Chief 
Information Officer (a) the authority to determine the format, data 
standards,

[[Page 2170]]

and electronic transmission standards and procedures acceptable to the 
Commission for provision of data to the Commission by SDRs; and (b) the 
authority to determine whether the Commission may permit or require use 
of one or more particular data standards by SDRs or reporting entities 
and counterparties in order to ensure that SDRs can provide data to the 
Commission as required. The determinations made by the Commission 
through the Chief Information Officer in these respects will be 
published in the Federal Register and on the Commission's Web site.

O. Reporting of Errors and Omissions in Previously Reported Data--Sec.  
45.14

1. Proposed Rule
    The NOPR directed all entities and counterparties required to 
report data to SDRs to report any errors and omissions in the data so 
reported, as soon as technologically practicable after discovery of any 
such error or omission. It also required non-reporting counterparties 
discovering a data error or omission to notify the reporting 
counterparty promptly, and required the reporting counterparty to then 
report it. The NOPR required reports of errors and omissions to be made 
using the same format used to report the erroneous or omitted data.
2. Comments Received
    a. Error reporting. WGCEF and MFA suggested that the final rule 
should permit (but not require) non-reporting counterparties to report 
errors they discover to the SDR. MFA argued this is needed in the event 
of a dispute between the reporting and non-reporting counterparties. 
ISDA and SIFMA recommended the reasons for an error correction should 
not be reported, on the basis that recording the reason for an 
adjustment is not current market practice. Encana requested 
clarification of the interaction of error reporting under this section 
and the part 49 provisions requiring an SDR to confirm with the 
counterparties the accuracy of the data submitted.
    b. Liability for errors. WGCEF, AGA, ISDA, and SIFMA suggested that 
safe harbors should be created for good-faith mistakes made by either 
counterparty in reporting swap data, and for errors of which the 
counterparties are not aware. AGA asked the Commission to state 
explicitly that it will not penalize parties for inadvertent errors in 
reporting, and that good faith efforts to comply with new requirements 
will not result in exposure to enforcement actions. ISDA and SIFMA 
asked the Commission to clarify that a party has no obligation to 
correct errors of which it is not aware, and suggested having the final 
rule provide that reporting parties are not responsible for data errors 
that occur after submission to an SDR.
3. Final Rule: Sec.  45.14
    The Commission has considered the above comments, and has 
determined to adopt the NOPR provisions concerning error reporting 
substantially as proposed. Accurate swap data is essential to effective 
fulfillment of the various regulatory functions of financial 
regulators, and the final rule provisions are designed to ensure data 
accuracy to the extent possible.
    a. Error reporting. As noted above, the Commission agrees that 
voluntary supplemental reporting may have benefits for data accuracy, 
and has added Sec.  45.12 to the final rule expressly permitting 
voluntary supplemental reporting, which is not limited in scope and can 
include error reporting. The Commission believes that it is a business 
decision of an SDR whether it should require reporting the reasons for 
an error correction, and has decided not to address that issue by rule. 
Records required to be kept pursuant to this part should provide 
sufficient information when necessary regarding the reasons for an 
error correction.\73\ The Commission intends Sec.  45.14 to work 
together in a complementary fashion with the provisions of part 49 
directing SDRs to obtain acknowledgment from counterparties of the 
accuracy of reported data within a short time after it is submitted. 
Both provisions are intended to protect the integrity and accuracy of 
the data in SDRs.
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    \73\ The Commission does not believe it is necessary or 
appropriate for the final rule to further address potential disputes 
between reporting and non-reporting counterparties, which could 
involve legal disputes between counterparties affecting the validity 
or terms of a swap.
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    To help ensure data accuracy, the final rule requires registered 
entities and swap counterparties that report swap data to an SDR or to 
any other registered entity or swap counterparty to report any errors 
or omissions in the data they report, as soon as technologically 
practicable after discovery of any error or omission.\74\ The final 
rule requires a non-reporting swap counterparty that discovers any 
error or omission with respect to any swap data reported to an SDR for 
its swaps to notify the reporting counterparty promptly of each such 
error or omission, and requires the reporting counterparty, upon 
receiving such notice, to report a correction of each such error or 
omission to the SDR, as soon as technologically practicable after 
receiving notice of it from the non-reporting counterparty. The 
Commission believes that this provision is an appropriate measure to 
ensure data accuracy.
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    \74\ Because daily snapshot reports of state data by reporting 
counterparties by their nature can correct errors or omissions in 
previous snapshot reports, the final rule provides that for swaps 
reported via the snapshot reporting method, reporting counterparties 
fulfill the requirement to report errors or omissions in state data 
previously reported by making corrections in their next daily report 
of state data.
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    To ensure consistency of data within an SDR with respect to error 
corrections, the final rule requires an entity or counterparty 
correcting an error or omission to do so in the same data format it 
used in making the erroneous report. To similarly ensure consistency of 
data transmitted to the Commission with respect to error corrections, 
the final rule imposes the same requirement on SDRs with respect to 
transmission of error corrections.
    b. Liability for errors. The Commission has determined that the 
final rule should not provide a safe harbor for good-faith mistakes 
made in reporting data. It is the reporting party's responsibility to 
report data accurately and develop processes to achieve this goal. The 
Commission will continue to carry out its oversight and enforcement 
responsibilities in a reasonable and appropriate manner. The final rule 
does not require swap counterparties to monitor data in an SDR, but 
does require them to report all data errors of which they become aware. 
As noted above, the Commission believes this is an appropriate measure 
to ensure data accuracy.

III. Related Matters

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA''), 5 U.S.C. 601 et seq., 
requires that agencies consider the impact of their rules on ``small 
entities.'' As provided in the NOPR, this part will have a direct 
effect on SDRs, DCOs, SEFs, DCMs, SDs, MSPs, and non-SD/MSP 
counterparties who are counterparties to one or more swaps and subject 
to the Commission's jurisdiction.
    As stated in the NOPR, the Commission has previously established 
that DCMs are not small entities for purposes of the RFA. The 
Commission also proposed that certain entities for which the Commission 
had not previously made a determination for RFA purposes--namely SDRs, 
DCOs, SEFs, SDs, and MSPs--should not be considered to be small 
entities, for reasons set forth in the NOPR.

[[Page 2171]]

    As noted in the NOPR, this part requires swap data reporting by a 
non-SD/MSP counterparty only with respect to swaps in which neither 
counterparty is an SD or MSP. With respect to such swaps, which 
represent a minority of swap transactions, only one of the swap non-SD/
MSP counterparties will be required to report--the counterparty 
designated as the reporting counterparty. In addition, the Commission 
has determined that the final rule provides that for swaps between non-
SD/MSP counterparties where only one counterparty is a ``financial 
entity'' as defined in CEA section 2(h)(7)(C), the financial entity 
shall be the reporting counterparty. The Commission believes these 
provisions of the final rule reduce the economic impact on any non-SD/
MSP counterparties that may be considered to be small entities under 
the RFA.
    Due to the operation of certain provisions of the CEA and the final 
rule, non-SD/MSP counterparties who may be considered small entities 
for RFA purposes are never required to report any swap creation data. 
Under the CEA, a non-SD/MSP counterparty is required to transact on a 
SEF or DCM unless that non-SD/MSP is an Eligible Contract Participant 
(``ECP'').\75\ The Commission has previously determined that ECPs are 
not ``small entities'' for RFA purposes.\76\ For all swaps executed on 
a SEF or DCM, the final rule requires the SEF or DCM to report all 
required swap creation data. Therefore, no ``small entities'' for RFA 
purposes are required to report any swap creation data under the final 
rule.
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    \75\ CEA section 2(e) provides that ``It shall be unlawful for 
any person, other than an eligible contract participant, to enter 
into a swap unless the swap is entered into on, or subject to the 
rules of, a [SEF or DCM].'' Congress created the ECP category in the 
Commodity Futures Modernization Act in 2000, to include individuals 
and entities that Congress determined to be sufficiently 
sophisticated in financial matters that they should be permitted to 
trade over-the-counter swaps without the protection of federal 
regulation. See, e.g., ``Report of the President's Working Group on 
Financial Markets'' (Nov. 1999) at 16 (recommending that 
``sophisticated counterparties that use OTC derivatives simply do 
not require the same protections under the CEA as those required by 
retail investors''). In the Dodd-Frank Act, Congress made two 
changes to the statutory ECP definition, both of which increased the 
thresholds to qualify as an ECP, making it harder for some entities 
and individuals to qualify. Compare CEA section 1a(12), 7 U.S.C. 
1a(12) (2009), with Sec. Sec.  721(a)(1) and (9) of the Dodd-Frank 
Act, respectively redesignating section 1a(12) as section 1a(18) and 
increasing thresholds for certain categories of ECP.
    \76\ 66 FR 20740, 20743, Apr. 25, 2001.
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    With respect to reporting of swap continuation data, the Commission 
has attempted to minimize the burden on non-SD/MSP counterparties who 
may be considered small entities for purposes of the RFA. As noted 
above, in the final rule the Commission is responding to comments 
concerning swap data reporting by creating a streamlined reporting 
regime that requires reporting by the registered entities or swap 
counterparties that the Commission believes will have the easiest, 
fastest, and cheapest data access and will be most likely to have the 
necessary automated systems, in order to minimize burdens and costs, to 
the extent possible, for swap counterparties and particularly for non-
SD/MSP counterparties. Under the final rule reporting regime, non-SD/
MSP reporting counterparties will not have to report either creation 
data or continuation data for any swap executed on a SEF or DCM and 
cleared on a DCO. In addition, non-SD/MSP counterparties will not have 
to report either creation data or continuation data for any off-
facility swap accepted by a DCO for clearing within the deadline for 
the initial data report for the swap, as the DCO is then required to 
report all swap data for the swap. The Commission believes that these 
provisions of the final rule further reduce the economic impact on any 
non-SD/MSP counterparties that may be considered to be small entities 
under the RFA.
    In the NOPR, the Chairman, on behalf of the Commission, certified 
that the rulemaking would not have a significant economic effect on a 
substantial number of small entities. Nonetheless, the Commission 
specifically requested comment on the impact these proposed rules may 
have on small entities. The Commission received one comment on its RFA 
statement, from the Electric Coalition, stating that the vast majority 
of members of the National Rural Electric Cooperative Association and 
the American Public Power Association are considered small entities for 
purposes of the RFA. The Electric Coalition suggested that the 
Commission should consider the overall impact of its Dodd-Frank Act 
rules on nonfinancial entities, including small entities, and conduct a 
comprehensive analysis under the RFA.
    In response to this comment, and to other comments by non-SD/MSP 
counterparties, the Commission has adjusted the final reporting regime 
to reduce burdens and costs for non-SD/MSP counterparties in a variety 
of ways, as set forth in detail in the discussion above concerning 
Sec. Sec.  45.3 and 45.4 of the final rule. The Commission notes that 
the commenter did not dispute the reasons for the Commission's 
conclusion that this part does not have a significant impact on a 
substantial number of small entities. For these reasons, and for the 
reasons stated above and in the NOPR, the Commission continues to 
believe that this part will not have a significant impact on a 
substantial number of small entities. Therefore, the Chairman, on 
behalf of the Commission, hereby certifies, pursuant to 5 U.S.C. 
605(b), that this part as finally adopted will not have a significant 
economic impact on a substantial number of small entities.

B. Paperwork Reduction Act

1. Introduction
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a 
currently valid control number issued by the Office of Management and 
Budget (``OMB''). Provisions of Commission Regulations 45.2, 45.3, 
45.4, 45.5, 45.6, 45.7, and 45.14 result in information collection 
requirements within the meaning of the Paperwork Reduction Act 
(``PRA'').\77\ The Commission submitted the NOPR and supporting 
documentation to OMB for review in accordance with 44 U.S.C. 3507(d) 
and 5 CFR 1320.11. The Commission requested that OMB approve, and 
assign a new control number for, the collections of information covered 
by the NOPR.
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    \77\ 44 U.S.C. 3301 et seq.
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    The title for the proposed collection of information under part 45 
is ``Swap Data Recordkeeping and Reporting Requirements.'' To the 
extent that the recordkeeping and reporting requirements in this 
rulemaking overlap with the requirements of other rulemakings for which 
the Commission prepared and submitted an information collection request 
to OMB, the burdens associated with the requirements are not being 
accounted for in the information collection request for this 
rulemaking, to avoid unnecessary duplication of information collection 
burdens.
2. Proposed Information Collection
    In its proposed rulemaking, the Commission provided burden 
estimates for the new collections of information contained in proposed 
Sec. Sec.  45.2, 45.3, and 45.4.
    In the NOPR, it was estimated that 30,384 SDRs, SEFs, DCMs, DCOs, 
SDs, MSPs, and non-SD/MSP counterparties \78\ would be required to

[[Page 2172]]

keep records of all activities relating to swaps. Specifically, the 
NOPR required SDRs, SEFs, DCMs, DCOs, SDs, and MSPs to keep complete 
records of all activities relating to their business with respect to 
swaps. The NOPR required non-SD/MSP counterparties to keep complete 
records with respect to each swap in which they would be a 
counterparty. For SDs and MSPs, the Commission determined that the 
proposed recordkeeping requirements would not impose any new 
recordkeeping or information collection requirements, or other 
collections of information, as requirements for maintaining and 
recording swap transaction data by SDs and MSPs would be addressed in 
related rulemakings associated with business conduct standards for SDs 
and MSPs. For SDRs, SEFs, DCMs, DCOs (an estimated 84 entities or 
persons), which were anticipated to have higher levels of swap 
recording activity \79\ than non-SD/MSP counterparties, the Commission 
estimates that there may be approximately 40 annual burden hours per 
entity, excluding customary and usual business practices. And for non-
SD/MSP reporting counterparties (an estimated 30,000 entities or 
persons), who were anticipated to have lower levels of swap recording 
activity, the Commission estimated that there would be approximately 10 
annual burden hours per entity, excluding customary and usual business 
practices. Accordingly, 303,360 estimated aggregate annual burden hours 
were estimated.
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    \78\ Because SDRs, MSPs, SDs, DCOs, and SEFs are new entities, 
the following estimates were made in the NOPR: 15 SDRs, 50 MSPs, 250 
SDs, 12 DCOs, and 40 SEFs. The number of DCMs was estimated to be 17 
DCMs based on the current (as of October 18, 2010) number of 
designated DCMs. Additionally, for purposes of the Paperwork 
Reduction Act, the Commission estimated that there would be 30,000 
non-SD/MSP counterparties who would be subject annually to the 
recordkeeping requirements of proposed Regulation 45.1.
    \79\ The Commission estimated that ``high activity'' entities or 
persons would be those persons who would process or enter into 
hundreds or thousands of swaps per week that would be subject to the 
jurisdiction of the Commission. Low activity users were estimated to 
be those who would process or enter into substantially fewer than 
the high activity users.
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    Under the NOPR's swap data reporting provisions, SEFs, DCMs, DCOs, 
MSPs, SDs, and non-SD/MSP counterparties were required to provide 
reports to SDRs regarding swap transactions. SEFs and DCMs were 
required to report certain information once at the time of swap 
execution. DCOs, SDs, MSPs, and non-SD/MSP counterparties were required 
to report certain information once, as well as other information on a 
daily basis. With respect to proposed reporting by SDs, MSPs, and non-
SD/MSP counterparties, only one counterparty was required to report, 
typically an SD or an MSP. The Commission anticipated that the 
reporting would to a significant extent be automatically completed by 
electronic computer systems, and calculated burden hours based on the 
annual burden hours necessary to oversee and maintain the reporting 
functionality.\80\ SEFs, DCMs, DCOs, MSPs, and SDs (an estimated 369 
entities or persons) were anticipated to have high levels of reporting 
activity, with the Commission estimating that the average annual burden 
would be approximately 2,080 hours.\81\ Non-SD/MSP counterparties 
required to report under the proposed rules--estimated at 1,500 
entities \82\--were anticipated to have lower levels of activity with 
respect to reporting. For such entities, the Commission estimated that 
the annual burden would be approximately 75 hours. In sum, the 
Commission estimated 880,020 aggregate annual burden hours for proposed 
regulation 45.3.
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    \80\ Estimated burden hours were obtained through consultation 
with the Commission's information technology staff.
    \81\ The Commission estimated 2,080 hours by assuming that a 
significant number of SEFs, DCMs, DCOs, MSPs, and SDs would dedicate 
the equivalent of at least one full-time employee to ensuring 
compliance with the reporting obligations of Regulation 45.3 (2,080 
hours = 52 weeks x 5 days x 8 hours). The Commission believed that 
this was a reasonable assumption due to the volume of swap 
transactions that would be processed by these entities, the varied 
nature of the information required to be reported by Regulation 
45.3, and the frequency (daily) with which some reports would be 
required to be made.
    \82\ This is the estimated number of non-SD/MSP counterparties 
who would be required to report in a given year. Only one 
counterparty to a swap would be required to report, most frequently 
anticipated to be an SD or a MSP.
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    Under the NOPR's unique identifier provisions, SDRs, SEFs, DCMs, 
SDs, and MSPs were required to report a unique swap identifier to other 
registered entities and swap participants. SEFs and DCMs were expected 
to have higher levels of activity than SDRs, SDs, and MSPs with respect 
to unique swap identifier reporting. The Commission anticipated that 
the reporting of the unique swap identifier would be automatically 
completed by electronic computer systems. Accordingly, the burden hours 
estimates in the proposal were based on the estimated burden hours 
necessary to oversee and maintain the electronic functionality of 
unique swap ID reporting.\83\ In accord, the Commission estimated that 
SEFs and DCMs (an estimated 57 entities or persons) would expend 
approximately 22 annual burden hours per entity. The Commission 
estimated that SDRs, SDs, and MSPs (an estimated 315 entities or 
persons) would expend approximately 6 annual burden hours per entity. 
Therefore, 3,144 estimated aggregated annual burden hours were 
estimated.
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    \83\ Estimated burden hours were obtained through consultation 
with the Commission's information technology staff.
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    The NOPR's unique identifier provisions also required SDs, MSPs, 
and non-SD/MSP counterparties (an estimated 30,300 entities and 
persons) to report into a confidential database their ownership and 
affiliations information (as well as changes to ownership and 
affiliations). The report would be made once at the time of the first 
swap reported to an SDR, and would be made anytime thereafter that the 
entity's legal affiliations change. The burden hours per report were 
estimated to be approximately two hours per entity, excluding customary 
and usual business practices. The number of reports required to be made 
per year was estimated to vary between zero and four, depending on the 
number of changes an entity would have in its legal affiliations in 
that year. The estimated annual burden per entity therefore was 
estimated to vary between zero and eight burden hours, with aggregate 
annual burden hours estimated to be between 0 and 242,400 hours.
3. Comments on Proposed Information Collection
    Swap data reporting is required by the CEA as amended by Title VII 
of the Dodd-Frank Act. The Commission received numerous comments 
supporting the overall goals of swap data reporting, including systemic 
risk protection, market integrity, and transparency goals. The 
Commission also received general comments and suggestions regarding the 
information collections set forth in the NOPR. The comments concerned, 
among other things, the type of information that should be collected; 
the entity or entities that should be responsible for reporting the 
information; the manner in which the data should be required to be 
reported (snapshot or lifecycle method of reporting); and the timeframe 
in which such data should be required to be reported. The comments 
received by the Commission are set forth in detail above in the 
discussions of each section of the final rule as well as the discussion 
below on the consideration of the costs and benefits of the final rule.
    In response, the Commission amended the information collection 
requirements set forth in the NOPR in a variety of ways in order to 
address concerns of the commenters and reduce the burden of the 
information collections on registered entities and counterparties. The 
Commission amended the information collection

[[Page 2173]]

requirements of the NOPR by, among other things, reducing the types of 
information to be collected (e.g., the final rule does not require 
reporting of contract intrinsic data, master agreements, certain 
collateral information, or certain valuation information); streamlining 
the entity or entities responsible for reporting the information in 
order to assign reporting responsibilities to the entity or entities 
with the easiest, fastest, and cheapest access to the data in question 
(e.g., the final rule does not require non-SD/MSP counterparties to 
report any additional swap data for swaps that are both executed on a 
platform and cleared, as the SEF/DCM reports all creation data and the 
DCO reports all continuation data); providing greater flexibility in 
the manner in which information is to be reported (the final rule 
permits either the snapshot or lifecycle method of reporting may be 
used for any asset class); and modifying the timeframe in which 
information is to be collected (e.g., the final rule requires non-SD/
MSP counterparties to report valuation data for uncleared swaps only on 
a quarterly basis, and provides phasing to all SDs, MSPs, and non-SD/
MSP counterparties with respect to the timeframe in which information 
must be reported).
    The Commission is also clarifying in the final rule that non-SD/MSP 
counterparties are permitted to fulfill their part 45 recordkeeping 
responsibilities by keeping records in paper, rather than electronic, 
form. The final rule also provides that other counterparties and 
registered entities are also permitted to keep paper, rather than 
electronic, records, if such records were originally created and 
exclusively maintained in paper form. These provisions concerning the 
recordkeeping information collection provisions are intended to address 
concerns raised by several commenters
4. Revised Information Collection Estimates
    Under the final rules, reporting entities and persons will provide 
information under sections 45.2, 45.3, 45.4, 45.5, 45.6, 45.7, and 
45.14 of this part. The information provided under each regulation is 
set forth below, together with burden estimates that were calculated, 
through research and through consultation with the Commission's 
technology staff, using wage rate estimates based on salary information 
for the securities industry compiled by the Securities Industry and 
Financial Markets Association (``SIFMA'').\84\
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    \84\ These wage estimates are derived from an industry-wide 
survey of participants and thus reflect an average across entities; 
the Commission notes that the actual costs for any individual 
company or sector may vary from the average. The Commission 
estimated the dollar costs of hourly burdens for each type of 
professional using the following calculations:
    (1) [(2009 salary + bonus) * (salary growth per professional 
type, 2009-2010)] = Estimated 2010 total annual compensation. The 
most recent data provided by the SIFMA report describe the 2009 
total compensation (salary + bonus) by professional type, the growth 
in base salary from 2009 to 2010 for each professional type, and the 
2010 base salary for each professional type; thus, the Commission 
estimated the 2010 total compensation for each professional type, 
but, in the absence of similarly granular data on salary growth or 
compensation from 2010 to 2011 and beyond, did not estimate dollar 
costs beyond 2010.
    (2) [(Estimated 2010 total annual compensation)/(1,800 annual 
work hours)] = Hourly wage per professional type.]
    (3) [Hourly wage) * (Adjustment factor for overhead and other 
benefits, which the Commission has estimated to be 1.3)] = Adjusted 
hourly wage per professional type.]
    (4) [(Adjusted hourly wage) * (Estimated hour burden for 
compliance)] = Dollar cost of compliance for each hour burden 
estimate per professional type.]
    The sum of each of these calculations for all professional types 
involved in compliance with a given element of the final rule 
represents the total cost for each counterparty, reporting 
counterparty, SD, MSP, SEF, DCM, or SDR, as applicable to that 
element of the final rule.
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    a. Section 45.2. Under Sec.  45.2, SDRs, SEFs, DCMs, DCOs, SDs, 
MSPs, and non-SD/MSP counterparties--which presently would include an 
estimated 30,210 entities or persons \85\--are required to keep records 
of all activities relating to swaps. Specifically, Sec.  45.2 requires 
SDRs, SEFs, DCMs, DCOs, SDs, and MSPs to keep complete records of all 
activities relating to their business with respect to swaps. The rule 
requires non-SD/MSP counterparties to keep complete records with 
respect to each swap in which they are a counterparty.
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    \85\ Because SDRs, MSPs, SDs, DCOs, and SEFs are new entities, 
estimates were made by the Commission: 15 SDRs, 50 MSPs, 250 SDs, 12 
DCOs, and 40 SEFs. The number of DCMs was estimated to be 17 DCMs 
based on the current (as of October 18, 2010) number of designated 
DCMs. Additionally, for purposes of the Paperwork Reduction Act, the 
Commission estimates that there would be 30,000 non-SD/MSP 
counterparties who would annually be subject to the recordkeeping 
requirements of proposed Regulation 45.1. The Commission is revising 
its estimate of SDs and MSPs from a total of 300 in the proposed 
rule to 125 for this final rule, and is revising its DCM estimate 
from 17 to 18 to account for the designation of a new DCM.
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    With respect to SDs and MSPs, the Commission has determined that 
Sec.  45.2 will not impose any new recordkeeping or information 
collection requirements, or other collections of information that 
require approval of the Office of Management and Budget under the 
Paperwork Reduction Act. The burden associated with the requirements 
for maintaining and recording swap transaction data by SDs and MSPs are 
also contained in separate rulemakings proposed by the Commission 
concerning business conduct standards for SDs and MSPs, for which the 
Commission has prepared an information collection request for review 
and approval by OMB.
    The Commission believes that some percentage of the estimated 
30,000 non-SD/MSP counterparties who would be subject to the 
recordkeeping requirements of section 45.2 would contract with third-
party service providers to fulfill these requirements, and would 
therefore pay some fee to such providers in lieu of incurring the 
Commission's estimated costs of reporting. The identity of such third 
parties, the composition of the marketplace for third party services, 
and the costs to third parties to provide recordkeeping services given 
the economies of scale and scope they may realize in providing those 
services are all presently unknowable. Therefore, the Commission does 
not believe it is feasible to quantify the fees charged by third 
parties to non-SD/MSPs at the present time, but believes that they will 
likely vary with the volume of records to be retained. The remaining 
non-SD/MSP counterparties would elect to perform these functions 
themselves and incur the costs enumerated below. The Commission notes 
that this final rule allows non-SD/MSP counterparties to retain records 
in either an electronic or paper form, which could facilitate 
recordkeeping for less technologically resourced counterparties, and 
thus encourage a greater percentage of non-SD/MSP counterparties to 
retain records themselves.
    For purposes of calculating recordkeeping burdens with respect to 
the PRA, the Commission is assuming that all 30,000 non-SD/MSP 
counterparties required to keep records will incur the cost of doing so 
themselves. The Commission estimates that this requirement would impose 
an initial non-recurring burden of 480 hours per reporting counterparty 
at a cost of $32,820, and investments in technological infrastructure 
of $50,000, and a recurring annual burden of 165 hours per reporting 
counterparty at a cost of $12,125 and a technological infrastructure 
maintenance cost of $25,000. This would present an aggregate non-
recurring burden of $2,484,600,000 for all non-SD/MSP counterparties, 
and an aggregate recurring annual burden of $1,113,750,000 for all non-
SD/MSP counterparties.

[[Page 2174]]

    With respect to SEFs, DCMs, DCOs, SDs, and MSPs (an estimated 195 
entities or persons), which will have higher levels of swap recording 
activity \86\ than non-SD/MSP counterparties, the Commission estimates 
that this requirement would impose an initial non-recurring burden of 
1,560 hours per SEF, DCO, or DCM at a cost of $111,917, and investments 
in technological infrastructure of $100,000, and a recurring annual 
burden of 700 hours per SEF, DCO, DCM, SD, or MSP at a cost of $49,798, 
and a technological infrastructure maintenance cost of $50,000.
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    \86\ For purposes of this Paperwork Reduction Act analysis, the 
Commission estimates that ``high activity'' entities or persons are 
those who process or enter into hundreds or thousands of swaps per 
week that are subject to the jurisdiction of the Commission. Low 
activity users would be those who process or enter into 
substantially fewer than the high activity users.
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    The Commission also estimates that Sec.  45.2 will result in 
retrieval costs for registered entities and swap counterparties that do 
not currently have the ability to retrieve records within the required 
timeframe. The Commission expects that this requirement will present 
costs to registered entities and swap counterparties in the form of 
non-recurring investments in technological systems and personnel 
associated with establishing data retrieval processes, and recurring 
expenses associated with the actual retrieval of swap data records.
    With respect to non-SD/MSP reporting counterparties that do not 
contract with a third party, the Commission estimates that this 
requirement would impose an initial non-recurring burden of 310 hours 
per reporting counterparty at a cost of $25,534 and a recurring annual 
burden of 115 hours per reporting counterparty at a cost of $9,510. 
With respect to SEFs, DCOs, DCMs, SDs, and MSPs, the Commission 
estimates that this requirement would impose an initial non-recurring 
burden of 350 hours per SEF, DCO, DCM, SD, or MSP at a cost of $28,745, 
and a recurring annual burden of 175 hours per SEF, DCO, DCM, SD, or 
MSP at a cost of $14,373.
    b. Sections 45.3 and 45.4. Pursuant to Sec. Sec.  45.3 and 45.4, 
SEFs, DCMs, DCOs, MSPs, SDs, and non-SD/MSP counterparties are required 
to provide reports to SDRs regarding swap transactions. SEFs and DCMs 
are required to report certain information (swap creation data) once at 
the time of swap execution. DCOs, SDs, MSPs, and non-SD/MSP 
counterparties are required to report certain information (swap 
creation data) once, as well as other information (swap continuation 
data) throughout the life of a swap--whenever a reportable event or a 
reportable change occurs. With respect to reporting by SDs, MSPs, and 
non-SD/MSP counterparties, only one counterparty to a swap is required 
to report information concerning that swap, typically an SD or an MSP, 
as determined by Sec.  45.8.
    The Commission anticipates that the reporting required by 
Sec. Sec.  45.3 and 45.4 will to a significant extent be automatically 
completed by electronic computer systems; the following burden hours 
are calculated based on the annual burden hours necessary to oversee, 
maintain, and utilize the reporting functionality. SEFs, DCMs, DCOs, 
MSPs, and SDs (an estimated 195 entities or persons) are anticipated to 
have high levels of reporting activity; the Commission estimates that 
their average annual burden may be approximately 2,080 hours per SEF, 
DCO, DCM, MSP, or SD.\87\ The Commission estimated 2,080 hours by 
assuming that a significant number of SEFs, DCMs, DCOs, MSPs, and SDs 
will dedicate the equivalent of least one full-time employee to 
ensuring compliance with the reporting obligations of Sec. Sec.  45.3 
and 45.4 (2,080 hours = 52 weeks x 5 days x 8 hours). The Commission 
believes that this is a reasonable assumption due to the volume of swap 
transactions that will be processed or entered into by these entities, 
the varied nature of the information required to be reported, and the 
frequency with which information may be required to be reported.\88\ 
The Commission notes, however, that these burdens should not be 
considered additional to the costs of compliance with Part 43, because 
the basic data reporting technology, processes, and personnel hours and 
expertise necessary to fulfill the requirements of Part 43 encompass 
both the data stream necessary for real-time public reporting and the 
creation data stream necessary for regulatory reporting.\89\
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    \87\ The Commission obtained this estimate in consultation with 
the Commission's information technology staff.
    \88\ The estimated burden hours were obtained in consultation 
with the Commission's information technology staff.
    \89\ The Commission notes that DCOs are not dicussed in Part 43. 
The costs to DCOs for compliance with this final rule are thus 
unique to this rule, but identical to the costs addressed in Part 
43.
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    Non-SD/MSP counterparties who would be required to report--which 
presently would include an estimated 1,000 entities \90\--are 
anticipated to have lower levels of activity with respect to reporting. 
Of those 1,000 non-SD/MSPs, the Commission believes that a majority, 
estimated now at 75%, or 750 entities, will contract with third parties 
to satisfy their reporting obligations. The identity of such third 
parties, the composition of the marketplace for third party services, 
and the costs to third parties to provide reporting services given the 
economies of scale and scope they may realize in providing those 
services are all presently unknowable. Therefore, the Commission does 
not believe it is feasibly to quantify the fees charged by third 
parties to non-SD/MSPs at the present time, but believes that they will 
likely vary with the volume of reports to be made. For those non-SDs/
non-MSPs who are required to report swap transaction and pricing data 
to an SDR and contract with a third party, the Commission estimates 
that such non-SD/MSP counterparties will incur a recurring burden for 
reporting errors and omissions should errors or omissions be noticed by 
the counterparty or the SDR; however, the Commission has already 
considered these burdens in Part 43, and thus has not reapplied them to 
this rule. The costs of reporting to the remaining 250 non-SD/MSP 
counterparties that do not contract with a third party are addressed 
below.
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    \90\ This is the estimated number of non-SD/MSP counterparties 
who will be required to report in a given year. Only one 
counterparty to a swap is required to report, typically an SD or a 
MSP as determined by Sec.  45.8. Therefore, a non-SD/MSP 
counterparty that is in a swap with an SD or MSP counterparty will 
not be subject to the reporting obligations of Sec. Sec.  45.3 and 
45.4.
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    The Commission estimates that costs applicable to reporting 
counterparties will include maintenance of an internal order management 
system (``OMS'') and the personnel hours needed to maintain a 
compliance program in support of that system. With respect to all 
reporting counterparties, including SEFs, DCOs, DCMs, SDs, MSPs, and 
non-SD/MSP counterparties that do not contract with a third party for 
reporting, the Commission estimates that the additional implementation 
of the OMS and the associated compliance and support program for the 
reporting of swap continuation data would impose an initial non-
recurring burden of 350 hours per reporting counterparty at a cost of 
$28,745, and a recurring annual burden of 175 hours per reporting 
counterparty at a cost of $14,373.
    In addition to the burden estimates presented here, reporting 
counterparties will incur costs associates with establishing and 
maintaining connectivity to an SDR for the purposes of effecting 
reporting. Connectivity costs have been accounted for in the

[[Page 2175]]

information collection prepared by the Commission with respect to its 
proposed part 43 rules, in which the information collection costs 
applicable to SDRs also have been estimated.\91\ To avoid creating 
duplicative PRA estimates, the Commission is not accounting again for 
those costs with respect to this rulemaking. And in the event that 
there is a swap asset class for which no SDR accepts swap data, swap 
data for a swap in that class must be reported to the Commission. With 
respect to all reporting counterparties, including SEFs, DCOs, DCMs, 
SDs, MSPs, and non-SD/MSP reporting counterparties that do not contract 
with a third party for reporting, the Commission estimates that the 
annual cost to maintain connectivity to the Commission would be 
approximately $100,000 for each reporting counterparty or registered 
entity that transacts in swap asset classes that are not accepted by 
any registered SDR.\92\
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    \91\ The Commission estimated the annual recurring technology-
related burden of maintaining connectivity to an SDR at 
approximately $100,000 per reporting entity. The Commission also 
estimated the non-recurring personnel hour burden of establishing 
connectivity to an SDR from the perspective of a non-financial end-
user counterparty with no initial infrastructure or personnel 
training to leverage to be approximately 172 burden hours at a cost 
of approximately $12,824 for each non-financial end-user. This 
estimate represents the costs of developing information capture and 
transmission systems, correspondence testing and operational 
support. The Commission notes that with respect to both part 43 and 
part 45, the cost to a non-financial end-user with no initial 
infrastructure or personnel training represents a high-end estimate, 
and that the costs of establishing and maintaining connectivity to 
an SDR will likely be considerably lower for SEFs, DCMs, SDs, and 
MSPs that likely have greater levels of technological sophistication 
and existing personnel training to leverage.
    \92\ This estimate is calculated as follows: [($100,000 in 
hardware- and software-related expenses, including necessary back-up 
and redundancy, per SDR connection) x (1 SDR connections per 
reporting counterparty)] = $100,000 per non-financial end-user. The 
Commission notes that there are circumstances under which a non-
financial end-user serving as a reporting counterparty would be 
required to incur additional costs to maintain connectivity to both 
the Commission and one or more SDRs. Specifically, if a reporting 
counterparty engages in swap transactions in multiple asset classes, 
and an SDR exists that accepts data for at least one of those asset 
classes, but no SDR exists that accepts data for one or more of 
these asset classes, the reporting counterparty would then incur the 
costs of establishing and maintaining connectivity to both an SDR 
and the Commission. The Commission believes that the costs of 
establishing and maintaining connectivity to a second data 
repository would be some percentage of, but not equal to, the costs 
of establishing and maintaining connectivity to the first data 
repository, because the reporting counterparty would likely be able 
to leverage existing technology and expertise in the process. The 
Commission does not believe that the percentage of the initial costs 
that this additional cost represents is readily quantifiable, 
because it will likely vary with the volume of swaps, and thus the 
volume of data to be reported, that the reporting counterparty 
transacts in the secondary asset classes.
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    c. Section 45.5. Pursuant to Sec.  45.5, SDRs, SEFs, DCMs, SDs, and 
MSPs will be required to report a unique swap identifier to other 
registered entities and swap participants. SEFs and DCMs are 
anticipated to have higher levels of activity than SDRs, SDs, and MSPs 
with respect to unique swap identifier reporting. The Commission 
anticipates that the reporting of the unique swap identifier will be 
automatically completed by electronic computer systems. The following 
burden hours are based on the estimated burden hours necessary to 
oversee, maintain, and utilize the electronic functionality of unique 
swap ID reporting.\93\
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    \93\ The estimated burden hours were obtained in consultation 
with the Commission's information technology staff.
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    The Commission estimates that USI-related costs will be highest for 
SEFs, DCOs, and DCMs, because they will have to create the greatest 
number of USIs. The Commission estimates the requirement for SEFs, 
DCOs, and DCMs to create and transmit USIs to counterparties and other 
registered entities to present a total marginal non-recurring burden of 
1,000 personnel hours at a total cost of $81,869 per entity, and a 
recurring annual burden of 470 personnel hours at a total cost of 
$37,741 per entity.
    For off-facility swaps with an SD or MSP reporting counterparty, 
the Commission estimates the requirement for SDs and MSPs to create and 
transmit USIs to counterparties and other registered entities to 
present a total marginal non-recurring burden of 750 personnel hours at 
a cost of $61,402 per entity, and a recurring annual burden of 353 
hours of annual personnel hours at a total cost of $28,386 per entity.
    For off-facility swaps between non-SD/MSP counterparties, the 
Commission estimates the requirement for SDRs to create and transmit 
USIs to counterparties and other registered entities to present a total 
marginal non-recurring burden of 500 annual personnel hours at a cost 
of $40,935 per entity, and a recurring annual burden of 235 annual 
personnel hours for a total cost of $18,871 per entity.
    d. Section 45.6. Pursuant to Sec.  45.6, each SD, MSP, and non-SD/
MSP counterparty (an estimated 30,125 entities and persons), will be 
required to report both level one and level two reference data 
concerning itself to a public level one reference database and a 
confidential level two reference database, respectively. The report 
will be made once at the time of the first swap data report to an SDR 
involving the SD, MSP, or non-SD/MSP counterparty. A similar report 
will be required whenever an update or correction to the previously 
reported reference data is required. For any such report, the estimated 
number of burden hours is approximately two hours per entity, excluding 
customary and usual business practices. The number of reports required 
to be made per year is estimated to vary between zero and four, 
depending on when the SD, MSP or non-SD/MSP counterparty is required to 
make either the initial report or a report of an update or 
correction.\94\ Thus, the estimated annual burden per entity varies 
between zero and eight burden hours. Therefore, there are between 0 and 
241,000 estimated aggregate annual burden hours.
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    \94\ The estimated burden hours and the estimated number of 
reports were obtained in consultation with the Commission's 
information technology staff.
---------------------------------------------------------------------------

    Additionally, the Commission anticipates that an LEI meeting the 
requirement of the final rule will be available before the commencement 
of swap data reporting. However, the Commission has also considered the 
potential burden that will be imposed on SDRs for creating, assigning 
and transmitting substitute identifiers if they should be required. The 
Commission estimates the cost to SDRs to create, assign and transmit 
substitute identifiers to counterparties and other registered entities 
to present a total marginal non-recurring burden of 500 annual 
personnel hours at a cost of $40,935 and a recurring annual burden of 
235 annual personnel hours for a total cost of $18,871.
    e. Section 45.7. Pursuant to Sec.  45.7, each swap subject to the 
Commission's jurisdiction will need to be identified in all 
recordkeeping and swap data reporting by means of a unique product 
identifier and product classification system, which shall be designated 
at a later date by the Commission. The Commission expects that this 
will result in a one-time retrieval burden for each SEF and DCM for 
each swap product traded on its platform, either at the time the 
Commission designates the system for currently listed products or at 
the time a product is listed for trading. SDs, MSPs, and non-SD/MSP 
reporting counterparties also will be subject to a one-time retrieval 
burden for each swap product that they are required to report to an SDR 
or the Commission. As with unique swap identifiers, the Commission 
anticipates that the reporting of the unique swap identifier will be 
automatically completed by

[[Page 2176]]

electronic computer systems. Until such time as a system is designated, 
however, the Commission cannot estimate the aggregate annual burden 
hours associated with the retrieval necessary to populate the records 
and reports. The Commission therefore will establish a burden estimate 
associated with the collection of information resulting from Sec.  45.7 
on the designation of a system.
    f. Sec.  45.14. Pursuant to Sec.  45.14, a registered SDR is 
required to develop protocols regarding the reporting and correction of 
erroneous information. The Commission anticipates that this requirement 
will result in costs to SDRs associated with the reporting of both 
creation and continuation data in the form of non-recurring investments 
in technological systems and personnel during the development of the 
formatting procedure, and recurring expenses associated with data 
processing, systems maintenance, and personnel hours to format new 
data. However, the burden associated with Sec.  45.14 are contained in 
the real time public reporting rules proposed by the Commission, for 
which the Commission has prepared an information collection request for 
review and approval by OMB. To avoid duplication of PRA burdens, those 
costs are not being accounted for in the information collection request 
associated with this rulemaking.

C. Consideration of Costs and Benefits

1. Introduction
    The swap markets, which have grown exponentially in recent years, 
are now an integral part of the nation's financial system. As the 
financial crisis of 2008 demonstrated, the absence of transparency in 
the swap markets can pose significant risk to this system.\95\ The 
Dodd-Frank Act seeks in part to promote the financial stability of the 
United States by improving financial system accountability and 
transparency. More specifically, Title VII of the Dodd-Frank Act 
directs the Commission to oversee the swap markets and to develop and 
promulgate regulations to increase swap market transparency and thereby 
reduce the potential for counterparty and systemic risk.\96\
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    \95\ As the U.S. Senate Committee on Banking, Housing, and Urban 
Affairs explained concerning the 2008 financial crisis:
    Information on prices and quantities [in ``over-the-counter'', 
or ``OTC'', derivatives contracts] is opaque. This can lead to 
inefficient pricing and risk assessment for derivatives users and 
leave regulators ill-informed about risks building up throughout the 
financial system. Lack of transparency in the massive OTC market 
intensified systemic fears during the crisis about interrelated 
derivatives exposures from counterparty risk. These counterparty 
risk concerns played an important role in freezing up credit markets 
around the failures of Bear Stearns, AIG, and Lehman Brothers.
    S. Rep. No. 111-176, at 30 (2010). More specifically with 
respect to credit default swaps (``CDSs''), the Government 
Accountability Office found that ``comprehensive and consistent data 
on the overall market have not been readily available,'' that 
``authoritative information about the actual size of the CDS market 
is generally not available,'' and that regulators currently are 
unable ``to monitor activities across the market.'' Government 
Accountability Office, ``Systemic Risk: Regulatory Oversight and 
Recent Initiatives to Address Risk Posed by Credit Default Swaps,'' 
GAO-09-397T (March 2009), at 2, 5, 27.
    \96\ See Mark Jickling and Kathleen Ann Ruane, Cong. Research 
Serv., The Dodd-Frank Wall Street Reform and Consumer Protection 
Act: Title VII, Derivatives 1 (2010); Financial Regulatory Reform--A 
New Foundation: Rebuilding Financial Supervision and Regulation, 
U.S. Department of the Treasury, at 47-48 (June 17, 2009).
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    Transaction reporting is a fundamental component of the 
legislation's objective to reduce risk, increase transparency, and 
promote market integrity within the financial system generally, and the 
swap market in particular. Specifically, the Dodd-Frank Act requires 
that ``each swap (whether cleared or uncleared) * * * be reported to a 
registered swap data repository.'' \97\ The Dodd-Frank Act also 
requires SDRs to collect and maintain swap transaction data as 
prescribed by the Commission, and to make such data electronically 
available to regulators.\98\
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    \97\ CEA section 2(a)(13)(G).
    \98\ Regulations governing core principles, registration 
requirements, and duties of SDRs are contained in part 49 of this 
chapter.
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    CEA section 21(b)(1)(A), added by section 728 of the Dodd-Frank 
Act, addresses the content of the swap transaction data that registered 
entities and reporting counterparties must report to a registered SDR 
and directs the Commission to ``prescribe standards that specify the 
data elements for each swap that shall be collected and maintained by 
each registered swap data repository.'' In fulfilling this statutory 
mandate, CEA section 21(b)(1)(B) also directs the Commission to 
``prescribe consistent data element standards applicable to registered 
entities and reporting counterparties.'' In promulgating this part 45, 
the Commission implements Congress's mandate that swap transaction and 
pricing data is reported to registered SDRs. Part 45 achieves the 
statutory objectives of transparency by, inter alia, requiring that 
market participants report swap transaction data to an SDR, possibly 
through intermediaries.\99\
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    \99\ CEA section 4r(a)(1)(B), added by section 729 of the Dodd-
Frank Act, requires that each swap not accepted for clearing by any 
DCO must be reported to a registered SDR or, in the case in which 
there is no SDR that would accept the swap, to the Commission.
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    As discussed in more detail below, the Commission anticipates that 
the requirements of part 45 will generate several overarching, if 
presently unquantifiable, benefits to swap market participants and the 
general public. These include (a) Increased transparency; (b) improved 
regulatory understanding of concentrations of risk within the market; 
(c) more effective monitoring of risk profiles by regulators and by 
regulated entities themselves through the use of unique identifiers; 
(d) improved regulatory oversight, and (e) more robust data management 
systems.
    The Commission believes these benefits, made possible by the timely 
reporting of comprehensive swap transaction data, consistent data 
standards for recordkeeping, and identification of products, entities 
and transactions through unique identifiers, will accrue to market 
participants in a number of ways:

     Increased transparency of derivatives markets.
     Improved risk management: a transfer of the costs 
associated with systemic risk from the public to private entities, 
particularly to those that are better positioned to realize 
economies of scale and scope in assuming those costs.
     More robust risk monitoring and management capabilities 
for market participants as a result of the systems required under 
part 45. This will improve the monitoring of the participant's 
current swap market position.
     New tools to process transactions at a lower expense 
per transaction given the systems required under part 45. These 
tools will enable participants to handle the same or an increased 
volume of swaps at a lower marginal expense.
     More robust standards for the financial services 
industry, such as utilizing UTC and unique identifiers.
     Swap transaction reporting under the final rules 
provides a means for the Commission to gain a better understanding 
of the swap markets--including aggregate positions both in specific 
swap instruments and positions taken by individual entities or 
groups--by requiring transaction data for currently opaque markets, 
and then aggregating that data in useful ways. For example, having 
such data would help Commission staff monitor and analyze the swap 
market in a more comprehensive manner. In this way, the final rule 
would support Congress' mandate that the Commission supervise the 
swap markets; in addition, transaction reporting aids the Commission 
in the development of the mandated semiannual reports on swap 
trading activity.

    In the NOPR, the Commission requested comment on whether a phase-in 
approach should be used for the time of reporting of confirmation by 
non-SD/MSP counterparties. The Commission also requested comment on 
whether

[[Page 2177]]

there was sufficient infrastructure to support lifecycle or alternative 
approaches for data reporting. The Commission received a number of 
comments on the implementation of the proposed rules that included 
cost-benefit considerations.
    Global Forex commented that the phase-in period should take into 
account the work needed for FX market participants to establish 
connectivity to the SDR and for the SDR to develop unique identifiers 
and become established. Similarly, CME added that the compliance date 
must take into account the scope of implementation, which could take in 
its view several years. The Electric Coalition recommended that the 
Commission clarify its regulatory needs before setting forth specific 
reporting rules. Thomson Reuters recommended that the Commission 
implement rules consistent with proposals by the European Commission in 
their Markets in Financial Instruments Directive (MiFID). DTCC 
recommended a nearly year-long phase-in with products with the greatest 
automation being required first. ISDA recommended that legal entity 
identifiers and unique product identifiers be implemented prior to 
reporting.
    The Electric Coalition presented a detailed three-step 
implementation proposal that it stated would reduce burdens for 
commercial energy firms. The Electric Coalition recommended that 
reporting be implemented in three phases: first for on-facility, 
cleared swaps; second for standardized but off-facility and uncleared 
swaps; and third for bespoke off-facility and uncleared swaps. 
Similarly, Chatham Financial presented a detailed implementation 
schedule in four stages by counterparty. Under Chatham Financial's 
approach, DCMs, SEFs and DCOs would be required to report in the first 
stage; financial SDs would begin reporting in the second stage; non-
financial SDs and MSPs would commence reporting in the third stage; and 
non-SD/MSP reporting counterparties would begin reporting in the fourth 
stage. CDEU agreed with Chatham Financial's approach. Dominion 
Resources recommended a phase-in approach for non-SD/MSP 
counterparties.
    As discussed above, the Commission agrees with comments 
recommending phasing in reporting by asset class and by counterparty 
type, and has determined that the final rule provides for such a phase-
in approach. The Commission anticipates that this approach will result 
in cost reductions for reporting counterparties relative to an 
immediate implementation of all of the reporting provisions of the 
rule. In particular, as discussed above, the phase-in approach adopted 
in the final rule will reduce costs for non-SD/MSP reporting 
counterparties by giving them six additional months to prepare for 
reporting. In response to comments, the Commission has also set forth a 
mechanism for voluntary supplemental reporting in Sec.  45.12. As 
discussed in more detail above, the Commission believes Sec.  45.12 may 
have benefits for both data accuracy and business processes.
    In the sections that follow, the Commission considers the costs and 
benefits of part 45 as required by CEA section 15(a).
a. Background
    Pursuant to CEA section 15(a), before promulgating a regulation 
under the CEA the Commission generally must consider the costs and 
benefits of its actions in the context of five broad areas of market 
and public concern: (1) Protection of market participants and the 
public; (2) efficiency, competitiveness, and financial integrity of 
markets; (3) price discovery; (4) sound risk management practices; and 
(5) other public interest considerations. The Commission, in its 
discretion, may give greater weight to any one of the five enumerated 
factors and may determine that, notwithstanding costs, a particular 
rule protects the public interest.\100\
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    \100\ See, e.g., Fisherman's Doc Co-op., Inc. v. Brown, 75 F.3d 
164 (4th Cir. 1996); Center for Auto Safety v. Peck, 751 F.2d 1336 
(DC Cir. 1985) (noting that an agency has discretion to weigh 
factors in undertaking cost-benefit analysis).
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    In the NOPR, the Commission stated that the proposed reporting and 
recordkeeping requirements could impose significant compliance costs on 
some SDRs, SEFs, DCMs, DCOs, SDs, MSPs, and non-SD/MSP counterparties. 
In particular, the Commission noted that the proposed recordkeeping and 
reporting requirements could require capital expenditures for some such 
entities that could affect their ability to compete in the global 
marketplace because of reductions in available resources. The 
Commission solicited comment on its consideration of costs and benefits 
and specifically invited commenters to submit any data or other 
information that they may have quantifying or qualifying the costs and 
benefits of the proposed requirements. The Commission also requested 
comments on the overall costs and benefits of the proposed rules 
implementing the Dodd-Frank Act.
    In considering the costs and benefits of this final rule as well as 
its other final rules implementing the Dodd-Frank Act, the Commission 
has, wherever feasible, endeavored to estimate or quantify the costs 
and benefits of the final rules. Where this is not feasible, the 
Commission provides a qualitative assessment of such costs and 
benefits. In this respect, the Commission notes that public comment 
letters did not provide quantitative data regarding the costs and 
benefits associated with the Proposed Rules.
    In the following discussion, the Commission addresses the costs and 
benefits of the final rule, considers comments regarding the costs and 
benefits of the final rule, and subsequently considers the five broad 
areas of market and public concern as required by section 15(a) of the 
CEA. Moreover, as this rulemaking contains numerous reporting and 
recordkeeping requirements, many of the costs of the rulemaking are 
associated with collections of information. The Commission is obligated 
to estimate the burden of and provide supporting statements for any 
collections of information it seeks to establish under considerations 
contained in the PRA, 44 U.S.C. 3501 et seq., and to seek approval of 
those requirements from the OMB. Therefore, the estimated burden for 
the collections of information in this rulemaking, as well as the 
consideration of comments thereto, are discussed in the PRA section of 
this rulemaking and the information collection request filed with OMB 
as required by that statute. Otherwise, the costs and benefits of the 
Commission's determinations are considered in light of the five factors 
set forth in CEA section 15(a).
    In this final rulemaking, the Commission is adopting regulations 
mandated by section 21(b) to specify ``consistent data element 
standards'' for reporting swaps to registered SDRs.
b. Cost-Estimation Methodology
    The Commission has chosen to use as the reference point for its 
cost estimates a non-SD/MSP counterparty that is not a financial entity 
as defined in CEA section (2)(h)(7)(C), and does not have the technical 
capability and other infrastructure to comply with the part 45 
requirements--in other words, a new market entrant with no prior swap 
market participation or infrastructure.
    However, the Commission expects that the actual costs to 
established market participants will often be lower than this reference 
point--perhaps significantly so, depending on the type,

[[Page 2178]]

flexibility, and scalability of systems already in place.\101\
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    \101\ ``The submission of information to trade repositories is 
an activity that takes place in many OTC markets today and will not 
unduly burden those who must comply with the requirement.'' CL-WMBAA 
at 6. In contrast, as commenters highlighted, the costs of complying 
with part 43 can be expected to be higher for non-financial end-
users and others currently lacking the resources and systems of 
large financial institutions that transact swaps more frequently. 
See, e.g., CL-COPE. ``Swap Dealers have books of business that 
typically are much larger because they encompass a much broader 
universe of types of swaps and because it is the core of their 
regular business * * * of necessity, swap dealers have and will 
continue to develop sophisticated and highly complex computer 
systems powered by highly customized software to enable them to keep 
track of and manage their books of business. * * * End-users simply 
do not have these systems and capabilities.'' CL-Coalition of Energy 
End-Users at 4.
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    The Commission recognizes that the costs of complying with part 45 
are largely attributable to the reporting and recordkeeping 
requirements of this rule. As discussed above, the Commission has 
determined that the final rule will adopt a streamlined reporting 
regime that requires reporting by the registered entities or swap 
counterparties with the easiest, fastest, and cheapest data access and 
those most likely to have the necessary automated systems. Under this 
reporting regime, reporting obligations for non-SD/MSP counterparties 
are entirely eliminated in many cases, and are phased in or reduced in 
all other cases.
    Non-SD/MSP counterparties can be required to report data only for 
the small minority of swaps in which both counterparties are non-SD/MSP 
counterparties.
    Even within this small minority of swaps, the non-SD/MSP reporting 
counterparty will have no reporting obligations for swaps executed on a 
SEF or DCM and cleared by a DCO, or for off-facility swaps accepted for 
clearing by a DCO within the extended deadline for PET data reporting 
by the non-SD/MSP reporting counterparty.\102\
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    \102\ If an off-facility swap is accepted for clearing after the 
deadline for PET data reporting by the non-SD/MSP reporting 
counterparty, the non-SD/MSP counterparty is excused from reporting 
confirmation data, which will instead be reported by the DCO.
---------------------------------------------------------------------------

    For swaps executed on a SEF or DCM but not cleared, the non-SD/MSP 
reporting counterparty's reporting obligations are limited to reporting 
required swap continuation data during the existence of the swap. Here 
the final rule provides reporting deadlines for non-SD/MSP reporting 
counterparties that are extended and phased in: a change to the primary 
economic terms of the swap must be reported by the end of the second 
business day following the date of the change during the first year of 
reporting, and by the end of the first business day following the date 
of the change thereafter; and valuation data is only required to be 
reported on a quarterly basis.
    A non-SD/MSP counterparty will be required to report both swap 
creation data and swap continuation data only for off-facility, 
uncleared swaps between non-SD/MSP counterparties; and this obligation 
can apply only if the non-SD/MSP counterparty is an ECP, since CEA 
section 2(e) restricts swap trading by non-ECP counterparties to on-
facility swaps. For the small number of off-facility, uncleared swaps 
for which a non-SD/MSP that is an ECP is the reporting counterparty, 
the final rule also provides reporting deadlines that are extended and 
phased in.\103\
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    \103\ In such cases, PET data must be reported within 48 hours 
after execution during the first year of reporting, within 36 
business hours after execution during the second year of reporting, 
and within 24 business hours after execution thereafter. 
Confirmation data must be reported within 48 hours after 
confirmation during the first year of reporting, within 36 business 
hours after confirmation during the second year of reporting, and 
within 24 business hours after confirmation thereafter. During the 
existence of the swap, changes to primary economic terms must be 
reported by the end of the second business day following the date of 
the change during the first year of reporting, and by the end of the 
first business day following the date of the change thereafter; and 
valuation data is only required to be reported on a quarterly basis.
---------------------------------------------------------------------------

    Furthermore, costs for non-SD/MSP counterparties that are not a 
``financial entity'' as defined in CEA section 2(h)(7)(C) will be 
further reduced by the fact that the final rule provides that for swaps 
between non-SD/MSP counterparties where only one counterparty is a 
financial entity, the financial entity will be the reporting 
counterparty. Because financial non-SD/MSP counterparties are more 
likely than non-SD/MSP counterparties that are not financial entities 
to have in place some or all of the personnel and technological 
infrastructure necessary to serve as the reporting counterparty, and to 
be able to realize economies of scale with respect to reporting, 
placing the burden of reporting in this context on the counterparty 
that is a financial entity is likely to provide a more cost-effective 
overall reporting process.
    These provisions of the final rule either eliminate or 
substantially reduce the cost and burden of reporting for non-SD/MSP 
counterparties.
    To address costs specific to SDRs, the Commission has estimated the 
incremental costs SDRs would incur to comply with the reporting and 
recordkeeping requirements of this rulemaking above the base operating 
costs for SDRs reflected in a separate rulemaking.\104\ These 
incremental costs include the creation and transmission of unique 
identifiers.
---------------------------------------------------------------------------

    \104\ See Commission, Swap Data Repositories: Registration 
Standards, Duties and Core Principles: Final Rule. 76 FR 54538 (Sep. 
1, 2011) at 54572 (SDR Final Rule).
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2. General Cost-Benefit Comments Received
    This rulemaking has generated an extensive record, which is 
discussed at length throughout this notice as it relates to the 
substantive provisions in the final rules. A number of commenters 
suggested that implementing and complying with the proposed rules would 
incur significant costs. Because of its concern about the potential 
level of costs, the Minneapolis Grain Exchange (``MGEX'') requested an 
extensive and realistic cost-benefit analysis of each regulation before 
adoption. The Commission also received general comments from Chatham 
Financial, Vanguard, ABC, EEI, WGCEF, Dominion Resources, FHLB, DTCC, 
the Electric Coalition, and CDEU, recommending that the Commission 
consider the costs and burdens of the proposed rules on non-registered, 
small entities. The Foreign Banks, Global Forex, CME, ISDA and SIFMA 
requested that the Commission consider the cost implications of the 
proposed regulations on all applicable entities and in some instances, 
recommended alternative approaches. The Commission has carefully 
considered alternatives suggested by commenters, and in a number of 
instances, has adopted alternatives or modifications to the proposed 
rules where, in the Commission's judgment, the alternative or modified 
standard accomplishes the same regulatory objective in a more cost-
effective manner.
    In response to the Commission's invitation in the NOPR for comments 
on the overall costs and benefits of the proposed rules, Better Markets 
stated that the Commission's cost-benefit analyses in the notices of 
proposed rulemaking may have understated the benefits of the proposed 
rules. Better Markets argued that adequate assessment of the costs and 
benefits of any single proposed rule or element of such a rule would be 
difficult or impossible without considering the integrated regulatory 
system of the Dodd-Frank Act as a whole. According to Better Markets:

    It is undeniable that the Proposed Rules are intended and 
designed to work as a system. Costing-out individual components of 
the Proposed Rules inevitably double counts

[[Page 2179]]

costs which are applicable to multiple individual rules. It also 
prevents the consideration of the full range of benefits that arise 
from the system as a whole that provides for greater stability, 
reduces systemic risk and protects taxpayers and the public treasury 
from future bailouts.\105\
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    \105\ CL-Better Markets II, at 3.

Better Markets also stated that an accurate cost benefit assessment 
must include the avoided risk of a new financial crisis. One measure of 
this is the still accumulating cost of the 2008 financial crisis. The 
comment letter cited a statement by Andrew G. Haldane, Executive 
Director for Financial Stability at the Bank of England, who estimated 
the worldwide cost of the crisis in terms of lost output at between $60 
trillion and $200 trillion, depending primarily on the long term 
persistence of the effects.
    Notwithstanding that it must (and does) conduct a cost-benefit 
analysis with respect to this rulemaking, the Commission agrees with 
Better Markets that the proposed rules should operate in a coordinated 
manner to improve and protect financial markets. In that regard, the 
costs and benefits associated with this final rule are in some 
instances not readily separable from the costs and benefits associated 
with other Commission rulemakings implementing the Dodd-Frank Act, most 
notably those governing real-time public reporting of swap transaction 
and pricing data (part 43) and registration and regulation of swap data 
repositories (part 49). Swap data recordkeeping and reporting, will, 
for instance, provide information to enable regulatory agencies to more 
fully understand the mechanisms and risks of the swap market. Access to 
previously unavailable data will allow these agencies to better model 
and analyze swap markets to mitigate systemic risk, detect potential 
market manipulation, and expand their capabilities in efficient market 
oversight. Acknowledging this, the Commission must conduct a cost-
benefit analysis with respect to specific rulemaking.
    In a broad sense, the costs presented to market participants by the 
requirements of this rule represent the internalization by financial 
market participants of a negative externality--the costs generated by 
systemically risky behavior on the part of market participants, which 
had previously been internalized by the taxpaying public in the form of 
government bailouts of failed financial firms that were brought down in 
part by this risky behavior.
    In analyzing the costs and benefits of this rulemaking, it is 
important to note that many elements of the rule are mandated by Dodd-
Frank Act and are thus outside the Commission's discretion. For 
example:

     Information about all swaps, cleared or uncleared, must 
be reported to a registered SDR (or, in the event that a swap is not 
is not accepted by an SDR, to the Commission).
     The Commission must prescribe consistent data element 
standards for SDRs, registered entities, and reporting 
counterparties.
     The Commission must determine the hierarchy of 
reporting responsibility for uncleared swaps.
3. Recordkeeping
    As discussed throughout this release, the CEA as amended by the 
Dodd-Frank Act establishes recordkeeping requirements for registered 
entities.
a. Benefits of Recordkeeping
    The recordkeeping requirements of part 45 will allow the Commission 
and other regulatory agencies to develop an accurate picture of swap 
markets in a timely fashion. This serves the public interest. From an 
enforcement perspective, the recordkeeping requirements of part 45 
enable investigators and attorneys to reconstruct a comprehensive, 
sequenced record of swap transactions that will be an essential tool in 
ensuring the fairness of swap markets. The recordkeeping requirements 
of part 45 will also facilitate examinations and investigations by the 
Commission and other regulators to ensure that registered entities are 
in compliance with core principles.
    The requirement to retain records for the life of the swap plus 
five years provides be of substantial benefit to the economists 
employed by the Commission and to other regulators. In general, 
economic analysis benefits from a broader body of data; in particular, 
time-series analysis (a fundamental element of economic and statistical 
analysis in which the value of a variable is charted over time) may 
benefit from a body of data that represents a longer time horizon.
b. Costs of Recordkeeping
    The Commission received several comments related to the costs of 
swap recordkeeping. With respect to recordkeeping by non-SD/MSP 
counterparties, the Electric Coalition recommended that the Commission 
reduce recordkeeping requirements to the minimum necessary and phase 
requirements relative to the cost of implementation. Shell Energy 
requested clarification that non-SD/MSP counterparties are not subject 
to the recordkeeping requirements. WGCEF requested that the Commission 
consider participants who transact in non-financial markets when 
adopting its recordkeeping proposals, and further evaluate the actual 
costs, availability of technology, and ability of market participants 
to deploy the technology required to comply with such requirements.
    With respect to record retention, AGA contended that requiring 
records to be kept through the life of a swap plus five years would 
impose substantive costs on end-users such as gas utilities. AGA also 
stated that the proposed three-day accessibility requirement 
effectively would require an off-site storage provider, which if 
available at all, could be cost-prohibitive. Reasoning that 
transactions between non-SD/MSP counterparties would represent only a 
small portion of regulated activity, AGA recommended that the 
Commission reduce its recordkeeping requirements for non-SD/MSPs so 
that they would only have to maintain such records for three years 
following expiration of the swap. CIEBA and WGCEF supported the 
proposed five-year post-expiration retention period, but also 
recommended not extending it further. ISDA and SIFMA requested 
clarification that the phrase ``via real-time electronic access'' does 
not mean ``instantly accessible'' which it characterized as 
impracticable given the volume of day to day reporting.
    As discussed above, the Commission has determined that the final 
rule requires SEFS, DCMs, DCOs, SDs, and MSPs to 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. Such records must be kept in electronic rather 
than paper form unless they are originally created and exclusively 
maintained in paper form. The final rule limits the parallel 
requirement for non-SD/MSP counterparties to full, complete, and 
systematic records, together with all pertinent data and memoranda, 
with respect to each swap in which they are a counterparty. In response 
to comments, the Commission has determined that non-SD/MSP 
counterparties may keep records in either electronic or paper form.
    With respect to record retention, the final rule provides that all 
records required to be kept by SEFS, DCMs, DCOs, SDs, and MSPs must be 
kept with respect to each swap throughout the life of the swap and for 
at least five years following final termination of the swap, or for at 
least ten years following the date of creation of the swap, whichever 
is greater. Non-SD/MSP counterparties

[[Page 2180]]

must keep required records throughout the existence of the swap and for 
five years following final termination of the swap.
    With respect to record retrieval, the final rule provides that 
required records maintained by SEFs, DCMs, DCOs, SDs, and MSPs must be 
readily accessible by the registered entity in question via real time 
electronic access throughout the life of the swap and for two years 
following the final termination of the swap, and must be retrievable 
within three business days throughout the remainder of the required 
retention period. Record retrieval requirements are lower in the case 
of non-SD/MSP counterparties: in response to comments, the Commission 
has determined that non-SD/MSP counterparties need only be able to 
retrieve records within five business days throughout the required 
retention period.
    As discussed above, the Commission has determined that the 
compliance date for non-SD/MSP counterparties will be six months after 
the compliance date for other registered entities and counterparties. 
The Commission has determined that compliance with the requirement to 
begin recordkeeping should not be further phased in for non-SD/MSP 
counterparties. As noted, the final rule provides lesser recordkeeping 
requirements and lesser retrieval requirements for non-SD/MSP 
counterparties, in order to reduce recordkeeping costs and burdens for 
them. The Commission believes that delaying the requirement to comply 
with recordkeeping requirements could interfere with the ability of the 
Commission and other regulators to carry out their oversight and 
enforcement responsibilities. As noted above, the Commission's 
experience with recordkeeping requirements in the context of futures 
suggests that all market participants do retain records, and that such 
recordkeeping is essential for effective oversight and prosecution of 
violations.
    The Commission anticipates that the recordkeeping requirements in 
Sec.  45.2 will present additional costs to registered entities and 
swap counterparties that currently do not retain swap records for the 
required period of time. Costs for recordkeeping costs will include 
non-recurring investments in technological systems and personnel 
associated with establishing data capture and storage systems, and 
recurring expenses associated with personnel, data storage and 
maintenance of data storage systems. The Commission has not identified 
any quantifiable costs of recordkeeping that are not associated with an 
information collection subject to the PRA. Quantifiable costs 
associated with the same are reflected in the PRA. The Commission 
believes that this cost will be substantially reduced or effectively 
eliminated for registered entities and swap counterparties that already 
engage in the recordkeeping as required by the final rule.
    The Commission anticipates that the retrieval requirements set 
forth in part 45.2 will result in additional costs to registered 
entities and swap counterparties that do not currently have the ability 
to retrieve records within the required timeframe. The Commission 
expects that this requirement will present costs to registered entities 
and swap counterparties in the form of non-recurring investments in 
technological systems and personnel associated with establishing data 
retrieval processes, and recurring expenses associated with the actual 
retrieval of swap data records. Quantifiable costs associated with the 
same are reflected in the PRA. The Commission believes that these costs 
will be substantially reduced or effectively eliminated for registered 
entities and swap counterparties with an existing infrastructure 
capable of record retrieval within the timeframe set forth in this 
requirement.
    The Commission also believes that its determination to allow non-
SD/MSP counterparties to keep records in either electronic or paper 
form will generally reduce the cost and burden of recordkeeping for 
such counterparties. While many non-SD/MSP counterparties may choose to 
keep records in electronic form, some such counterparties that 
currently do not have electronic recordkeeping systems may prefer, as 
suggested by comments, to avoid the cost of acquiring such systems by 
continuing to maintain paper records. The Commission believes that the 
final rule provision lengthening the record retrieval period for non-
SD/MSP counterparties to five business days will give such 
counterparties adequate time to retrieve such paper records in the 
event that the records are requested by the Commission or another 
regulator in the course of an investigation. The Commission generally 
believes that the pre-Dodd-Frank rationale for requiring Commission 
registrants to keep all records relating to their business similarly 
applies to swaps by registered entities and swap counterparties. The 
Commission requires these records to perform its regulatory function. 
Retaining readily accessible records may also improve the risk 
management practices of complying entities that wish to consult or 
analyze swap transactions as part of their proprietary risk management 
strategies.
c. Recordkeeping Requirements in Light of CEA Section 15(a)
    The Commission has evaluated the benefits of the recordkeeping 
provisions of Sec.  45.2 in light of the specific considerations 
identified in section 15(a) of the CEA as follows:
    Protection of market participants and the public. As discussed 
above, the Commission has endeavored to limit the costs attributable to 
discretionary implementation decisions to the maximum degree consistent 
with statutory requirements and their intended benefits. The Commission 
has endeavored to match the costs of the post-implementation 
marketplace with the sizes, levels of sophistication, and levels of 
systemic importance of the affected participants, so that the 
associated benefits may be realized by the public.
    With respect to recordkeeping, the Commission believes the benefits 
include the protection of market participants and the public. The 
Commission believes that the recordkeeping requirements in the final 
rule will enable the Commission and other regulatory agencies to 
fulfill their oversight and enforcement responsibilities. The record 
retention periods in the final rule are consistent with both the 
Commission's existing retention requirement in the context of futures, 
pursuant to Commission Regulation 1.31, and with applicable statutes of 
limitation. Such record retention will give the Commission ready access 
to data essential to its mission to protect market participants and the 
public from violations of the CEA and Commission regulations. The 
build-up of systemic risk in the largely opaque swap market played a 
significant role in the financial crisis of 2007-2008; accordingly, the 
Commission believes that the introduction of transparency to these 
markets will be critical to regulators' efforts to inform and protect 
market participants and the public in the future.
    Efficiency, competiveness, and financial integrity. As discussed 
above, the Commission has endeavored to limit the costs attributable to 
discretionary implementation decisions to the maximum degree consistent 
with statutory requirements and their intended benefits. The Commission 
has endeavored to match the costs of the post-implementation 
marketplace with the sizes, levels of sophistication, and

[[Page 2181]]

levels of systemic importance of the affected participants, so that the 
associated benefits may be realized by the public.
    The Commission believes that the recordkeeping requirements 
provided in the final rule will serve to protect the financial 
integrity of swap markets, through increased transparency. This 
transparency will provide the Commission and other regulators enhanced 
enforcement abilities, aiding the prosecution and deterrence of market 
abuses. The Commission acknowledges the costs associated with the 
recordkeeping requirement (discussed above), and has attempted to 
minimize costs to the extent consistent with fulfillment of the 
purposes of the Dodd-Frank Act. The final rule adopts the NOPR 
provision for lesser recordkeeping requirements for non-SD/MSP 
counterparties. While other registered entities and counterparties must 
keep records of all activities relating to their businesses with 
respect to swaps, non-SD/MSP counterparties are only required to keep 
records with respect to each swap in which they are a counterparty. 
Recordkeeping by all swap counterparties, including non-SD/MSP 
counterparties, is essential to the Commission's enforcement and market 
supervision functions. The Commission also notes that current lapses in 
recordkeeping by institutions may generate implicit integrity costs to 
financial transactions and the wider public; the final rule attempts to 
mitigate these current costs through various recordkeeping requirements 
(including universal identifiers), aiding financial integrity.
    The Commission believes that, by improving the integrity of the 
U.S. swap markets in the manner described above, this final rule may 
make participation in the U.S. swap markets more appealing to entities 
that currently do not participate, and thus could enhance demand for 
access to the U.S. swap market and its participants both domestically 
and internationally. This potential increase in swap market 
participation may improve the competitiveness of the swap marketplace 
as more parties demand sources of risk transference.
    Furthermore, the Commission does not anticipate that the 
recordkeeping requirements of this final rule present any costs that 
would impede the efficiency of swap markets. Required recordkeeping may 
aid internal audits and dispute resolution. Electronic recordkeeping, 
which will aid required electronic reporting, may improve efficiency 
and reduce initiation and maintenance costs over the long run.
    Price discovery. The Commission does not believe that this 
requirement has a material effect on the price discovery process.
    Sound risk management practices. The Commission believes that the 
final rule recordkeeping requirements may serve to improve the 
soundness of the risk management practices of market participants. The 
Commission is essentially requiring the maintenance of accurate records 
in a manner such that records are readily available for reproduction to 
regulators, but the Commission anticipates an ancillary risk management 
benefit. That is, market participants will now have access to a highly 
organized and streamlined internal records system when analyzing or 
otherwise developing their risk management practices. The Commission 
does not believe that the costs associated with its discretionary 
implementation decisions are of a magnitude to impede sound risk 
management. Moreover, the cost of implementation of the recordkeeping 
rule may be partially compensated by error avoidance and the mitigation 
of internal risk.
    Other public interest considerations. As discussed throughout the 
preamble, the Commission believes that the greater market transparency, 
enhanced market monitoring, and increased systemic risk mitigation that 
will be enabled by the swap recordkeeping required by the final rule 
are in the public interest.
4. Swap Data Reporting
    a. Benefits of Swap Data Reporting
    The Commission anticipates that the part 45 reporting requirements 
will generate several overarching, if presently unquantifiable, 
benefits to swap market participants and the general public. These 
include(i) Improved risk management; (ii) a transfer of the costs 
associated with systemic risk from the public to private entities, 
particularly to those that are better positioned to realize economies 
of scale and scope in assuming those costs; and (iii) improved 
regulatory oversight.
    The Commission believes these benefits, made possible by the timely 
reporting of comprehensive swap transaction data, will accrue to market 
participants in a number of ways:

     More robust risk monitoring and management capabilities 
for market participants as a result of the systems required under 
part 45. This will improve the monitoring of the participant's 
current swap market position.
     New tools to process transactions at a lower expense 
per transaction given the systems required under part 45. These 
tools will enable participants to handle the same or an increased 
volume of swaps at a lower marginal expense both at trade inception 
and during its life.
     More robust standards for the financial services 
industry, such as utilizing UTC and unique identifiers for products 
and legal entities.

    Transaction reporting under part 45 also benefits the general 
public by supporting the Commission's supervision of the swap market, 
as well as the broader supervisory responsibilities of U.S. financial 
regulators to protect against financial market systemic risk. The 
reporting and recordkeeping requirements provide a means for the 
Commission to gain a better understanding of the swap market--including 
the pricing patterns of certain commodities. As bespoke swaps move onto 
more standardized, and in some cases, electronic platforms, more 
numerous trade participants will likely enter these markets. Timely, 
comprehensive, and standardized regulatory reporting is especially 
crucial for successful oversight of these marketplaces.
    Transparency facilitated by transaction reporting to SDRs also will 
help provide a check against a reoccurrence of the type of systemic 
risk build-up that occurred in 2008, when ``the market permitted 
enormous exposure to risk to grow out of the sight of regulators and 
other traders and derivatives exposures that could not be readily 
quantified exacerbated panic and uncertainty about the true financial 
condition of other market participants, contributing to the freezing of 
credit markets.'' \106\ The ability to monitor and quantify these 
levels of risk assumption provides one additional line of defense 
against another occurrence of crippling financial costs.
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    \106\ Mark Jickling and Kathleen Ann Ruane, Cong. Research 
Serv., The Dodd-Frank Wall Street Reform and Consumer Protection 
Act: Title VII, Derivatives 1 (2010).
---------------------------------------------------------------------------

    Pursuant to this final rule, reporting counterparties will be 
required to report allocation information when a swap is transacted by 
an agent on behalf of clients. The Commission believes that this 
requirement will enable regulators to better understand swaps in the 
context of allocation, and to more accurately assess their associated 
systemic risk, by enabling regulators to see the full record of each 
such swap all the way back to both the original transaction and the 
actual counterparties.
    The Commission believes requiring all data to be reported in the 
same SDR following the initial report from a SEF or DCM would reduce 
data fragmentation and improve regulatory

[[Page 2182]]

oversight. The costs and benefits of the Commission's approach are 
addressed in more detail below in the discussion of the section 15(a) 
factors. The Commission is harmonizing its initial PET data reporting 
with the part 43 real-time public reporting requirements to the extent 
possible and setting forth identical timeframes so that counterparties 
and registered entities may be able to, in most cases, submit data for 
both requirements in a single report.\107\
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    \107\ The phase-in and implementation of these requirements may 
differ.
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    The Commission notes that there is a cost reduction associated with 
the improved harmonization between the approach to PET data reporting 
of this final rule and the part 43 real-time public reporting 
requirements that were made by the Commission between the issuance of 
the NOPR and this final rule. These requirements have been harmonized 
to the extent possible, including the imposition of identical 
timeframes, so that counterparties and registered entities will be able 
to make one initial report. The Commission anticipates that this 
harmonization will result in a significant reduction in cost to 
counterparties and registered entities.
    The Commission believes that part 45 will yield significant 
benefits to the public and swap market participants. As discussed more 
fully below, however, the Commission is mindful of the costs of its 
rules and has carefully considered comments concerning the potential 
costs of its proposed recordkeeping and reporting rules. To the extent 
possible and consistent with the statutory and regulatory objectives of 
this rulemaking, the Commission has adopted cost-mitigating 
alternatives presented by commenters. In the following paragraphs, the 
Commission first estimates the costs of reporting and next considers 
those costs and the aforementioned benefits in light of the five public 
interest factors of CEA section 15(a).
    b. Costs of Swap Data Reporting
    As discussed in detail above, the Commission received a number of 
comments supporting the proposed reporting rules, and others suggesting 
alternatives or refinements. Commenters did not provide any 
quantitative data regarding the costs to registered entities, reporting 
counterparties and the public. The Commission addressed those comments 
above and, where deemed appropriate, the final rules reflect 
commenters' suggestions.
Costs of Reporting Requirements
    The Commission anticipates that the direct, quantifiable costs of 
complying with the requirement for SEFs, DCMs, DCOs, and reporting 
counterparties to report creation data will take the forms of (i) 
nonrecurring expenditures in technology and personnel; and (ii) 
recurring expenses associated with systems maintenance, support, and 
compliance. Each of these quantifiable costs of swap data reporting is 
associated with an information collection subject to the PRA. These 
costs therefore have been accounted for in the information collection 
requests filed with OMB as required by the PRA.
    The Commission estimates that the initial costs for its reference 
point, a non-SD/MSP reporting counterparty that is not a ``financial 
entity'' as defined in CEA section 2(h)(7)(C), and does not contract 
with a third party to report swap data, will likely consist of (i) 
Developing an internal OMS capable of capturing all relevant swap data 
in real-time; (ii) establishing connectivity with an SDR that accepts 
data; (iii) developing written policies and procedures to ensure 
compliance with part 45; and (iv) compliance with error correction 
procedures.\108\
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    \108\ As noted above, most data reporting pursuant to Part 45 
will be performed by SDs, MSPs, SEFs, DCMs, or DCOs. However, when 
estimating costs to market participants for this final rule, the 
Commission anticipates that the technological infrastructure and 
personnel costs will likely be highest for an unsophisticated non-
SD/MSP reporting counterparty that is not a financial entity, has no 
existing infrastructure for reporting, and does not contract with a 
third-party service provider to facilitate reporting. Accordingly 
the Commission considered costs from this perspective. The 
Commission anticipates that these costs will be lower, and in many 
cases significantly reduced or completely eliminated, for larger or 
more sophisticated entities that already have technological and 
personnel systems developed and operational.
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    The Commission anticipates, however, that the costs of creation 
data reporting for the reporting entities and counterparties listed 
above are already largely addressed by the costs of reporting the real-
time data stream for compliance with part 43. Accordingly, the costs of 
creation data reporting presented by part 45 should not be considered 
incremental to the costs of capturing and transmitting the real-time 
data stream pursuant to part 43 except in certain instances, which are 
addressed below. In general, the Commission estimates that the 
processes necessary for capturing and transmitting the real-time data 
stream pursuant to part 43 will encompass the costs of capturing and 
transmitting creation data pursuant to part 45. The Commission 
anticipates that a reporting entity or counterparty will use its OMS to 
capture all of the information that pertains to a given swap. This body 
of information will be used to produce the fields necessary for 
compliance with both part 43 and part 45. Therefore, the Commission 
believes that, in general, the costs of developing and maintaining an 
OMS necessary for compliance with part 45 should not be considered to 
be incremental to the costs of developing and maintaining an OMS for 
compliance with part 43.
    Similarly, under both part 43 and part 45 the reporting entity will 
be required to establish and maintain connectivity with an SDR for the 
transmission of data. The Commission anticipates that, in order to 
streamline the data reporting process, reporting entities will transmit 
both the real-time data stream and the regulatory data stream 
simultaneously to the same SDR via the same connection.\109\ The 
Commission has aligned the reporting deadlines provided in part 45 and 
the public dissemination delays set forth in part 43 in order to reduce 
costs and burdens by permitting registered entities and reporting 
counterparties to fulfill their swap data reporting obligations with 
respect to both part 45 and part 43 by transmitting a single 
report.\110\ Given simultaneous transmission of the data streams 
necessary for compliance with parts 43 and 45, the Commission believes 
that, in general, the costs of establishing and maintaining 
connectivity to an SDR in order to comply with part 45 should not be 
considered to be additional to the costs of establishing and 
maintaining connectivity to an SDR in order to comply with part 43.
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    \109\ Should a reporting entity elect to transmit these streams 
separately, its cost to transmit data to an SDR would likely 
increase; however, it is for precisely this reason that the 
Commission anticipates that reporting entities would, in fact, 
eliminate duplicative reporting of data streams for a given swap by 
transmitting both streams simultaneously.
    \110\ For off-facility swaps that are not accepted for clearing 
within the applicable deadline for the reporting counterparty to 
report PET data, the reporting counterparty can combine required PET 
data reporting and required real time reporting in a single report, 
but would still have to report confirmation data separately if it is 
not reported along with PET data. Reporting counterparties can avoid 
the need for a separate confirmation data report by confirming their 
swaps within the applicable deadline for PET data reporting.
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    The Commission anticipates that the same logic may be applied to 
the costs of developing written compliance policies and procedures, as 
well as the costs of developing and implementing error correction 
procedures. Because the data streams necessary for compliance with 
parts 43 and 45 for a given swap

[[Page 2183]]

originate from the same set of information, the Commission anticipates 
that reporting entities will likely consider the management of both 
streams when developing compliance and error correction procedures. The 
Commission therefore believes that in general, the costs of developing 
and implementing compliance and error correction procedures presented 
by part 45 should not be considered additional to the costs of 
developing and implementing compliance and error correction procedures 
presented by part 43.
    The Commission acknowledges that part 43 does not address the costs 
of reporting by DCOs. The Commission estimates that the incremental 
costs to DCOs of compliance with this final rule would be comparable to 
the costs either (a) a SEF or DCM, if the DCO makes the creation data 
report for an off-facility, cleared swap,\111\ or (b) an SDR, if the 
DCO registers as such. In the event that a DCO registers as an SDR, it 
will also incur the costs of registering as such pursuant to part 49.
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    \111\ The costs to a DCO will be similar to those of a SEF or 
DCM in this instance because the initial report to the Commission by 
the registered entity will include the same data fields reported in 
the same timeframe; thus, the non-recurring and recurring costs to a 
DCO of processing and reporting those data should be similar, if not 
identical, to those incurred by a SEF or DCM.
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Costs of Reporting Timelines
    The reporting timelines and requirements established in this part 
were designed to accommodate the needs of reporting counterparties and 
registered entities of varying size and sophistication. The Commission 
believes that these reporting timelines and requirements have been 
tailored appropriately to the sizes and levels of technological and 
personnel sophistication of the affected entities, and will not impose 
any additional costs to reporting counterparties or registered entities 
above the costs associated with their reporting obligations. Costs 
associated with reporting obligations are discussed below in the 
sections addressing the costs of creation data reporting and 
continuation data reporting.
    Several commenters addressed the timeframes allotted for reporting 
creation and continuation data. The AGA requested at least 24 hours for 
PET data reports by non-SD/MSP reporting counterparties, both initially 
and when required to supplement an incomplete SEF or DCM report. AGA 
also requested more than the 24 hour timeframe allotted for PET data 
reporting for swaps that are neither electronically executed nor 
verified, because in certain instances the reports could be required 
outside normal business hours, which would increase reporting costs. 
Similarly, ABC asked the Commission to clarify that the 24 hour 
timeframe did not include non-business days, such as a national or 
state holiday or a national or state period of emergency.
    MFA commented generally that it believed that the policy benefits 
of providing swap data within minutes of execution do not outweigh the 
costs in terms of the high likelihood of errors, or the infrastructure 
costs to establish a mechanism to report swaps information in these 
short timeframes. Specifically, MFA recommended that the Commission 
define ``execution'' as being coterminous with ``confirmation'' for on-
facility swaps. It also urged that, for swaps not executed or confirmed 
electronically, the 24-hour timeframe in the NOPR should commence 
following manual confirmation. Similarly, COPE, EEI, and IECA commented 
that the 24 hour timeframe was too short for non-SD/MSP counterparties. 
Specifically, IECA recommended weekly reports for all required creation 
data and weekly or biweekly for continuation data.
    Chatham Financial and CDEU recommended a timeline of the next 
business day following execution for electronically executed non-SD/MSP 
reportable swaps and second business day following execution for non-
electronically executed and confirmed non-SD/MSP reportable swaps.
    The Electric Coalition recommended that non-SD/MSP reporting 
counterparties be required to report no more than quarterly, and 
generally commented that the timelines were too short for non-financial 
entities. Similarly, CDEU commented that, for valuation data (a subset 
of continuation data reporting), non-SD/MSP end-users should not be 
required no more frequently than they are required to reconcile their 
portfolios.
    As discussed above, after considering these comments, the 
Commission has determined that the final rule will adopt a streamlined 
reporting regime that requires reporting by the registered entities or 
swap counterparties with the easiest, fastest, and cheapest data access 
and those most likely to have the necessary automated systems.
    Under this reporting regime, in the case of swaps executed on a SEF 
or DCM and cleared on a DCO, and in the case of off-facility swaps 
accepted for clearing by a DCO within the deadlines for reporting 
counterparties to report PET data, reporting obligations for non-SD/MSP 
reporting counterparties are entirely eliminated, and the only 
reporting obligation for SD or MSP reporting counterparties is the 
requirement to report valuation data during the existence of the swap.
    For on-facility swaps that are not cleared, reporting 
counterparties must report only required swap continuation data, 
including reports of changes to primary economic terms of the swap made 
after occurrence of such a change, and reports of valuation data. As 
noted above, the deadlines for such reports by non-SD/MSP reporting 
counterparties have been substantially extended.
    For off-facility swaps not accepted for clearing within the 
applicable counterparty reporting deadline, but eventually cleared, SD 
or MSP reporting counterparties are required to report only PET data 
and valuation data, and non-SD/MSP reporting counterparties are 
required to report only PET data.
    A non-SD/MSP counterparty will be required to report both swap 
creation data and swap continuation data only for off-facility, 
uncleared swaps between non-SD/MSP counterparties; and this obligation 
can apply only if the non-SD/MSP counterparty is an ECP, since CEA 
section 2(e) restricts swap trading by non-ECP counterparties to on-
facility swaps. For the extremely small number of off-facility, 
uncleared swaps for which a non-SD/MSP that is an ECP is the reporting 
counterparty, the final rule also provides reporting deadlines that are 
extended and phased in. In such cases, PET data must be reported by the 
non-SD/MSP reporting counterparty within 48 hours after execution 
during the first year of reporting, within 36 business hours after 
execution during the second year of reporting, and within 24 business 
hours after execution thereafter. Confirmation data must be reported 
within 48 hours after confirmation during the first year of reporting, 
within 36 business hours after confirmation during the second year of 
reporting, and within 24 business hours after confirmation thereafter. 
During the existence of the swap, changes to primary economic terms 
must be reported by the end of the second business day following the 
date of the change during the first year of reporting, and by the end 
of the first business day following the date of the change thereafter; 
and valuation data is only required to be reported on a quarterly 
basis.
    Finally, for off-facility, uncleared swaps, SD or MSP reporting 
counterparties must report both required swap creation data and 
required swap confirmation data. However, the reporting timeframes for 
these reports have been coordinated with the dissemination delays for 
real

[[Page 2184]]

time reporting, in order to permit counterparties to fulfill both real 
time and regulatory reporting obligations by making a single creation 
data report.\112\ Confirmation data reporting deadlines in this context 
have also been extended to 24 business hours in cases where 
confirmation occurs manually rather than through use of automated 
systems, due to the presence of a non-SD/MSP counterparty that lacks 
such systems.
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    \112\ The phase-in and implementation of these requirements may 
differ.
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    These provisions of the final rule either eliminate or 
substantially reduce the costs and burdens of swap data reporting for 
all reporting counterparties, and particularly for non-SD/MSP reporting 
counterparties, who are those least likely to have existing 
technological and personnel infrastructure for swap data reporting.
Costs of Reporting Cleared Swaps
    The Commission notes that the final rule swap data reporting 
requirements could present costs to reporting counterparties and 
registered entities to the extent that a SEF, DCM, or reporting 
counterparty reports regulatory data to an SDR with which it does not 
have a presently existing connection, rather than to a DCO registered 
as an SDR, with which registered entity or reporting counterparty has a 
presently existing connection for clearing purposes.\113\ However, the 
Commission enumerated the costs of establishing connectivity to an SDR 
for swap data reporting in its final part 43 rules governing real-time 
reporting of swap transaction and pricing information. The costs of 
connectivity presented by this final rule are not additional to those 
costs considered in connection with part 43, and thus are not 
appropriate for evaluating costs relative to benefits in this 
rulemaking. Moreover, the Commission has not identified any 
quantifiable costs with respect to connectivity not associated with the 
part 43 information collection request, for which the Commission must 
account under the PRA.
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    \113\ Should a DCO register as an SDR, counterparties that 
transacted through the DCO previously would have already established 
connectivity for processing those transactions, and would thus not 
have to incur new connectivity costs once the DCO began functioning 
as an SDR.
---------------------------------------------------------------------------

    Two commenters addressed cost-benefit considerations in regard to 
the reporting of cleared swaps to SDRs. CMC recommended that the 
Commission leverage existing DCOs for reporting cleared swaps, adding 
that requiring the industry to establish a redundant set of expensive 
connections with non-DCO SDRs for the purpose of making regulatory 
reports for cleared trades would be costly, inefficient and 
unnecessary. Similarly, CME recommended that the initial regulatory 
report for a cleared swap be reported to a DCO or an SDR chosen by the 
DCO, adding that this approach is the lowest cost and least burdensome 
method for implementing the regulatory reporting requirements.
    The Commission has determined to adopt the rules as they relate to 
reporting swap data for cleared trades to SDRs largely as proposed. 
While the Commission is cognizant of the cost-benefit considerations, 
section 2(a) of the CEA requires each ``swap (whether cleared or 
uncleared) * * * be reported to a registered swap data repository'' 
(emphasis added). The Commission notes that section 21(a)(1)(B) allows 
DCOs to register as SDRs, and that the final rules do not preclude 
counterparties or registered entities from reporting swap data to 
existing DCOs registered as SDRs, or to SDRs chosen by DCOs, if they so 
choose for business or cost-benefit reasons.
Costs Affected by Permitted Use of Third-Party Service Providers to 
Facilitate Reporting
    The Commission anticipates that the final rule reporting 
requirements for reporting counterparties and registered entities may 
result in costs to such counterparties and entities in the form of (i) 
personnel hours dedicated to the development and maintenance of 
reporting systems and connectivity to data repositories; and (ii) the 
development and ongoing administration of a compliance program. Such 
costs could include standardizing data or hiring new personnel to 
upgrade technology infrastructure. However, such costs could be 
affected or reduced where the reporting counterparty or registered 
entity required to report chooses to have a third-party service 
provider facilitate reporting.
    The Commission requested comment on the merits of allowing third-
party facilitation of swap data reporting and on how it should be 
structured. Several commenters responded with comments regarding cost-
benefit considerations. Global Forex, DTCC and WGCEF supported the NOPR 
provision allowing third-party facilitation of reporting because they 
believe it will reduce costs, particularly for non-SD/MSPs.
    As noted above, the Commission has considered these comments, and 
has determined to adopt in the final rule the NOPR provision permitting 
third-party facilitation of data reporting. The use of third-party 
service providers in the reporting phase of the regulatory data 
reporting process may also represent a likely cost reduction. Reporting 
counterparties and registered entities that elect to contract with 
third-party service providers can realize the cost savings associated 
with the comparative advantages of third-party providers specializing 
in swap data reporting services.
Costs of Creation Data Reporting
i. Costs to Counterparties and Registered Entities
    As discussed in more detail above, the NOPR called for two types of 
creation data reporting, namely PET data reporting and confirmation 
data reporting. The Commission anticipates that creation data reporting 
will represent costs to reporting counterparties and registered 
entities in the form of (a) significant non-recurring investments in 
technological systems and personnel; and (b) recurring expenses 
associated with systems usage and maintenance and personnel hours 
required for data reporting.
    The Commission estimates that the initial costs for its reference 
point, a non-SD/MSP reporting counterparty that is not a financial 
entity as defined in the Dodd-Frank Act and does not contract with a 
third party to report swap data, will likely consist of (i) Developing 
an internal OMS capable of capturing all relevant swap data in real-
time; (ii) establishing connectivity with an SDR that accepts data; 
(iii) developing written policies and procedures to ensure compliance 
with part 43; and (iv) compliance with error correction procedures.
    The Commission estimates that the recurring costs for its reference 
point, a non-SD/MSP reporting counterparty that is not a financial 
entity and does not contract with a third party to report swap data, 
will likely consist of (i) Operational support for its OMS, including 
adaptation to new products, systems upgrades and ongoing maintenance; 
(ii) maintaining connectivity with an SDR that accepts data, including 
the demands on technological systems and the burden associated with the 
personnel hours necessary to facilitate transmission of data; and (iii) 
compliance with error correction procedures, including the burden 
associated with the personnel hours necessary to monitor and report 
errors.
    The Commission notes, however, these costs should not be added to 
the costs of reporting data for real-time public reporting enumerated 
in the Commission's final rules in part 43

[[Page 2185]]

concerning real time reporting, insofar as they refer to PET data for 
regulatory reporting.
    Pursuant to the final rule, counterparties will be required to 
report allocation information when a swap is transacted by an agent on 
behalf of clients. The Commission does not believe that this 
requirement is likely to present a significant incremental burden to 
counterparties. Based on conversations with industry participants, the 
Commission believes that allocation reports are already transmitted 
from one counterparty to the other following a swap; therefore, 
transmitting that report to an SDR would present a negligible 
additional burden.
    The final rule provides that, should there be a swap asset class 
for which no SDR accepts swap data, swap data for a swap in that asset 
class must be reported to the Commission. This provision was set forth 
in the NOPR, and is required by CEA section 4r(b) and (c). The 
Commission anticipates that this requirement is unlikely to impose 
additional costs on registered entities and swap counterparties 
required to report swap data, since SDRs covering all existing swap 
asset classes have already applied for designation by the Commission. 
The Commission also notes that the requirements for such reporting 
differ from those for reporting to an SDR. The final rule calls for 
data for such swaps to be reported to the Commission at times announced 
by the Commission and in an electronic file in a format acceptable to 
the Commission, as determined by the Commission's Chief Information 
Officer.
    The Commission has nonetheless considered possible costs associated 
with such reporting, which would apply only in the event that there is 
an asset class for which no SDR accepts data. In such circumstances, 
reporting counterparties and registered entities required to report 
swap data would be required to incur an initial one-time cost to 
establish and test connectivity to the Commission. The Commission 
notes, however, that because reporting counterparties will already be 
required to develop and test technological systems for establishing 
connectivity to an SDR pursuant to this final rule, there will not be 
an incremental non-recurring cost presented by this requirement. 
Rather, because this cost will only be incurred by a reporting 
counterparty in the absence of an SDR that accepts data for any asset 
class, this cost should be considered to exist in the absence of, 
rather than together with, the cost of establishing connectivity to an 
SDR.
    In the event that a new asset class comes into existence for which 
no SDR immediately accepts regulatory swap data reports, the Commission 
will be required to receive data reports concerning swaps in that asset 
class until an SDR elects to receive swap data in that asset class. The 
Commission has accounted in the PRA for the cost of maintaining 
connectivity to the Commission which would be incurred by registered 
entities and reporting counterparties transacting in such an asset. The 
Commission does not believe it is feasible to estimate the likelihood 
that such an asset class will arise or the length of time for which the 
Commission will be required to receive the associated regulatory data.
    The Commission believes that this recurring burden of transmitting 
data to the Commission will represent a small percentage of the burden 
of transmitting data to a registered SDR or third-party service 
provider as required for real time reporting pursuant to part 43 and 
regulatory reporting to SDRs as required by this part. The Commission 
has determined that this percentage is not readily quantifiable, 
because the asset classes for which reporting to the Commission would 
be required, and thus the amount of data that would be required to be 
reported to the Commission, are currently unknown.
    The NOPR sought to mitigate the fragmentation of data for a single 
swap across multiple SDRs by requiring that once an initial data report 
concerning a swap is made to an SDR, all data reported for that swap 
thereafter must be reported to that same SDR.\114\ Roundtable 
participants agreed that the NOPR provision calling for all data for a 
given swap to be reported to a single SDR was essential to preventing 
fragmentation of data across multiple SDRs, something that would 
seriously impair both regulators' ability to view or aggregate all of 
the data concerning a swap and the ability of reporting entities and 
counterparties to review data reported by them. WGCEF commented that 
all swap data for a given swap should be reported to the same SDR. The 
Commission received no comments opposing this requirement.
---------------------------------------------------------------------------

    \114\ The NOPR also called for PET data to be reported promptly 
following execution of the swap.
---------------------------------------------------------------------------

    Global Forex observed that, after the initial swap data report is 
made for a swap, market participants required to make further reports 
concerning that swap would need to ensure that they can connect to the 
chosen SDR. EEI, EPSA, and WGCEF suggested that the rules should ensure 
that SDR selection by a platform, SD, or MSP is equitable and does not 
result in unreasonable costs or burdens being imposed on non-SD/MSP 
counterparties.
    WGCEF also suggested that market participants should not be 
required to report all of their swaps to the same SDR, since SDR 
competition would tend to lower fees associated with reporting. DTCC, 
ICE, and WGCEF recommended that the reporting counterparty should 
always select the SDR. ICE argued that otherwise reporting 
counterparties could incur significant expenses to build and maintain 
connections to an SDR with which they are not already connected. ABC 
and CIEBA suggest that for swaps involving a benefit plan as a 
counterparty, the SDR selection should always be made by the plan.
    The CMC and CME both recommended that the initial regulatory report 
for a cleared trade be transmitted to either a DCO or an SDR that is 
affiliated with a DCO. CMC suggested that this would reduce unnecessary 
expenses and operational difficulties, whereas it would be costly, 
inefficient and unnecessary to require industry to establish a 
redundant set of expensive connections with non-DCO SDRs for the 
purpose of making regulatory reports for cleared trades. CME stated 
that having cleared swaps reported to a DCO also registered as an SDR 
or an SDR that is affiliated with a DCO would provide the lowest cost 
and least operationally burdensome path available to meet regulatory 
requirements.
    The Commission anticipates that, because the final rule does not 
require each cleared swap to be reported to an SDR affiliated with the 
DCO that clears the swap, in some circumstances DCOs may incur some 
increased costs, relative to an environment in which all cleared swaps 
must be reported to a DCO-SDR.

     For a cleared swap executed on a SEF or DCM, and 
reported to an SDR by the SEF or DCM as required by the final rule, 
the DCO could incur incremental costs, if the SEF or DCM chooses to 
report to an SDR other than the DCO-SDR. In this circumstance, the 
DCO would be required to report confirmation data and continuation 
data to the SDR receiving the initial report, and thus to assume the 
costs necessary to establish connectivity to that SDR and transmit 
data to it. Such connectivity and transmission costs are addressed 
below. However, if the DCO chooses to register as an SDR, as 
explicitly permitted by the statute and anticipated by these 
commenters, the SEF or DCM would be able to reduce its costs by 
selecting the DCO-SDR as the SDR receiving the initial report, and 
thus avoid the need to send data separately to an SDR for regulatory 
reporting purposes and to a DCO for clearing purposes. In such an 
event, the DCO would not incur these incremental costs.
     For an off-facility, cleared swap for which the 
reporting counterparty is excused

[[Page 2186]]

by the final rule from reporting creation data, the DCO would not 
incur incremental costs. In this situation, the DCO would select the 
SDR to which all data is reported, by making the initial creation 
data report. The DCO could report to itself in its capacity as an 
SDR if it chooses to to register as an SDR, as explicitly permitted 
by the statute and anticipated by these commenters.
     For an off-facility, cleared swap with respect to which 
the reporting counterparty makes the initial PET data report, the 
DCO would incur incremental costs if the reporting counterparty 
chooses to report to an SDR other than the DCO-SDR. In this 
circumstance the DCO would be required to report confirmation data 
and continuation data to the SDR receiving the initial report, and 
thus to assume the costs necessary to establish connectivity to that 
SDR and transmit data to it. These costs are addressed below. 
However, if the DCO chooses to register as an SDR, as explicitly 
permitted by the statute and anticipated by these commenters, the 
reporting counterparty would be able to reduce its costs by 
selecting the DCO-SDR as the SDR receiving the initial report, and 
thus avoid the need to send data separately to an SDR for regulatory 
reporting purposes and to a DCO for clearing purposes. In such an 
event, the DCO would not incur these incremental costs.

    The Commission also anticipates that, because the final rule does 
not require each cleared swap to be reported to an SDR affiliated with 
the DCO that clears the swap, in some circumstances reporting 
counterparties may incur some increased costs, but also some increased 
benefits, relative to an environment in which all cleared swaps must be 
reported to a DCO-SDR.

     For swaps executed on a SEF or DCM, an SD or MSP 
reporting counterparty would incur the incremental costs if the SEF 
or DCM chooses to report to an SDR other than the DCO-SDR. In this 
circumstance, the SD or MSP would be required to report valuation 
data to the SDR, and thus to assume the costs necessary to establish 
connectivity to that SDR and transmit data to it. Such costs are 
addressed below. A non-SD/MSP reporting counterparty would not incur 
such incremental costs, because all continuation data would be 
reported by the DCO. However, if the DCO chooses to register as an 
SDR, as explicitly permitted by the statute and anticipated by these 
commenters, the SEF or DCM would be able to reduce its costs by 
selecting the DCO-SDR as the SDR receiving the initial report, and 
thus avoid the need to send data separately to an SDR for regulatory 
reporting purposes and to a DCO for clearing purposes. In such an 
event, the SD or MSP reporting counterparty would not incur these 
incremental costs.
     For an off-facility, cleared swap with respect to which 
the reporting counterparty is excused by the final rule from 
reporting creation data, an SD or MSP reporting counterparty would 
incur incremental costs only if the DCO chooses not to register as 
an SDR.\115\ In this situation, the DCO would select the SDR to 
which all data is reported, by making the initial creation data 
report, and could report to itself in its capacity as an SDR if it 
chooses to to register as an SDR, as explicitly permitted by the 
statute and anticipated by these commenters. The incremental costs 
for the SD or MSP reporting counterparty would be the costs 
necessary to establish connectivity to, and transmit valuation data 
to, the SDR to which the initial creation data report was made. A 
non-SD/MSP reporting counterparty would not incur such incremental 
costs, because all continuation data would be reported by the DCO.
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    \115\ The Commission believes that a DCO registered as an SDR 
would choose to report to itself in its capacity as an SDR in this 
circumstance.
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     For an off-facility, cleared swap with respect to which 
the reporting counterparty makes the initial PET data report, the 
reporting counterparty would not incur incremental costs, but would 
receive the benefit of being able to choose either the DCO-SDR or 
any other SDR accepting swaps in the asset class in question.

    The Commission also anticipates that, because the final rule does 
not require each cleared swap to be reported to an SDR affiliated with 
the DCO that clears the swap, SEFs and DCMs would receive benefits 
relative to an environment in which all cleared swaps must be reported 
to a DCO-SDR. Specifically, for any swap executed on a SEF or DCM, the 
facility would be able to choose either the DCO-SDR or any other SDR 
accepting swaps in the asset class in question.
    The Commission notes that DCOs are eligible to register as SDRs and 
capitalize on these existing connections, and the Commission 
anticipates that the competitive market for SDR services will dictate 
such an outcome if it is indeed cost-effective. The Commission believes 
that a competitive marketplace for SDR services presents the 
opportunity for significant reductions to the cost of swap data 
reporting.
    WGCEF and Dominion recommended that the Commission harmonize its 
PET data requirements with the reporting required by the part 43 real-
time public reporting regulations to reduce the reporting burdens on 
counterparties.
    After considering these comments, the Commission has determined, as 
noted above, that the final rule should require that all data for a 
given swap be reported to the same SDR to which the initial report of 
swap data is made as provided in the final rule. The wide variety of 
suggestions by commenters concerning who should choose the SDR suggests 
that no single approach produces the lowest cost for all market 
participants in all circumstances, and that this decision is best left 
to the market. The final rule as adopted avoids injecting the 
Commission unnecessarily into a market decision, and leaves the choice 
of SDR to be influenced by market forces and possible market 
innovations. Requiring that all cleared swaps be reported only to DCOs 
registered as SDRs would create a non-level playing field for 
competition between DCO-SDRs and non-DCO-SDRs. Conversely, giving the 
choice of the SDR to the reporting counterparty in all cases could in 
practice give an SDR substantially owned by SDs a dominant market 
position with respect to much swap data reporting. The final rule also 
addresses the major substance of the concerns expressed by non-SD/MSP 
counterparties, since it requires the initial data report to be made by 
a non-SD/MSP counterparty only in the case of a swap executed off-
facility between two non-SD/MSP counterparties that are ECPs. Moreover, 
in this situation, the non-SD/MSP reporting counterparty will, by 
making the initial data report, be able to select the SDR as 
recommended by comments.
ii. Costs to SDRs
    The Commission anticipates that creation data reporting will 
present additional costs to SDRs, both in the form of non-recurring 
investments in technological systems and personnel during the 
development of the formatting procedure, and in the form of recurring 
expenses associated with data processing, systems maintenance, and 
personnel hours. However, these costs should not be considered 
independent of the costs associated with real time reporting pursuant 
to part 43, which includes the burden estimate for the data formatting 
processes that an SDR will need to employ. The Commission anticipates 
that compliance with this requirement will primarily require SDRs to 
handle additional swap data required to be reported by this part but 
not required to be reported by part 43. This part will not require SDRs 
to fulfill any of the rounding, counterparty masking, or disseminating 
requirements of real-time public reporting. Therefore, in general, the 
Commission anticipates that the recurring burden to an SDR presented by 
creation data reporting will be negligibly incremental to the costs to 
SDRs associated with real-time public reporting.
    Pursuant to the final rule, in the context of allocations, as 
discussed above, reporting of both the original swap between the 
reporting counterparty and the agent and reporting of the swaps 
resulting from allocation will be required. The only additional duty 
for SDRs in this context

[[Page 2187]]

is the need to map together these related swaps. SDRs will already be 
required to have automated systems and personnel capable of mapping 
together various data reports, such as mapping together different data 
reports for a single swap using the USI for the swap that is included 
in each such report. As a result of the requirement for mapping in the 
context of allocations, the Commission anticipates that SDRs will incur 
an incremental burden consisting of (a) one-time setup costs to program 
automated systems to do the required mapping in the allocation context, 
and (b) low ongoing maintenance costs associated with keeping such 
programming up to date. The Commission does not believe that this 
burden is readily quantifiable, both because the percentage of swaps 
involving allocations is currently unknown, and because the number of 
client allocations could vary greatly between swaps involving 
allocation. As noted above, SDRs must have the capacity to map together 
all data reports associated with any USI, and compliance with this 
requirement will facilitate the data mapping process in the context of 
allocations, which will also involve USIs. This should reduce the 
additional burden of linking allocation reports, or eliminate it in 
some cases. The Commission was informed by roundtable participants that 
existing trade repositories are able to accept data in multiple formats 
or data standards from different counterparties, and to map the data 
they receive into a common data standard within the repository, without 
undue difficulty, delay, or cost. Therefore, the Commission anticipates 
that SDRs will be able to perform the mapping required in the 
allocation context using existing technologies and processes.
    With regard to SDRs, the error reporting requirement of this final 
rule would require a registered SDR to develop protocols regarding the 
reporting and correction of erroneous information. This reporting 
requirement is associated with an information collection for which the 
Commission is obligated to account under the PRA. Accordingly, the 
burden estimates have been addressed in the information collection 
requests that the Commission has prepared and submitted to OMB for 
approval, as required under that statute
Costs of Continuation Data Reporting
    The Commission received several comments on the cost-benefit 
implications of its proposed approach regarding continuation reporting.
    Several comments addressed the NOPR provisions prescribed the data 
reporting method--life cycle reporting or snapshot reporting--to be 
used in each asset class to report changes to the primary economic 
terms of the swap. TriOptima supported the NOPR's approach. ICE 
commented with respect to the other commodity asset class that the 
snapshot approach would be inefficient, create burdens, and prove 
technologically challenging, and that therefore its drawbacks would 
outweigh its benefits. Reval commented that continuation data reporting 
by either method would require significant capabilities and 
investments, and stated that snapshot reporting for interest rate, 
currency, and other commodity swaps would not lessen the burdens of 
compliance. As noted above, ISDA, SIFMA, REGIS-TR, and DTCC recommended 
having the rule not make the choice between the lifecycle and the 
snapshot reporting method for each asset class, but rather allowing 
SDRs to decide whether to accept data by either or both methods.
    Other comments addressed the impact of required frequency of 
reporting. EEI, WGCEF, and CDEU contended that daily snapshot reporting 
would be burdensome and excessive for non-SD/MSP counterparties, and 
recommended quarterly rather than daily reports. AGA stated that daily 
continuation data reporting would be unduly burdensome, and recommended 
monthly reporting instead.
    Additional comments addressed costs associated with valuation data 
reporting. Chatham Financial recommended that the Commission align the 
timing for valuation data reporting with the timing for the portfolio 
reconciliation requirements in the Commission's portfolio and 
reconciliation rulemaking, in order to reduce the burden on non-SD/MSP 
reporting counterparties. ICE suggested that only DCOs be required to 
report valuation data for cleared swaps, since requiring both DCOs and 
counterparties to report this data would drastically increase the 
number of messages transmitted to SDRs on a daily basis and 
unnecessarily burden reporting counterparties. EEI and CDEU questioned 
the Commission's regulatory authority and need for valuation data 
reporting from non-registered counterparties. ISDA and SIFMA commented 
that the implementation of any valuation methodology requires 
significant operational and infrastructure development, and called for 
further consultation before the Commission requires such a methodology. 
FHLB recommended weekly valuation reporting by non-SD/MSP reporting 
counterparties, arguing that this should be sufficient for regulatory 
purposes and would avoid forcing such counterparties to implement the 
costly infrastructure needed to generate daily valuation reports. The 
Electric Coalition recommended quarterly valuation data reporting for 
the same reason.
    The Commission anticipates that the reporting of continuation data 
will present additional costs beyond the costs of reporting required 
swap creation data as discussed above, consisting of the additional 
maintenance of an internal OMS and the additional personnel hours 
needed to maintain a compliance program in support of the OMS.
    The Commission believes that promptly submitting amended 
transaction and pricing data to the appropriate registered SDR after 
discovery of an error would impose a burden on reporting counterparties 
and registered entities. Likewise, the Commission believes that 
promptly notifying the relevant reporting counterparty or registered 
entity after discovery of an error would impose a burden on non-
reporting counterparties.
    The Commission believes that error reporting would impose an 
initial, non-recurring burden associated with designing and building 
the reporting parties' reporting system to be capable of submitting 
amended swap transactions to a registered SDR. In addition, reporting 
parties will be required to support and maintain the error reporting 
function and registered SDRs will be required to accept the error 
reporting.
    The Commission believes that designing and building appropriate 
reporting system functionality would be a component of, and represent 
an incremental add-on to, the cost of building a reporting system and 
developing a compliance function as required by Sec.  43.3(a) (real-
time reporting rule). With regard to non-reporting counterparties, the 
Commission believes that the error reporting requirement of this final 
rule would impose a minimal non-recurring and recurring burdens 
associated with promptly notifying the relevant reporting party after 
discovery of an error. The Commission believes, however, that swap 
counterparties already monitor their swap transactions in the ordinary 
course of business, and thus the error reporting requirement of this 
final rule would not result in any significant new burdens for these 
participants.
    Upon consideration of the comments, the Commission is adopting the 
NOPR continuation data provisions with a number of modifications that 
the

[[Page 2188]]

Commission believes will further reduce costs and burdens for 
registered entities and reporting counterparties, and in particular for 
non-SD/MSP reporting counterparties. If a swap is cleared, the DCO will 
report all continuation data with the exception of valuation reporting 
by SDs and MSPs. Non-SD/MSP reporting counterparties will not be 
required to report any continuation data for cleared swaps. For 
uncleared swaps, the deadlines for non-SD/MSP reporting counterparties 
to report changes to primary economic terms have been extended and 
phased in. While the NOPR required the reporting of all of the data 
elements necessary for a person to determine the current market value 
of the swap, the final rule requires only the reporting of the data 
elements necessary to describe the daily mark of the transaction. In 
addition, non-SD/MSP reporting counterparties will only be required to 
report valuation data on a quarterly basis. In part to further reduce 
continuation data reporting costs as discussed in the above comments, 
the final rule requires that continuation data be reported in a manner 
sufficient to ensure that the information in the SDR concerning the 
swap is current and accurate, and includes all changes to any of the 
primary economic terms of the swap, but will leave to the SDR and 
registered entity and reporting counterparty marketplace the choice of 
the reporting method used to meet this requirement. This approach will 
help to address commenters' concerns about the cost of daily reporting, 
since reporting counterparties would not be required to report on a 
daily basis if the SDR in question accepts life cycle reporting.\116\ 
Additionally in order to reduce reporting burdens to the extent this 
can be done without impairing the purposes for which the Dodd-Frank Act 
requires swap data reporting, the Commission has determined that the 
final rule will not require reporting of contract-intrinsic events.
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    \116\ The flexibility of this approach should also ensure 
harmonization of the final rule with SEC rules in this respect: even 
if the SEC rules specify a reporting method for reporting to 
security-based swap data repositories, SDRs that accept mixed swaps 
will be free to accept reporting by any reporting method mandated by 
the SEC.
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    The Commission believes that the swap data reporting requirements 
of the final rule represent a reduced cost compared to the requirements 
of the NOPR. The Commission does not mandate which particular approach 
an SDR chooses, either snapshot approach or lifecycle, in the final 
rule, so long as the continuation data for a given swap are accurately 
reported. This approach will allow registered SDRs to select the method 
of continuation data reporting that is most cost-effective and most 
logical for the swap business of their reporting customers. As noted, 
costs have been reduced by elimination of required reporting of 
contract-intrinsic data. The Commission does not mandate the reporting 
of contract-intrinsic data in the final rule, a data stream that was 
required under the proposed rule. The Commission believes that this 
requirement would have presented a cost burden to reporting 
counterparties and registered entities and its elimination will present 
a cost reduction. Furthermore, allowing the clearing of a swap on a DCO 
to satisfy the continuation data reporting obligations of non-SD/MSP 
reporting counterparties represents a lowered overall cost. This 
approach eliminates duplication of the reporting requirement, 
capitalizes on the transmission pipeline from the DCO to the SDR, and 
will allow for more cost-effective reporting than a regime in which 
reporting parties entering into a cleared swap would always be 
responsible for reporting regulatory data, as the DCO will likely 
realize economies of scale in the reporting process.
Collateral and Master Agreement Reporting
    In the NOPR, the Commission requested comment as to whether 
separate warehouse and library systems should be developed for 
collateral and master agreements. Several commenters responded with 
cost-benefit considerations regarding establishing these separate 
reporting systems. ABC supported requiring master agreement reporting 
but recommended that they be reported only once if required. SunGard 
supported the establishment of a collateral SDR that could hold credit 
support agreements and related net margin and collateral positions 
between two counterparties, adding that this would eliminate 
unnecessary costs. Chatham Financial and CDEU recommended that the 
Commission not require master agreement or collateral reporting because 
the costs of reporting would outweigh the benefits. After consideration 
of these comments, the Commission has determined not to require master 
agreement or collateral reporting at this time.
c. Reporting Requirements in Light of CEA Section 15(a)
    The Commission has evaluated the costs and benefits of the 
reporting provisions under Sec.  45.3 in light of the specific 
considerations identified in Section 15(a) of the CEA as follows.
    Protection of market participants and the public. As discussed 
above, the Commission has endeavored to limit the costs attributable to 
discretionary implementation decisions to the maximum degree consistent 
with statutory requirements and their intended benefits. The Commission 
has endeavored to match the costs of the post-implementation 
marketplace with the sizes, levels of sophistication, and levels of 
systemic importance of the affected participants, so that the 
associated benefits may be realized by the public.
    With respect to swap data reporting, the Commission believes the 
benefits include the protection of market participants and the public. 
The Commission believes that the reporting requirement of Sec.  45.3 
will provide regulatory agencies with a wealth of previously 
unavailable data. This comprehensive data will be available in a 
unified format, greatly enhancing the ability of regulators in their 
oversight and enforcement functions. Systemic risk regulators need data 
that will enable them to monitor gross and net counterparty exposures 
wherever possible, not just notional volumes for each contract but also 
market values. Such data would make it possible to calculate the 
concentration of counterparty risk on both participant and market 
levels. Market regulators need data that helps them promote market 
fairness and competitiveness; protect market participants against 
fraud, manipulation, and abusive trading practices; enforce aggregate 
speculative position limits as adopted; and ensure the financial 
integrity of the clearing process.
    The Commission believes that important regulatory purposes of Dodd-
Frank would be frustrated, and that regulators' ability to see 
necessary information concerning swaps could be impeded, if data 
concerning a given swap was spread over multiple SDRs.
    Efficiency, competiveness, and financial integrity. As discussed 
above, the Commission has endeavored to limit the costs attributable to 
discretionary implementation decisions to the maximum degree consistent 
with statutory requirements and their intended benefits. The Commission 
has endeavored to match the costs of the post-implementation 
marketplace with the sizes, levels of sophistication, and levels of 
systemic importance of the affected participants, so that the 
associated benefits may be realized by the public.

[[Page 2189]]

    With respect to swap data reporting, the Commission believes the 
benefits include enhancing the financial integrity of swap markets. The 
Commission believes that final rule's streamlined reporting regime, 
including the counterparty hierarchy used to select the reporting 
counterparty, can be considered efficient in that it assigns greater 
reporting responsibility to more sophisticated entities more likely to 
be able to realize economies of scale and scope in reporting costs. 
This reporting regime may also be an incentive for the platform 
execution of swaps that might have otherwise been executed bilaterally, 
since platform execution absolves the swap counterparties of the 
majority of the reporting burden discussed in this Consideration of 
Costs and Benefits section. The Commission anticipates that this will 
increase the role of the registered entities in the market that are 
able to report data to an SDR most efficiently. Similarly, a potential 
increase in the number of participants using platform execution, due to 
this efficiency, may aid in market competition.
    The Commission believes that, by improving the integrity of the 
U.S. swap markets in the manner described above, this final rule may 
make participation in the U.S. swap markets more appealing to entities 
that currently do not participate; therefore, this final rule presents 
the potential to enhance the demand for access to the U.S. swap market 
and its participants both domestically and in the global swap 
marketplace. This potential increase in swap market participation may 
improve the competitiveness of the swap marketplace as more parties 
demand sources of risk transference.
    The Commission believes that reporting parties may be able to 
realize lower costs by means of transmitting reporting and regulatory 
data through third-party service providers. These providers will likely 
have a comparative advantage in data processing costs relative to the 
capabilities of reporting parties; as in the case of the reporting 
hierarchy, the final rule allows for the use of reporting methods 
considered more efficient by market participants themselves.
    Because the accuracy of swap data is essential for market integrity 
and regulatory oversight, the final Sec.  45.14 requires the prompt 
correction of errors. As seen during the most recent financial crisis, 
market volatility may be such that a delay in error correction, even on 
the order of a day, may be too late for effective analysis and 
response. Because of this, the Commission has considered the cost of 
error correction on market participants with regard to the effects of 
market turmoil during critical events intensified by market opacity.
    The Commission believes that the data standards provisions of the 
final rule will serve to reduce costs and burdens for registered 
entities and swap counterparties by (a) allowing reporting entities and 
counterparties to use whatever facilities, methods, or data standards 
are provided or required by the SDR to which data is reported; and (b) 
allowing SDRs to use various facilities, methods, and data standards to 
receive data, so long as the SDR can provide data to the Commission in 
the format required by the Commission. The Commission believes this 
approach is preferable to having the Commission mandate that reporting 
entities or counterparties adopt a particular format or data standard 
for reporting swap data, which in some cases could impose the 
additional burden of acquiring new technological capability different 
or more extensive that what the entity or counterparty already 
possesses. The Commission believes that, in light of this provision of 
the final rule, market competition is likely to lead SDRs to allow 
reporting entities and counterparties to report using data formats or 
standards that are easiest and least costly for them. Costs for market 
participants may also be lowered by the final rule provision 
authorizing the Commission's Chief Information Officer to require use 
of a particular data standard in order to accommodate the needs of 
different communities of users.\117\
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    \117\ This authority could be used, for example, to require SDRs 
to accept swap data reports using a particular computer language 
already used by firms in a particular segment of the swap 
marketplace, so that they are not forced to incur additional cost by 
acquiring the capability needed to report using a different computer 
language.
---------------------------------------------------------------------------

    Furthermore, the Commission does not anticipate that the 
recordkeeping requirements of this final rule present any costs that 
would impede the efficiency of swap markets.
    Price Discovery. The Commission does not believe that the data 
reporting requirements of this final rule have a material effect on the 
price discovery process. The Commission does not believe that the costs 
associated with its discretionary implementation decisions are of a 
magnitude to impede the normal functioning of swap market participants, 
and thereby disrupt the price discovery process.
    Sound risk management practices. The Commission does not believe 
that the data reporting requirements of this final rule have a material 
effect on sound risk management practices of market participants or 
that the costs associated with its discretionary implementation 
decisions are of a magnitude to impede sound risk management. However, 
as noted in the section on recordkeeping, data which will be reported 
may be of use for internal risk management.
    Other public interest considerations. The Commission believes that 
the data reporting requirements of this final rule will allow 
regulators to readily acquire and analyze market data, thus 
streamlining the surveillance process.
5. Unique Identifiers
    As discussed more fully above, pursuant to its authority in CEA 
section 21(b) (added by section 728(b) of the Dodd Frank Act), the 
Commission proposed requiring the use of three unique identifiers, 
which would serve as critical tools for data aggregation for the 
purposes of conducting market and financial risk surveillance, 
enforcing position limits, analyzing market data, enforcing Commission 
regulations, monitoring systemic risk, and improving market 
transparency.
    The NOPR required that each swap be identified in all swap 
recordkeeping and data reporting by a Unique Swap Identifier (``USI''). 
The NOPR took a ``first-touch'' approach to USI creation, with the USI 
created by SEFs and DCMs for platform-executed swaps, by SDs and MSPs 
for off-platform swaps in which they are the reporting counterparty, 
and by SDRs for off-platform swaps between non-SD/MSP counterparties 
(who may lack the requisite systems for USI creation). This approach 
was designed to foster efficiency by taking advantage of the 
technological sophistication and capabilities of SEFs, DCMs, SDs, MSPs, 
and SDR, while ensuring that a swap is identified by a USI from its 
inception. The provision calling for SDRs to create USIs for off-
facility swaps between non-SD/MSP counterparties was designed to reduce 
costs and burdens for such counterparties. Non-SD/MSP counterparties 
may lack the sophistication to assign unique identifiers, whereas SDRs 
will likely be large, sophisticated entities capable of realizing 
economies of scope and scale in processing varied swap data streams; 
thus, SDRs are better suited to assign unique identifiers for off-
facility swaps between non-SD/MSP counterparties.
    The NOPR required that each swap counterparty be identified in all 
swap recordkeeping and data reporting by a legal entity identifier 
(``LEI'') (referred to in the NOPR as a unique counterparty identifier 
or ``UCI'') approved by the Commission. The NOPR established

[[Page 2190]]

principles that an LEI must follow to be designated by the Commission 
as the LEI to be used in swap data recordkeeping and reporting pursuant 
to the Commission's Regulations.
    The NOPR also called for establishment of a confidential, non-
public LEI reference database, to which each swap counterparty 
receiving an LEI would be required to report reference data that would 
be associated with its LEI. The NOPR stated the Commission's belief 
that optimum effectiveness of LEIs for achieving the systemic risk 
protection and transparency goals of the Dodd-Frank Act would come from 
a global LEI created on an international basis through an international 
voluntary-consensus standards body such as ISO. The NOPR provided that 
the Commission would determine, prior to the initial compliance date, 
whether such an LEI is available. If it were, the NOPR called for the 
Commission to designate that LEI as the LEI approved by the Commission 
for use in complying with the final rule. During such time as such an 
LEI is not available, the NOPR called swap counterparties to be 
identified by a substitute identifier created and assigned by an SDR as 
described in the NOPR.
    The NOPR required that each swap subject to CFTC jurisdiction be 
identified in all swap recordkeeping and data reporting by a unique 
product identifier (``UPI'') and a product classification system, as 
determined by the Commission, for the purpose of categorizing swaps 
with respect to the underlying products referenced in them. The NOPR 
called for the UPI and product classification system to identify both 
the swap asset class and the subtype within that asset class to which 
the swap belongs, with sufficient specificity and distinctiveness to 
enable regulators to fulfill their regulatory responsibilities and to 
facilitate real time reporting. As provided in the NOPR, UPIs would be 
assigned to swaps at a particular, asset class-specific level of the 
robust swap taxonomy used by the product classification system, and the 
use of UPIs and the classification system would enable regulators to 
aggregate and report swap activity at a variety of product type levels, 
and to prepare reports required by the Dodd-Frank Act regarding swap 
market activity.
a. Benefits of the Unique Identifier Requirements
    The Commission anticipates that its approach regarding unique 
identifiers will generate several overarching, if presently 
unquantifiable, benefits to both swap market participants and the 
public generally, including both improved risk management and improved 
regulatory oversight. The Commission believes these benefits will 
accrue to market participants in a number of ways:

     Improved policy analysis by financial regulators 
employing legal entity reference data as the basic infrastructure 
for identifying, describing, classifying, labeling, organizing, and 
using information about trades, counterparties and market 
instruments.
     Improved identification and quantification of existing 
or altered interconnections between firms.
     Improved real time analysis across multiple financial 
markets to identify systemic risk, market stresses and potential 
contagion effects across asset classes.
     Improved financial transaction processing, internal 
recordkeeping, compliance, due diligence, and risk management by 
financial entities.

    Unique identifiers will benefit the general public by supporting 
the Commission's supervisory function over the swap market, as well as 
the broader supervisory responsibilities of U.S. financial regulators 
to protect against financial market systemic risk, enhancing the 
Commission's ability to detect anomalies in the market.
    USIs will assist fulfillment of the systemic risk mitigation, 
transparency, and market monitoring purposes of the Dodd-Frank Act, by 
enabling identification of the origins of each swap as well as events 
that affect the swap during its existence. USIs will be essential for 
collating various data reports concerning a swap into a single, 
accurate data record. They will also help to avoid double-counting of a 
swap reported to different SDRs or to foreign trade repositories, 
something that will improve data quality and accurate data aggregation. 
Substantial benefits of LEIs for the public are recognized in the CPSS-
IOSCO Report on OTC Derivatives Data Reporting and Aggregation 
Requirement, which recommends expeditious development of a global LEI:


    [A] standard system of LEIs is an essential tool for aggregation 
of OTC derivatives data. An LEI would contribute to the ability of 
authorities to fulfill the systemic risk mitigation, transparency, 
and market abuse protection goals established by the G20 commitments 
related to OTC derivatives, and would benefit efficiency and 
transparency in many other areas. As a universally available system 
for uniquely identifying legal entities in multiple financial data 
applications, LEIs would constitute a global public good.\118\
---------------------------------------------------------------------------

    \118\ CPSS-IOSCO Report on OTC Derivatives Data Reporting and 
Aggregation Requirement, August 2011, p. 36. Publicly available at 
http://www.bis.org/publ/cpss96.pdf.

    LEIs also offer benefits to market participants. The Commission 
notes that while requiring the use of LEIs will represent a new cost to 
market participants, LEIs may also reduce the costs of entity 
identification for market participants. As noted in the CPSS-IOSCO Data 
---------------------------------------------------------------------------
Report:

    The data aggregation experience of the private sector in past 
years suggests * * * that a universal LEI would have the added 
benefit of improving the operational efficiency of firms that are 
OTC derivatives counterparties. For financial firms, the current 
absence of an industry-wide LEI standard makes tracking 
counterparties and calculating exposures across multiple data 
systems complicated and expensive, and can lead to costly errors. 
Maintaining internal identifier databases and reconciling entity 
identification with counterparties is expensive for large firms and 
may be disproportionately so for small firms. In the worst case 
scenario, identification problems can lead to transactions that are 
broken or fail to settle. Entity identification touches so many 
aspects of critical business functions that many firms have created 
their own internal identifiers, sometimes doing so on a department-
by-department or function-by function basis. Such stop-gap measures 
can provide a measure of local relief, but ultimately they further 
aggravate and complicate the discontinuity, inconsistency, and 
incompatibility of legal entity identification systems both for 
identifying OTC derivatives counterparties and across the 
international financial sector as a whole. This makes useful data 
aggregation and analysis substantially more difficult or even 
impracticable. In addition, complete automation of back-office 
activities and ``straight through processing'' remain elusive, in 
part, because of the lack of a universal identifier for legal 
entities.\119\
---------------------------------------------------------------------------

    \119\ CPSS-IOSCO Report on OTC Derivatives Data Reporting and 
Aggregation Requirement, August 2011, p. 30. Publicly available at 
http://www.bis.org/publ/cpss96.pdf.

    UPIs may enable better assessment of systemic risk with respect to 
particular products, more effective monitoring of the positions and 
exposures of individual market participants, and greater transparency 
provided by real time reporting as well as by the availability to 
regulators of a clearer picture of the marketplace. They may also allow 
aggregation of swap data across multiple SDRs, and comparison of swap 
data with information concerning cash, equities, and futures markets. 
As noted in the CPSS-IOSCO Data Report, UPIs may also assist the back 
office and risk management processes of market participants. Much as 
LEIs may reduce the costs of entity identification in the fashion 
described above by the CPSS-IOSCO Data Report, the Commission believes 
that while requiring the use of UPIs will represent

[[Page 2191]]

a new cost to market participants, UPIs may lower costs for market 
participants associated with the need to develop and maintain 
proprietary product data models and systems, which many firms are 
forced to do because of the absence of a universally-accepted standard 
for describing, classifying, and identifying swap products.
b. Costs of Unique Identifier Requirements
Costs of USI Requirements
    As noted above, for swaps executed on a SEF or DCM, the final rule 
requires SEFs and DCMs to generate a USI at the time of execution, and 
transmit it to both counterparties, the DCO (if applicable), and the 
SDR. For off-facility swaps with an SD or MSP reporting counterparty, 
the final rule requires the SD or MSP reporting counterparty to create 
the USI at the time of execution, and to transmit it to its 
counterparty, the DCO (if applicable) and the SDR. For off-facility 
swaps between two non-SD/MSP counterparties, the SDR will assign and 
transmit the USI to both counterparties and to the DCO (if applicable). 
The Commission anticipates that this requirement will impose additional 
costs to SEFs, DCMs, SDs, MSPs and SDRs. The Commission has not 
identified any quantifiable costs of the USI requirements that are not 
associated with an information collection subject to the PRA. These 
costs therefore have been accounted for in the information collection 
requests filed with OMB as required by the PRA.
    Thomson Reuters stated that the USI proposal could impose a 
significant implementation burden on market participants because it 
requires the linkage of additional information such as tracking 
numbers. Thomson Reuters recommended a USI with no linked information 
such as embedded asset class or geographical identifiers.
    The Commission believes that, even in the absence of this 
requirement, the automated systems of SEFs, DCMs, DCOs, SDs, MSPs, and 
SDRs would in all cases create internal identifiers for swap 
transactions. Accordingly, for these entities, the cost of creating 
USIs will not constitute an incremental cost for such entities above 
costs they would already incur. Additionally, to reduce costs for off-
facility bilateral swaps between two non-SD/MSP counterparties, the 
final rules have maintained the NOPR approach requiring SDRs to create 
and transmit USIs for such swaps.
Costs of LEI Requirements
    The Commission anticipates that required use of LEIs will impose 
additional costs on market participants.
    The Commission received several comments regarding the cost-benefit 
implications of the NOPR's LEI provisions.
    Three commenters presented LEI proposals or alternatives they 
believed would meet the Commission's requirements in the most cost-
effective manner. CME recommended that the Commission use its large 
trader system for futures, since this would be quicker, easier, less 
costly, and less risky than attempting to establish a new international 
method identifying legal entities. CUSIP presented its CABRE system as 
a viable and cost-effective alternative for LEIs, suggesting that it 
would help market participants realize significant cost savings much 
earlier than other options. GS1 presented itself as a potential LEI 
provider, suggesting that it could implement a LEI system at no 
additional cost to SDs and SEFs that would minimize the overall cost of 
the identification system. Two members of Congress asked that the 
Commission give full and fair consideration to GS1's proposal because 
it could make implementation less costly and burdensome for a 
significant segment of the industry.
    TriOptima commented that the LEI would require significant 
adaptation costs and could possibly delay the implementation of SDRs. 
TriOptima suggested an interim period to allow reporting institutions 
to submit their own LEI and then map this identifier to the one used by 
the SDR.
    With respect to the NOPR requirement for reporting of level two LEI 
reference data concerning the affiliations of a counterparty, AMG 
suggested that the Commission should establish a 50 percent majority 
ownership threshold, because requiring corporate affiliation 
information from companies that have less than majority ownership may 
be burdensome, and in many cases, impracticable.
    As discussed above, three commenters presented alternatives to the 
Commission's proposals regarding LEIs. The Commission has evaluated 
these proposals and will continue to weigh the cost and benefits of 
each as it prepares to implement an international industry initiative 
and designate an LEI for use in swap data reporting as provided in the 
final rule.
    The Commission has determined that costs for market participants 
are not readily quantifiable. However, the Commission understands that 
start-up costs for the LEI system may be borne at least in part by data 
service providers, SDs, and other major market participants that are 
involved in the international industry initiative now underway to 
develop LEIs. Because this process is ongoing, the Commission has 
determined that it cannot readily estimate the remaining costs to 
market participants that will be imposed by its completion, or what 
portion of the impetus for the LEI initiative can be attributed to this 
final rule rather than to a general pre-implementation industry 
initiative for a better system of legal entity identification.
    The final rule calls for the Commission to determine prior to the 
start of swap data reporting whether an LEI system meeting the 
requirements of the final rule is available. If the Commission 
determines that such a system is available, its use will be required in 
all swap data recordkeeping and reporting. If the Commission determines 
that such a system is not yet available, until such time as the 
Commission designates such a system for use in complying with the final 
rule, swap counterparties will be identified by means of a substitute 
identifier created by SDRs as specified in the final rule. Although the 
Commission anticipates that an LEI meeting the requirement of the final 
rule will be available before the commencement of swap data reporting, 
the Commission has also considered the potential costs and benefits to 
SDRs for creating, assigning and transmitting such substitute 
identifiers if they should be required. The Commission anticipates that 
if SDRs are required to create substitute identifiers, such 
requirements will impose additional costs for SDRs.
    Pursuant to this final rule, the reporting of Level Two LEI 
reference data will be limited to the identity of a swap counterparty's 
ultimate parent. This represents a reduction to the burden presented in 
the NOPR, which called for the reporting of all affiliations of each 
swap counterparty identified by an LEI. The Commission believes that 
this approach is practical and cost-effective, because it reduces the 
burden on swap counterparties, while capturing the essential level two 
LEI reference data for a given swap that will allow the Commission and 
other regulators to aggregate swap data in a way that enables effective 
monitoring of systemic risk.
Costs of UPI requirements
    Thomson Reuters recommended that the Commission establish a pilot 
program for the development of UPI codes.

[[Page 2192]]

    The Commission anticipates that this requirement will ultimately 
impose additional costs to market participants. The final rule provides 
that when the Commission determines that a UPI and product 
classification system acceptable to the Commission is available, the 
Commission will designate that system for use in all swap data 
recordkeeping and reporting. Until the Commission designates such a 
system, the final rule calls for swaps to be identified by the internal 
product identifier or product description used by the SDR to which a 
swap is reported. As the Commission has not set forth requirements for 
a UPI system in the final rules, and has not yet designated such a 
system for use by market participants, the Commission has not 
identified any quantifiable costs of the LEI requirements that are not 
associated with an information collection subject to the PRA. These 
costs therefore have been accounted for in the information collection 
requests filed with OMB as required by the PRA.
c. Unique Identifiers in Light of CEA Section 15(a)
    The Commission has evaluated the benefits of the required use of 
USIs, LEIs, and UPIs in light of the specific considerations identified 
in Section 15(a) of the CEA, as follows.
    Protection of market participants and the public. As discussed 
above, the Commission has endeavored to limit the costs attributable to 
discretionary implementation decisions to the maximum degree consistent 
with statutory requirements and their intended benefits. The Commission 
has endeavored to match the costs of the post-implementation 
marketplace with the sizes, levels of sophistication, and levels of 
systemic importance of the affected participants, so that the 
associated benefits may be realized by the public.
    With respect to unique identifiers, the Commission believes the 
benefits include the protection of market participants and the public.
    USIs. The Commission believes that USIs will be a vital tool for 
regulatory agencies in analyzing swap market data for the purposes of 
identifying the positions of systemically important market participants 
and the accumulation of systemic risk, thus protecting market 
participants and the public. USIs will allow for the creation of a 
clear and unified data stream by allowing for the aggregation of 
transaction information without double-counting swaps reported to 
different SDRs or to foreign trade repositories, or reported in VSRs.
    LEIs. The Commission believes that requiring the use of LEIs will 
greatly enhance the ability of the Commission and other regulatory 
agencies to oversee swap markets by providing necessary clarity and 
cohesion to the data used for regulatory analyses. Among the benefits 
to regulators of an LEI regime, the Global Financial Markets 
Association (``GFMA'') identified more efficient data aggregation; more 
powerful modeling and risk analysis; facilitation of information 
sharing and reconciliation between regulators; better supervision of 
cross-border firms and firms whose business lines are overseen by 
multiple regulators; and facilitating identification of affiliates and 
parent companies. GFMA also called the LEI regime ``a powerful tool for 
regulators in monitoring and managing systemic risks.'' \120\ The CPSS-
IOSCO Report on OTC Derivatives Data Reporting and Aggregation 
Requirement, which recommends expeditious development of a global LEI, 
states that:
---------------------------------------------------------------------------

    \120\ GFMA, Creating a Global Legal Entity Identifier (LEI) 
Standard, September 21, 2001, p. 10. Publicly available at http://www.sifma.org/uploadedfiles/issues/technology_and_operations/legal_entity_identifier/lei-project-summary-slides.pdf.

    [A] standard system of LEIs is an essential tool for aggregation 
of OTC derivatives data. An LEI would contribute to the ability of 
authorities to fulfill the systemic risk mitigation, transparency, 
and market abuse protection goals established by the G20 commitments 
related to OTC derivatives, and would benefit efficiency and 
transparency in many other areas. As a universally available system 
for uniquely identifying legal entities in multiple financial data 
applications, LEIs would constitute a global public good.\121\
---------------------------------------------------------------------------

    \121\ CPSS-IOSCO Report on OTC Derivatives Data Reporting and 
Aggregation Requirement, August 2011, p.36. Publicly available at 
http://www.bis.org/publ/cpss96.pdf.

    UPIs. The Commission believes that UPIs will work in conjunction 
with USIs to create an accurate, clear, and unified data record free of 
double-counting. The use of UPIs will also allow regulatory agencies to 
compare swap market data with data from the cash, equities, and futures 
markets for a given product, thus enhancing regulators' understanding 
of the roles of different financial instruments in the marketplace for 
that product.
    Efficiency, competitiveness, and financial integrity. As discussed 
above, the Commission has endeavored to limit the costs attributable to 
discretionary implementation decisions to the maximum degree consistent 
with statutory requirements and their intended benefits. The Commission 
has endeavored to match the costs of the post-implementation 
marketplace with the sizes, levels of sophistication, and levels of 
systemic importance of the affected participants, so that the 
associated benefits may be realized by the public. With respect to 
unique identifiers, the Commission believes the benefits include 
enhancements to the financial integrity of the swap market.
    The Commission believes that, by improving the integrity of the 
U.S. swap markets in the manner described above, this final rule may 
make participation in the U.S. swap markets more appealing to entities 
that currently do not participate. Therefore, this final rule presents 
the potential to enhance the demand for access to the U.S. swap market 
and its participants both domestically and in the global swap 
marketplace. This potential increase in swap market participation may 
improve the competitiveness of the swap marketplace as more parties 
demand sources of risk transference.
    Furthermore, the Commission does not anticipate that the unique 
identifier requirements of this final rule present any costs that would 
impede the efficiency of swap markets.
    USIs. The Commission believes that the benefits of USIs include 
greater transparency, improved data aggregation and cross-border 
supervision. This will improve regulatory oversight and responsiveness, 
and promote a more thorough understanding of the exposures of swap 
counterparties, which will provide more financial integrity for the 
swap market.
    The Commission believes that USIs, as well as LEIs and UPIs, will 
enable greater automation of back-office processes for reporting 
counterparties, thereby promoting efficiency and a potential source of 
cost reduction for swap market participants.
    LEIs. As stated above, the Commission believes that LEIs, along 
with USIs and UPIs, will promote greater automation of back-office 
processes for reporting counterparties, thereby improving operational 
efficiency.
    UPIs. The Commission believes that UPIs will serve to work in 
conjunction with USIs in creating an accurate, clear, and unified data 
record. UPIs will therefore promote the same benefits of greater 
transparency, data aggregation, and cross-border supervision, and 
therefore enhance the financial integrity of swap markets.
    Price discovery. The Commission does not believe that the unique 
identifier requirements will have a material impact on price discovery, 
or that the costs associated with its discretionary implementation 
decisions are of a magnitude to impede the normal functioning of swap 
market participants

[[Page 2193]]

and thereby disrupt the price discovery process.
    Sound risk management practices. The Commission believes that 
requiring the use of USIs, UPIs, and LEIs will also facilitate risk 
management for market participants.
    USIs. The Commission believes that the use of USIs will likely 
create a more clearly organized, readily accessible database of swap 
information for each reporting counterparty, including accurate 
information related to cross-border transactions, which may facilitate 
the internal risk management operations of the counterparty.
    LEIs. The Commission believes that LEIs will provide a number of 
benefits in the area of risk management to reporting counterparties. 
These include the benefits identified by GFMA, which are enumerated 
below.
    GFMA stated that the risk management benefits of LEIs included 
improved response times for crisis reporting and the potential for 
improved response times for sanctions monitoring; a holistic view of 
counterparty and issuer risks; and the facilitation of data 
aggregation, modeling, and analysis.\122\
---------------------------------------------------------------------------

    \122\ GFMA, Creating a Global Legal Entity Identifier (LEI) 
Standard, September 21, 2001, p. 11. Publicly available at http://www.sifma.org/uploadedfiles/issues/technology_and_operations/legal_entity_identifier/lei-project-summary-slides.pdf.
---------------------------------------------------------------------------

    GFMA also listed a number of other operational benefits to market 
participants of implementing LEIs. These include an integrated view of 
entities across divisions and subsidiaries; support for the development 
of hierarchy information; processing and settlement efficiency; an 
improved vendor feed and improved corporate actions management; support 
for new client on-boarding; and the facilitation of post-merger 
integrations.\123\
---------------------------------------------------------------------------

    \123\ GFMA, Creating a Global Legal Entity Identifier (LEI) 
Standard, September 21, 2001, p. 11. Publicly available at http://www.sifma.org/uploadedfiles/issues/technology_and_operations/legal_entity_identifier/lei-project-summary-slides.pdf.
---------------------------------------------------------------------------

    The Commission believes that the benefits of LEIs also include the 
facilitation of straight-through processing, which will promote risk 
mitigation for counterparties. As the Counterparty Risk Management 
Policy Group II (CPRMG II) noted:

    CRMPG II recommends that trade associations and market 
participants must pursue and develop straight through processing of 
OTC transactions, a critical risk mitigant in today's high volume 
markets. As a fundamental matter, disputes over the existence or the 
terms of a transaction have the potential for enormously increasing 
risk, since each party to the disputed transaction hedges and risk 
manages the disputed trade based on certain economic assumptions. 
[Straight through processing] reduces the number and frequency of 
trade disputes and maximizes market efficiency, opportunity and 
access. [Straight through processing] therefore fosters legal, 
credit, market and operational certainty.\124\
---------------------------------------------------------------------------

    \124\ Counterparty Risk Management Policy Group II, Toward 
Greater Financial Stability: A Private Sector Perspective, July 27, 
2005, p. 84. Publicly available at http://fcic-static.law.stanford.edu/cdn_media/fcic-docs/2005-07-25%20Counterparty%20Risk%20Management%20Policy%20Group-%20Toward%20Greater%20Financial%20Stability.pdf.

    UPIs. The Commission believes that UPIs will serve to work in 
conjunction with USIs in creating an accurate and unified internal data 
record for each reporting counterparty. The use of UPIs will allow a 
reporting counterparty to monitor its swap market exposures and compare 
them to its positions and to the broader market variables in analogous 
cash, equities, and futures instruments. The Commission believes that 
this will greatly enhance the ability of the reporting counterparty to 
assess the risk associated with its swap market exposures.
    Other public interest considerations. The Commission anticipates 
that unique identifiers will facilitate the efforts of academics and 
analysts employed by regulatory agencies in the course of their 
investigations by providing a clear framework for data aggregation and 
comparison across financial instruments.

IV. Compliance Dates

A. Proposed Rule

    Section 754 of the Dodd-Frank Act requires Title VII to be 
effective within 360 days of enactment (i.e., by July 16, 2011) or, to 
the extent a provision of Title VII requires rulemaking, not less than 
60 days after publication of final rules or regulations implementing 
such a provision of Title VII. While the final rules become effective 
sixty (60) days after Federal Register publication, the Commission has 
discretion to set forth dates to begin enforcement of regulatory 
provisions.\125\ In setting forth compliance dates the Commission has 
taken into consideration comment received and factors such as available 
resources and the Dodd-Frank Act's goals. In May 2011, the Commission 
and the SEC held a joint public roundtable to elicit comment concerning 
what implementation schedule should be set for the Commission's Dodd-
Frank Act rules, including comment concerning the amount of time 
registered entities and counterparties will need, after issuance of the 
final rule, to prepare for the commencement of swap data reporting 
pursuant to this part. The NOPR requested comment regarding the nature 
and length of the implementation and preparation period which the 
Commission should provide prior to the start of swap data reporting, 
and concerning how the beginning of such reporting should be phased in.
---------------------------------------------------------------------------

    \125\ See Heckler v. Chaney, 470 U.S. 821 (1985).
---------------------------------------------------------------------------

B. Comments Received

    The Commission received numerous comments from comment letters and 
roundtable participants concerning when swap data reporting should 
begin, and how the commencement of reporting should be phased in.
1. Initial Compliance Date
    A variety of comments addressed the setting of the initial 
compliance date for reporting.
    a. Definite compliance dates. Better Markets called on the 
Commission to provide the industry with clear compliance dates for the 
start of reporting.
    b. Period for infrastructure development and testing. Roundtable 
participants, DTCC, ISDA, SIFMA, Global Forex, MFA, WGCEF, and Dominion 
Resources emphasized that reporting should not be required to begin 
until the industry has time to implement or modify and to test 
automated systems to be used for reporting. In order to allow for such 
infrastructure development and testing, commenters urged that the 
initial compliance date for reporting should be set at least six to 
nine months following issuance of the final rule.
    c. Conditions precedent to reporting. EEI, the Electric Coalition, 
and roundtable participants commented that reporting should not be 
required to begin until after issuance of all the Commission's Dodd-
Frank Act rules, or at least of certain key rules including definitions 
of ``swap,'' ``swap dealer,'' and ``major swap participant.'' ISDA, 
SIFMA, Global Forex, MFA, and WGCEF argued that reporting should not be 
required to begin until at least one SDR accepting swaps in the asset 
class in question is fully functional, and DTCC and WGCEF suggested 
that reporting should begin only after both unique identifiers and data 
formats for reporting are finalized. MFA noted that beginning reporting 
after SDR registration and infrastructure are finalized could avoid 
giving current service providers an advantage over new entrants.
    d. Other initial reporting suggestions. ISDA and SIFMA suggested 
that the CFTC and the SEC should harmonize

[[Page 2194]]

when reporting will commence. Global Forex, DTCC, and Thomson Reuters 
suggested consideration of a partially voluntary, benchmark approach to 
implementation of reporting, similar to the ODSG commitment letter 
approach used to initiate existing reporting to trade repositories.
2. Phasing in the Start of Reporting
    A number of commenters also advocated phasing in the start of 
reporting.
    a. Phasing by asset class. DTCC, Global Forex, and roundtable 
participants urged phasing in the start of reporting by asset class. 
They noted that that different swap asset classes are at different 
levels of automation and data normalization, with the credit and 
interest rate asset classes at a more advanced stage of development 
than the equity, foreign exchange, and other commodity asset classes.
    b. Phasing by counterparty type. The Electric Coalition and Chatham 
Financial advocated phasing in the start of reporting according to the 
type and sophistication of the counterparty, with end users being 
phased in last as they have the least technological sophistication. 
Global Forex suggested that the phase-in design should include a 
gradual reduction of target reporting times to allow participants to 
improve their systems over time.
    c. Phasing by product type. WGCEF and Thomson Reuters suggested 
that reporting for swaps executed on electronic platforms should be 
phased in more quickly than reporting for off-platform, bespoke 
transactions, and that the Commission should focus on the more liquid 
contracts which represent the bulk of the OTC market.
    d. Other phasing suggestions. DTCC, Global Forex, and roundtable 
participants suggested that phasing in reporting of confirmation data 
to begin several months later than the reporting of PET data would take 
into account the need for additional time to prepare for reporting of 
the relative larger amount of data involved in confirmation data 
reporting, to develop ways to represent confirmation terms in machine-
readable form, and to normalize and create data fields for confirmation 
data. Eris Exchange suggested that voluntary reporting should precede 
mandatory reporting. MGEX called for a carefully thought out, 
staggered, and reasonable implementation schedule.

C. Determination of Compliance Dates

    The Commission has considered the above comments, and has 
determined to provide an implementation schedule and compliance dates 
for swap data reporting incorporating many of commenters' suggestions, 
as set forth below.
1. Initial Compliance Dates
    a. Clear compliance dates. The Commission agrees with comments 
calling for clear compliance dates for the beginning of full compliance 
with this part. The Commission has determined that each SEF, DCM, DCO, 
SDR, SD, MSP, and non-SD/MSP counterparty subject to the jurisdiction 
of the Commission must commence full compliance with this part on the 
applicable compliance date set forth below.\126\
---------------------------------------------------------------------------

    \126\ The obligations of swap counterparties with respect to 
historical swaps, i.e., swaps executed prior to the applicable 
compliance date and in existence on or after July 15, 2010, the date 
of enactment of the Dodd-Frank Act, will be as provided in part 46 
of this chapter.
---------------------------------------------------------------------------

    b. Period for infrastructure development and testing. The 
Commission agrees with commenters and roundtable participants that it 
is important to provide a period of at least six months following 
issuance of the final data recordkeeping and reporting rule, in order 
to allow necessary infrastructure development and testing in light of 
the requirements of the final rule to occur before reporting is 
required to begin. The initial compliance date for swap data reporting 
set by the final rule provides such an infrastructure development and 
testing period. The Commission believes that a six month period should 
be sufficient for this purpose, and also believes that timely 
fulfillment of the important purposes of the Dodd-Frank Act would be 
frustrated if the start of swap data reporting were further delayed. In 
order to minimize confusion concerning the commencement of both 
regulatory reporting and real time reporting, and to reduce burdens on 
registered entities and swap counterparties required to report under 
both part 45 and part 43, the Commission has determined to set the same 
date as the initial compliance date for reporting under both part 45 
and part 43.
    c. Conditions precedent to reporting. The Commission recognizes 
that adequate preparation by registered entities and swap 
counterparties for the beginning of swap data reporting would be 
difficult in the absence of final Commission rules defining ``swap,'' 
``swap dealer,'' and ``major swap participant.'' The definition of 
``swap'' is relevant to determining what transactions must be reported, 
while the definitions of SD and MSP are relevant to determining which 
counterparty is the reporting counterparty pursuant to this part. 
Accordingly, the Commission has determined that the initial compliance 
date provided in the final rule will be the later of (1) the date 
certain listed below, or (2) 60 days following issuance of the later of 
the Commission's final rules defining swap and defining SD and MSP. The 
Commission disagrees with comments calling for swap data reporting to 
be delayed until after all Commission rules under the Dodd-Frank Act 
are issued, because it believes that important purposes of the Dodd-
Frank Act would be frustrated by additional delay.
    d. Other initial reporting suggestions. The Commission has 
consulted extensively with the SEC concerning the Commission's swap 
data reporting rule and the SEC's security-based swap data reporting 
rule. Both Commissions have worked to coordinate and harmonize those 
rules to the extent practicable. Since the Dodd-Frank Act provides 
clear delineation of the jurisdiction of each Commission with respect 
to swaps, the Commission does not believe that it is necessary to delay 
the commencement of reporting pursuant to this part until issuance of 
the SEC's final security-based swap data reporting rule. The Commission 
disagrees with comments calling for swap data reporting pursuant to 
this part to follow the voluntary, benchmark approach to implementation 
of reporting followed previously under the ODSG commitment letter 
approach used to initiate reporting to trade repositories, or to have 
voluntary reporting precede mandatory reporting. The Commission has 
consulted with ODSG and ODRF concerning experience gained from prior 
voluntary reporting. The Commission believes, however, that a 
``benchmark'' approach involving flexible timetables is not appropriate 
for implementation of reporting under the Dodd-Frank Act. The 
uncertainty in such a reporting regime could burden the industry, and 
make effective oversight and enforcement more difficult.
2. Phasing in the Start of Reporting
    a. Phasing by asset class. The Commission accepts the view of many 
market participants that differences between asset classes with respect 
to both existing automation and existing data normalization are 
significant and should be taken into account in order to ensure that 
data reporting required by the final rule is practicable to achieve by 
the applicable compliance dates. The Commission also believes that 
establishing deadlines for the commencement of reporting in all asset 
classes will serve as an important

[[Page 2195]]

incentive for continued progress by the industry in these regards. 
Accordingly, the Commission has determined that swap data reporting 
should be phased in by asset class, with reporting for credit swaps and 
interest rate swaps beginning earlier than reporting for equity swaps, 
foreign exchange transactions, and other commodity swaps.
    b. Phasing by counterparty type. The Commission agrees with 
comments suggesting that the initial compliance date for non-SD/MSP 
reporting counterparties should take into account the fact that such 
counterparties are less likely than SEFs, DCMs, DCOs, SDs, and MSPs, to 
have sophisticated automated systems for reporting, and the possible 
need of non-SD/MSP reporting counterparties for additional time to 
prepare for reporting. The Commission has determined that swap data 
reporting should be phased in by counterparty type, with reporting by 
non-SD/MSP reporting counterparties in each asset class commencing 180 
days after the start of reporting in that asset class by SEFs, DCMs, 
DCOs, SDs, and MSPs.\127\ The Commission does not believe that 
reporting should be further phased in by registered entity or 
counterparty type. The Commission believes that SEFs, DCMs, DCOs, SDs, 
and MSPs have sufficient technological expertise to enable them to meet 
a compliance date which provides an appropriate, six-month preparation 
period, without further phase-in.
    c. Phasing by product type. In light of the phasing by asset class 
and by counterparty type to be provided in the final rule as noted 
above, the Commission does not believe that additional phasing by 
product type is necessary. The Commission does not believe that it is 
technologically necessary to delay reporting for off-facility, 
uncleared swaps. Where an SD or MSP is the reporting counterparty for a 
bespoke swap, reporting systems should be available. In the relatively 
few instances where a non-SD/MSP counterparty is the reporting 
counterparty for a bespoke swap, the final rule already provides an 
additional six-month phase-in period and extended reporting deadlines.
---------------------------------------------------------------------------

    \127\ The Commission notes that one consequence of this approach 
is that continuation data reporting by a non-SD/MSP reporting 
counterparty for an on-facility swap in some cases may begin as much 
as six months after the creation data report for that swap by the 
SEF or DCM on which the swap was executed. The Commission believes 
this is acceptable in light of the burden reduction provided to non-
SD/MSP reporting counterparties by phasing in their swap data 
reporting.
---------------------------------------------------------------------------

    d. Other phasing suggestions. As discussed above, the Commission 
believes that confirmation data is essential to fulfilling the purposes 
of the Dodd-Frank Act, and should be reported starting with the 
applicable compliance date. However, the Commission also recognizes 
that for some swap counterparties, and particularly for non-SD/MSP 
reporting counterparties, reporting confirmation data normalized in 
data fields may not yet be technologically practicable when reporting 
begins. These considerations are less applicable in the case of swaps 
executed on a SEF or DCM or cleared by a DCO, since in such cases, as 
discussed above, execution on the SEF or DCM or clearing on the DCO 
will be required to include all terms of the confirmation of the swap. 
Therefore, as discussed above in the section addressing creation data 
reporting, the final rule provides as follows. For off-facility, 
uncleared swaps, during the first six months following the applicable 
compliance date, while PET data will have to be reported electronically 
with data normalized in data fields, reporting counterparties for whom 
reporting confirmation data normalized in data fields is not yet 
technologically practicable may report required confirmation data by 
transmitting an image of all documents recording the confirmation. This 
will allow needed additional time for development of schemas for data 
reporting and implementation by non-SD/MSP counterparties. Electronic 
reporting of all confirmation data normalized in data fields will be 
required after this six month period.
3. Compliance Dates
    For the reasons set forth above, the Commission has determined that 
each swap execution facility, designated contract market, derivatives 
clearing organization, swap data repository, swap dealer, major swap 
participant, and non-SD/MSP counterparty subject to the jurisdiction of 
the Commission shall commence full compliance with all provisions of 
this part on the applicable compliance dates set forth below. The 
obligations of swap counterparties with respect to swaps executed prior 
to the applicable compliance date as provided in this section and in 
existence on or after July 21, 2010, the date of enactment of the Dodd-
Frank Act, are set forth in part 46 of this chapter.
a. Compliance Dates for Swap Execution Facilities, Designated Contract 
Markets, Derivatives Clearing Organizations, Swap Data Repositories, 
Swap Dealers, and Major Swap Participants.
    Swap execution facilities, designated contract markets, derivatives 
clearing organizations, swap data repositories, swap dealers, and major 
swap participants shall commence full compliance with all provisions of 
this part as follows:
    Credit swaps and interest rate swaps. Compliance date 1, the 
compliance date with respect to credit swaps and interest rate swaps, 
shall be the later of: July 16, 2012; or 60 calendar days after the 
publication in the Federal Register of the later of the Commission's 
final rule defining the term ``swap'' or the Commission's final rule 
defining the terms ``swap dealer'' and ``major swap participant.''
    Equity swaps, foreign exchange swaps, and other commodity swaps. 
Compliance date 2, the compliance date with respect to equity swaps, 
foreign exchange swaps, and other commodity swaps, shall be 90 calendar 
days after compliance date 1.
    Compliance date for non-SD/MSP counterparties. Non-SD/MSP 
counterparties shall commence full compliance with all provisions of 
this part for all swaps on compliance date 3, which shall be 90 
calendar days after compliance date 2.
    The phasing in of swap data reporting under the final rule is shown 
graphically in the following table.
BILLING CODE 6351-01-P

[[Page 2196]]

[GRAPHIC] [TIFF OMITTED] TR13JA12.002


[[Page 2197]]


BILLING CODE 6351-01-C

Final Rules

List of Subjects in 17 CFR Part 45

    Swaps, Data recordkeeping requirements and data reporting 
requirements.


0
In consideration of the foregoing, and pursuant to the authority of the 
Commodity Exchange Act as amended, and in particular sections 8a(5) and 
21 of the Act, the Commission hereby adopts an amendment to Chapter 1 
of Title 17 of the Code of Federal Regulation by adding a part 45 to 
read as follows:

PART 45--SWAP DATA RECORDKEEPING AND REPORTING REQUIREMENTS

Sec.
45.1 Definitions.
45.2 Swap recordkeeping.
45.3 Swap data reporting: Creation data.
45.4 Swap data reporting: Continuation data.
45.5 Unique swap identifiers.
45.6 Legal entity identifiers.
48.7 Unique product identifiers.
45.8 Determination of which counterparty must report.
45.9 Third-party facilitation of data reporting.
45.10 Reporting to a single swap data repository.
45.11 Data reporting for swaps in a swap asset class not accepted by 
any swap data repository.
45.12 Voluntary supplemental reporting.
45.13 Required data standards.
45.14 Reporting of errors and omissions in previously reported data.
Appendix 1 to Part 45--Tables of minimum primary economic terms 
data.

    Authority:  7 U.S.C. 6r, 7, 7a-1, 7b-3, 12a and 24, as amended 
by Title VII of the Wall Street Reform and Consumer Protection Act 
of 2010, Pub. L. 111-203, 124 Stat. 1376 (2010), unless otherwise 
noted.


Sec.  45.1  Definitions.

    As used in this part:
    Asset class means the broad category of goods, services or 
commodities, including any ``excluded commodity'' as defined in CEA 
section 1a(19), with common characteristics underlying a swap. The 
asset classes include credit, equity, foreign exchange (excluding 
cross-currency), interest rate (including cross-currency), other 
commodity, and such other asset classes as may be determined by the 
Commission.
    Business day means the twenty-four hour day, on all days except 
Saturdays, Sundays, and legal holidays, in the location of the 
reporting counterparty or registered entity reporting data for the 
swap.
    Business hours means consecutive hours during one or more 
consecutive business days.
    Compliance date means the applicable date on which a registered 
entity or swap counterparty subject to the jurisdiction of the 
Commission is required to commence full compliance with all provisions 
of this part, as set forth in the preamble to this part.
    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. For cleared 
swaps, confirmation data also includes the internal identifiers 
assigned by the automated systems of the derivatives clearing 
organization to the two transactions resulting from novation to the 
clearing house.
    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.
    Derivatives clearing organization has the meaning set forth in CEA 
section 1a(9), and any Commission regulation implementing that Section, 
including, without limitation, Sec.  39.5 of this chapter.
    Designated contract market has the meaning set forth in CEA section 
5, and any Commission regulation implementing that Section.
    Electronic confirmation (confirmation ``occurs electronically'') 
means confirmation that is done by means of automated electronic 
systems.
    Electronic reporting (``report electronically'') means the 
reporting of data normalized in data fields as required by the data 
standard or standards used by the swap data repository to which the 
data is reported. Except where specifically otherwise provided in this 
chapter, electronic reporting does not include submission of an image 
of a document or text file.
    Electronic verification (verification ``occurs electronically'') 
means verification that is done by means of automated electronic 
systems.
    Financial entity has the meaning set forth in CEA section 
2(h)(7)(C).
    Foreign exchange forward has the meaning set forth in CEA section 
1a(24).
    Foreign exchange instrument means an instrument that is both 
defined as a swap in part 1 of this chapter and included in the foreign 
exchange asset class. Instruments in the foreign exchange asset class 
include: Any currency option, foreign currency option, foreign exchange 
option, or foreign exchange rate option; any foreign exchange forward 
as defined in CEA section 1a(24); any foreign exchange swap as defined 
in CEA section 1a(25); and any non-deliverable forward involving 
foreign exchange.
    Foreign exchange swap has the meaning set forth in CEA section 
1a(25). It does not include swaps primarily based on rates of exchange 
between different currencies, changes in such rates, or other aspects 
of such rates (sometimes known as ``cross-currency swaps'').
    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; or any swap which is primarily based on 
rates of exchange between different currencies, changes in such rates, 
or other aspects of such rates (sometimes known as ``cross-currency 
swaps'').
    International swap means a swap required by U.S. law and the law of 
another jurisdiction to be reported both to a swap data repository and 
to a different trade repository registered with the other jurisdiction.
    Life cycle event means any event that would result in either a 
change to a primary economic term of a swap or to any primary economic 
terms data previously reported to a swap data repository in connection 
with a swap. Examples of such events include, without limitation, a 
counterparty change resulting from an assignment or novation; a partial 
or full termination of the swap; a change to the end date for the swap; 
a change in the cash flows or rates originally reported; availability 
of a legal entity identifier for a swap counterparty previously 
identified by name or by some other identifier; or a corporate action 
affecting a security or securities on which the swap is based (e.g., a 
merger, dividend, stock split, or bankruptcy).
    Life cycle event data means all of the data elements necessary to 
fully report any life cycle event.
    Major swap participant has the meaning set forth in CEA section 
1a(33) and in part 1 of this chapter.
    Mixed swap has the meaning set forth in CEA section 1a(47)(D), and 
refers to an instrument that is in part a swap

[[Page 2198]]

subject to the jurisdiction of the Commission, and in part a security-
based swap subject to the jurisdiction of the SEC.
    Multi-asset swap means a swap that does not have one easily 
identifiable primary underlying notional item, but instead involves 
multiple underlying notional items within the Commission's jurisdiction 
that belong to different asset classes.
    Non-electronic confirmation (confirmation ``does not occur 
electronically'') means confirmation that is done manually rather than 
by means of automated electronic systems.
    Non-electronic verification (verification ``does not occur 
electronically'') means verification that is done manually rather than 
by means of automated electronic systems.
    Non-SD/MSP counterparty means a swap counterparty that is neither a 
swap dealer nor a major swap participant.
    Off-facility swap means a swap not executed on or pursuant to the 
rules of a swap execution facility or designated contract market.
    Other commodity swap means any swap not included in the credit, 
equity, foreign exchange, or interest rate asset classes, 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.
    Primary economic terms means all of the terms of a swap matched or 
affirmed by the counterparties in verifying the swap, including at a 
minimum each of the terms included in the most recent Federal Register 
release by the Commission listing minimum primary economic terms for 
swaps in the swap asset class in question. The Commission's current 
lists of minimum primary economic terms for swaps in each swap asset 
class are found in Appendix 1 to Part 45.
    Primary economic terms data means all of the data elements 
necessary to fully report all of the primary economic terms of a swap 
in the swap asset class of the swap in question.
    Quarterly reporting (``reported quarterly'') means reporting four 
times each fiscal year, following the end of each fiscal year quarter, 
making each quarterly report within 30 calendar days of the end of the 
fiscal year quarter.
    Reporting counterparty means the counterparty required to report 
swap data pursuant to this part, selected as provided in Sec.  45.8.
    Required swap continuation data means all of the data elements that 
must be reported during the existence of a swap to ensure that all data 
concerning the swap in the swap data repository remains current and 
accurate, and includes all changes to the primary economic terms of the 
swap occurring during the existence of the swap. For this purpose, 
required swap continuation data includes:
    (1) All life cycle event data for the swap if the swap is reported 
using the life cycle reporting method, or all state data for the swap 
if the swap is reported using the snapshot reporting method; and
    (2) All valuation data for the swap.
    Required swap creation data means all primary economic terms data 
for a swap in the swap asset class in question, and all confirmation 
data for the swap.
    State data means all of the data elements necessary to provide a 
snapshot view, on a daily basis, of all of the primary economic terms 
of a swap in the swap asset class of the swap in question, including 
any change to any primary economic term or to any previously-reported 
primary economic terms data since the last snapshot. At a minimum, 
state data must include each of the terms included in the most recent 
Federal Register release by the Commission listing minimum primary 
economic terms for swaps in the swap asset class in question. The 
Commission's current lists of minimum primary economic terms for swaps 
in each swap asset class are found in Appendix 1 to Part 45.
    Swap data repository has the meaning set forth in CEA section 
1a(48), and in part 49 of this chapter.
    Swap dealer has the meaning set forth in CEA section 1a(49), and in 
part 1 of this chapter.
    Swap execution facility has the meaning set forth in CEA section 
1a(50) and in part 37 of this chapter.
    Valuation data means all of the data elements necessary to fully 
describe the daily mark of the transaction, pursuant to CEA section 
4s(h)(3)(B)(iii), and to Sec.  23.431 of this chapter if applicable.
    Verification (``verify,'' ``verified,'' or ``verifying'') means the 
matching by the counterparties to a swap of each of the primary 
economic terms of a swap, at or shortly after the time the swap is 
executed.


Sec.  45.2  Swap recordkeeping.

    (a) Recordkeeping by swap execution facilities, designated contract 
markets, derivatives clearing organizations, swap dealers, and major 
swap participants. Each swap execution facility, designated contract 
market, derivatives clearing organization, swap dealer, and major swap 
participant subject to the jurisdiction of the Commission shall keep 
full, complete, and systematic records, together with all pertinent 
data and memoranda, of all activities relating to the business of such 
entity or person with respect to swaps, as prescribed by the 
Commission. Such records shall include, without limitation, the 
following:
    (1) For swap execution facilities, all records required by part 37 
of this chapter.
    (2) For designated contract markets, all records required by part 
38 of this chapter.
    (3) For derivatives clearing organizations, all records required by 
part 39 of this chapter.
    (4) For swap dealers and major swap participants, all records 
required by part 23 of this chapter, and all records demonstrating that 
they are entitled, with respect to any swap, to elect the clearing 
requirement exception pursuant to CEA section 2(h)(7).
    (b) Recordkeeping by non-SD/MSP counterparties. All non-SD/MSP 
counterparties subject to the jurisdiction of the Commission shall keep 
full, complete, and systematic records, together with all pertinent 
data and memoranda, with respect to each swap in which they are a 
counterparty, including, without limitation, all records demonstrating 
that they are entitled, with respect to any swap, to elect the clearing 
requirement exception in CEA section 2(h)(7).
    (c) Record retention. All records required to be kept pursuant to 
this section shall be retained with respect to each swap throughout the 
life of the swap and for a period of at least five years following the 
final termination of the swap.
    (d) Retention form. Records required to be kept pursuant to this 
section must be kept as required by paragraph (d)(1) or (2) of this 
section, as applicable.
    (1) Records required to be kept by swap execution facilities, 
designated contract markets, derivatives clearing organizations, swap 
dealers, or major swap participants may be kept in electronic form, or 
kept in paper form if originally created and exclusively maintained in 
paper form, so long as they are retrievable, and information in them is 
reportable, as required by this section.
    (2) Records required to be kept by non-SD/MSP counterparties may be 
kept in either electronic or paper form, so long as they are 
retrievable, and information in them is reportable, as required by this 
section.
    (e) Record retrievability. Records required to be kept by swap 
execution facilities, designated contract markets, derivatives clearing 
organizations, or swap counterparties pursuant to this

[[Page 2199]]

section shall be retrievable as provided in paragraphs (e)(1) and (2) 
of this section, as applicable.
    (1) Each record required by this section or any other section of 
the CEA to be kept by a swap execution facility, designated contract 
market, derivatives clearing organization, swap dealer, or major swap 
participant shall be readily accessible via real time electronic access 
by the registrant throughout the life of the swap and for two years 
following the final termination of the swap, and shall be retrievable 
by the registrant 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 by this section or any other section of 
the CEA to be kept by a non-SD/MSP counterparty shall be retrievable by 
that counterparty within five business days throughout the period 
during which it is required to be kept.
    (f) Recordkeeping by swap data repositories. Each swap data 
repository registered with the Commission shall keep full, complete, 
and systematic records, together with all pertinent data and memoranda, 
of all activities relating to the business of the swap data repository 
and all swap data reported to the swap data repository, as prescribed 
by the Commission. Such records shall include, without limitation, all 
records required by part 49 of this chapter.
    (g) Record retention and retrievability by swap data repositories. 
All records required to be kept by a swap data repository pursuant to 
this section must be kept by the swap data repository both:
    (1) Throughout the existence of the swap and for five years 
following final termination of the swap, during which time the records 
must be readily accessible by the swap data repository and available to 
the Commission via real time electronic access; and
    (2) Thereafter, for a period of at least ten additional years in 
archival storage from which they are retrievable by the swap data 
repository within three business days.
    (h) Record inspection. All records required to be kept pursuant to 
this section by any registrant or its affiliates or by any non-SD/MSP 
counterparty subject to the jurisdiction of the Commission 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 as authorized by the Commission. 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. 
Copies of records required to be kept by any registrant shall be 
provided either by electronic means, in hard copy, or both, as 
requested by the Commission, with the sole exception that copies of 
records originally created and exclusively maintained in paper form may 
be provided in hard copy only. Copies of records required to be kept by 
any non-SD/MSP counterparty subject to the jurisdiction of the 
Commission that is not a Commission registrant shall be provided in the 
form, whether electronic or paper, in which the records are kept.


Sec.  45.3  Swap data reporting: creation data.

    Registered entities and swap counterparties must report required 
swap creation data electronically to a swap data repository as set 
forth in this Section. This obligation commences on the applicable 
compliance date set forth in the preamble to this part. The reporting 
obligations of swap counterparties with respect to swaps executed prior 
to the applicable compliance date and in existence on or after July 21, 
2010, the date of enactment of the Dodd-Frank Act, are set forth in 
part 46 of this chapter. This section and Sec.  45.4 establish the 
general swap data reporting obligations of swap dealers, major swap 
participants, non-SD/MSP counterparties, swap execution facilities, 
designated contract markets, and derivatives clearing organizations to 
report swap data to a swap data repository. In addition to the 
reporting obligations set forth in this section and Sec.  45.4, 
registered entities and swap counterparties are subject to other 
reporting obligations set forth in this chapter, including, without 
limitation, the following: Swap dealers, major swap participants, and 
non-SD/MSP counterparties are also subject to the reporting obligations 
with respect to corporate affiliations reporting set forth in Sec.  
45.6; swap execution facilities, designated contract markets, swap 
dealers, major swap participants, and non-SD/MSP counterparties are 
subject to the reporting obligations with respect to real time 
reporting of swap data set forth in part 43 of this chapter; 
counterparties to a swap for which the clearing requirement exception 
in CEA section 2(h)(7) has been elected are subject to the reporting 
obligations set forth in part 39 of this chapter; and, where 
applicable, swap dealers, major swap participants, and non-SD/MSP 
counterparties are subject to the reporting obligations with respect to 
large traders set forth in parts 17 and 18 of this chapter.
    (a) Swaps executed on or pursuant to the rules of a swap execution 
facility or designated contract market. (1) For each swap executed on 
or pursuant to the rules of a swap execution facility or designated 
contract market, the swap execution facility or designated contract 
market must report all required swap creation data, as soon as 
technologically practicable after execution of the swap. This report 
must include all confirmation data for the swap, as defined in part 23 
and in Sec.  45.1, and all primary economic terms data for the swap, as 
defined in Sec.  45.1.
    (2) If such a swap is accepted for clearing by a derivatives 
clearing organization, the derivatives clearing organization must 
report all confirmation data for the swap, as defined in part 39 and in 
Sec.  45.1, as soon as technologically practicable after clearing. The 
derivatives clearing organization shall fulfill this requirement by 
reporting all confirmation data for the swap, as defined in part 39 and 
in this Sec.  45.1, which must include all primary economic terms data 
for the swap as defined in Sec.  45.1, and must include the internal 
identifiers assigned by the automated systems of the derivatives 
clearing organization to the two transactions resulting from novation 
to the clearing house.
    (b) Off-facility swaps subject to mandatory clearing. For all off-
facility swaps subject to the mandatory clearing requirement, except 
for those off-facility swaps excepted from that requirement pursuant to 
CEA section 2(h)(7) and those off-facility swaps covered by CEA section 
2(a)(13)(C)(iv), required swap creation data must be reported as 
provided in paragraph (b) of this section.
    (1) The reporting counterparty, as determined pursuant to Sec.  
45.8, must report all primary economic terms data for the swap, within 
the applicable reporting deadline set forth in paragraph (b)(1)(i) or 
(ii) of this section. However, if the swap is voluntarily submitted for 
clearing and accepted for clearing by a derivatives clearing 
organization before the applicable reporting deadline set forth in 
paragraphs (b)(1)(i) or (ii) of this section, and if the swap is 
accepted for clearing before the reporting counterparty reports any 
primary economic terms data to a swap data repository, then the 
reporting counterparty is excused from reporting required swap creation 
data for the swap.
    (i) If the reporting counterparty is a swap dealer or a major swap 
participant, the reporting counterparty must report all primary 
economic terms data for the

[[Page 2200]]

swap as soon as technologically practicable after execution, but no 
later than: 30 minutes after execution during the first year following 
the compliance date; and 15 minutes after execution thereafter.
    (ii) If the reporting counterparty is a non-SD/MSP counterparty, 
the reporting counterparty must report all primary economic terms data 
for the swap as soon as technologically practicable after execution, 
but no later than: four business hours after execution during the first 
year following the compliance date; two business hours after execution 
during the second year following the compliance date; and one business 
hour after execution thereafter.
    (2) If the swap is accepted for clearing by a derivatives clearing 
organization, the derivatives clearing organization must report all 
confirmation data for the swap, as defined in part 39 and in Sec.  
45.1, as soon as technologically practicable after clearing. The 
derivatives clearing organization shall fulfill this requirement by 
reporting all confirmation data for the swap, as defined in part 39 and 
in this Sec.  45.1, which must include all primary economic terms data 
for the swap as defined in Sec.  45.1, and must include the internal 
identifiers assigned by the automated systems of the derivatives 
clearing organization to the two transactions resulting from novation 
to the clearing house.
    (3) If the swap is not accepted for clearing, the reporting 
counterparty must report all confirmation data for the swap, as defined 
in Sec.  45.1, within the applicable reporting deadline set forth in 
paragraph (b)(3)(i) or (ii) of this section. During the first 180 
calendar days following the compliance date, if reporting confirmation 
data normalized in data fields is not yet technologically practicable 
for the reporting counterparty, the reporting counterparty may report 
confirmation data to the swap data repository by transmitting to the 
swap data repository an image of the document or documents constituting 
the confirmation, until such time as electronic reporting of 
confirmation data is technologically practicable for the reporting 
counterparty. Beginning 180 days after the compliance date, the 
reporting counterparty must report all confirmation data to the swap 
data repository electronically.
    (i) If the reporting counterparty is a swap dealer or major swap 
participant, the reporting counterparty must report all confirmation 
data as soon as technologically practicable following confirmation, but 
no later than: 30 minutes after confirmation if confirmation occurs 
electronically; or 24 business hours after confirmation if confirmation 
does not occur electronically.
    (ii) If the reporting counterparty is a non-SD/MSP counterparty, 
the reporting counterparty must report all confirmation data as soon as 
technologically practicable following confirmation, but no later than: 
the end of the second business day after the date of confirmation 
during the first year following the compliance date; and the end of the 
first business day after the date of confirmation thereafter.
    (c) Off-facility swaps not subject to mandatory clearing, with a 
swap dealer or major swap participant reporting counterparty. For all 
off-facility swaps not subject to the mandatory clearing requirement 
set forth in CEA section 2(h), all off-facility swaps for which the 
clearing requirement exception in CEA section 2(h)(7) has been elected, 
and all off-facility swaps covered by CEA section 2(a)(13)(C)(iv), for 
which a swap dealer or major swap participant is the reporting 
counterparty, required swap creation data must be reported as provided 
in paragraph (c) of this section.
    (1) Credit, equity, foreign exchange, and interest rate swaps. For 
each such credit swap, equity swap, foreign exchange instrument, or 
interest rate swap:
    (i) The reporting counterparty, as determined pursuant to Sec.  
45.8, must report all primary economic terms data for the swap, within 
the applicable reporting deadline set forth in paragraph (c)(1)(i)(A) 
or (B) of this section. However, if the swap is voluntarily submitted 
for clearing and accepted for clearing by a derivatives clearing 
organization before the applicable reporting deadline set forth in 
paragraphs (c)(1)(i)(A) or (B) of this section, and if the swap is 
accepted for clearing before the reporting counterparty reports any 
primary economic terms data to a swap data repository, then the 
reporting counterparty is excused from reporting required swap creation 
data for the swap.
    (A) If the non-reporting counterparty is a swap dealer, a major 
swap participant, or a non-SD/MSP counterparty that is a financial 
entity as defined in CEA section 2(h)(7)(C), or if the non-reporting 
counterparty is a non-SD/MSP counterparty that is not a financial 
entity as defined in CEA section 2(h)(7)(C) and verification of primary 
economic terms occurs electronically, then the reporting counterparty 
must report all primary economic terms data for the swap as soon as 
technologically practicable after execution, but no later than: one 
hour after execution during the first year following the compliance 
date; and 30 minutes after execution thereafter.
    (B) If the non-reporting counterparty is a non-SD/MSP counterparty 
that is not a financial entity as defined in CEA section 2(h)(7)(C), 
and if verification of primary economic terms does not occur 
electronically, then the reporting counterparty must report all primary 
economic terms data for the swap as soon as technologically practicable 
after execution, but no later than: 24 business hours after execution 
during the first year following the compliance date; 12 business hours 
after execution during the second year following the compliance date; 
and 30 minutes after execution thereafter.
    (ii) If the swap is accepted for clearing by a derivatives clearing 
organization, the derivatives clearing organization must report all 
confirmation data for the swap, as defined in part 39 and in Sec.  
45.1, as soon as technologically practicable after clearing. The 
derivatives clearing organization shall fulfill this requirement by 
reporting all confirmation data for the swap, as defined in part 39 and 
in this Sec.  45.1, which must include all primary economic terms data 
for the swap as defined in Sec.  45.1, and must include the internal 
identifiers assigned by the automated systems of the derivatives 
clearing organization to the two transactions resulting from novation 
to the clearing house.
    (iii) If the swap is not voluntarily submitted for clearing, the 
reporting counterparty must report all confirmation data for the swap, 
as defined in Sec.  45.1, as soon as technologically practicable after 
confirmation, but no later than: 30 minutes after confirmation if 
confirmation occurs electronically; or 24 business hours after 
confirmation if confirmation does not occur electronically. During the 
first 180 calendar days following the compliance date, if reporting 
confirmation data normalized in data fields is not yet technologically 
practicable for the reporting counterparty, the reporting counterparty 
may report confirmation data to the swap data repository by 
transmitting to the swap data repository an image of the document or 
documents constituting the confirmation, until such time as electronic 
reporting of confirmation data is technologically practicable for the 
reporting counterparty. Beginning 180 days after the compliance date, 
the reporting counterparty must report all confirmation data to the 
swap data repository electronically.

[[Page 2201]]

    (2) Other commodity swaps. For each such other commodity swap:
    (i) The reporting counterparty, as determined pursuant to Sec.  
45.8, must report all primary economic terms data for the swap, within 
the applicable reporting deadline set forth in paragraph (c)(2)(i)(A) 
or (B) of this section. However, if the swap is voluntarily submitted 
for clearing and accepted for clearing by a derivatives clearing 
organization before the applicable reporting deadline set forth in 
paragraphs (c)(2)(i)(A) or (B) of this section, and if the swap is 
accepted for clearing before the reporting counterparty reports any 
primary economic terms data to a swap data repository, then the 
reporting counterparty is excused from reporting required swap creation 
data for the swap.
    (A) If the non-reporting counterparty is a swap dealer, a major 
swap participant, or a non-SD/MSP counterparty that is a financial 
entity as defined in CEA section 2(h)(7)(C), or if the non-reporting 
counterparty is a non-SD/MSP counterparty that is not a financial 
entity as defined in CEA section 2(h)(7)(C) and verification of primary 
economic terms occurs electronically, then the reporting counterparty 
must report all primary economic terms data for the swap as soon as 
technologically practicable after execution, but no later than: four 
hours after execution during the first year following the compliance 
date; and two hours after execution thereafter.
    (B) If the non-reporting counterparty is a non-SD/MSP counterparty 
that is not a financial entity as defined in CEA section 2(h)(7)(C), 
and if verification of primary economic terms does not occur 
electronically, then the reporting counterparty must report all primary 
economic terms data for the swap as soon as technologically practicable 
after execution, but no later than: 48 business hours after execution 
during the first year following the compliance date; 24 business hours 
after execution during the second year following the compliance date; 
and two hours after execution thereafter.
    (ii) If the swap is accepted for clearing by a derivatives clearing 
organization, the derivatives clearing organization must report all 
confirmation data for the swap, as defined in part 39 and in Sec.  
45.1, as soon as technologically practicable after clearing. The 
derivatives clearing organization shall fulfill this requirement by 
reporting all confirmation data for the swap, as defined in part 39 and 
in this Sec.  45.1, which must include all primary economic terms data 
for the swap as defined in Sec.  45.1, and must include the internal 
identifiers assigned by the automated systems of the derivatives 
clearing organization to the two transactions resulting from novation 
to the clearing house.
    (iii) If the swap is not voluntarily submitted for clearing, the 
reporting counterparty must report all confirmation data for the swap, 
as defined in Sec.  45.1, as soon as technologically practicable after 
confirmation, but no later than: 30 minutes after confirmation if 
confirmation occurs electronically; or 24 business hours after 
confirmation if confirmation does not occur electronically. During the 
first 180 calendar days following the compliance date, if reporting 
confirmation data normalized in data fields is not yet technologically 
practicable for the reporting counterparty, the reporting counterparty 
may report confirmation data to the swap data repository by 
transmitting to the swap data repository an image of the document or 
documents constituting the confirmation, until such time as electronic 
reporting of confirmation data is technologically practicable for the 
reporting counterparty. Beginning 180 days after the compliance date, 
the reporting counterparty must report all confirmation data to the 
swap data repository electronically.
    (d) Off-facility swaps not subject to mandatory clearing, with a 
non-SD/MSP reporting counterparty. For all off-facility swaps not 
subject to the mandatory clearing requirement set forth in CEA section 
2(h), all off-facility swaps for which the clearing requirement 
exception in CEA section 2(h)(7) has been elected, and all off-facility 
swaps covered by CEA section 2(a)(13)(C)(iv), in all asset classes, for 
which a non-SD/MSP counterparty is the reporting counterparty, required 
swap creation data must be reported as provided in this paragraph (d).
    (1) The reporting counterparty, as determined pursuant to Sec.  
45.8, must report all primary economic terms data for the swap, as soon 
as technologically practicable after execution, but no later than: 48 
business hours after execution during the first year following the 
compliance date; 36 business hours after execution during the second 
year following the compliance date; and 24 business hours after 
execution thereafter. However, if the swap is voluntarily submitted for 
clearing and accepted for clearing by a derivatives clearing 
organization before the applicable reporting deadline set forth in this 
paragraph (d)(1), and if the swap is accepted for clearing before the 
reporting counterparty reports any primary economic terms data to a 
swap data repository, then the reporting counterparty is excused from 
reporting required swap creation data for the swap.
    (2) If the swap is accepted for clearing by a derivatives clearing 
organization, the derivatives clearing organization must report all 
confirmation data for the swap, as defined in part 39 and in Sec.  
45.1, as soon as technologically practicable after clearing. The 
derivatives clearing organization shall fulfill this requirement by 
reporting all confirmation data for the swap, as defined in part 39 and 
in this Sec.  45.1, which must include all primary economic terms data 
for the swap as defined in Sec.  45.1, and must include the internal 
identifiers assigned by the automated systems of the derivatives 
clearing organization to the two transactions resulting from novation 
to the clearing house.
    (3) If the swap is not voluntarily submitted for clearing, the 
reporting counterparty must report all confirmation data for the swap, 
as defined in Sec.  45.1, as soon as technologically practicable after 
confirmation, but no later than: 48 business hours after confirmation 
during the first year following the compliance date; 36 business hours 
after confirmation during the second year following the compliance 
date; and 24 business hours after confirmation thereafter. During the 
first 180 calendar days following the compliance date, if reporting 
confirmation data normalized in data fields is not yet technologically 
practicable for the reporting counterparty, the reporting counterparty 
may report confirmation data to the swap data repository by 
transmitting to the swap data repository an image of the document or 
documents constituting the confirmation, until such time as electronic 
reporting of confirmation data is technologically practicable for the 
reporting counterparty. Beginning 180 days after the compliance date, 
the reporting counterparty must report all confirmation data to the 
swap data repository electronically.
    (e) Allocations. For swaps involving allocation, required swap 
creation data shall be reported to a single swap data repository as 
follows.
    (i) Initial swap between reporting counterparty and agent. The 
initial swap transaction between the reporting counterparty and the 
agent shall be reported as required by Sec.  45.3(a) through (d) of 
this part. A unique swap identifier for the initial swap transaction 
must be created as provided in Sec.  45.5 of this part.

[[Page 2202]]

    (ii) Post-allocation swaps. (A) Duties of the agent. In accordance 
with this section, the agent shall inform the reporting counterparty of 
the identities of the reporting counterparty's actual counterparties 
resulting from allocation, as soon as technologically practicable after 
execution, but not later than eight business hours after execution.
    (B) Duties of the reporting counterparty. The reporting 
counterparty must report all required swap creation data for each swap 
resulting from allocation, to the same swap data repository to which 
the initial swap transaction is reported, as soon as technologically 
practicable after it is informed by the agent of the identities of its 
actual counterparties. The reporting counterparty must create a unique 
swap identifier for each such swap as required in Sec.  45.5 of this 
part.
    (C) Duties of the swap data repository. The swap data repository to 
which the initial swap transaction and the post-allocation swaps are 
reported must map together the unique swap identifiers of the original 
swap transaction and of each of the post-allocation swaps.
    (f) Multi-asset swaps. For each multi-asset swap, required swap 
creation data and required swap continuation data shall be reported to 
a single swap data repository that accepts swaps in the asset class 
treated as the primary asset class involved in the swap by the swap 
execution facility, designated contract market, or reporting 
counterparty making the first report of required swap creation data 
pursuant to this section. The registered entity or reporting 
counterparty making the first report of required swap creation data 
pursuant to this section shall report all primary economic terms for 
each asset class involved in the swap.
    (g) Mixed swaps. (1) For each mixed swap, required swap creation 
data and required swap continuation data shall be reported to a swap 
data repository registered with the Commission and to a security-based 
swap data repository registered with the Securities and Exchange 
Commission. This requirement may be satisfied by reporting the mixed 
swap to a swap data repository or security-based swap data repository 
registered with both Commissions.
    (2) The registered entity or reporting counterparty making the 
first report of required swap creation data pursuant to this section 
shall ensure that the same unique swap identifier is recorded for the 
swap in both the swap data repository and the security-based swap data 
repository.
    (h) International swaps. For each international swap, the reporting 
counterparty shall report as soon as practicable to the swap data 
repository the identity of the non-U.S. trade repository not registered 
with the Commission to which the swap is also reported and the swap 
identifier used by the non-U.S. trade repository to identify the swap. 
If necessary, the reporting counterparty shall obtain this information 
from the non-reporting counterparty.


Sec.  45.4  Swap data reporting: continuation data.

    Registered entities and swap counterparties must report required 
swap continuation data electronically to a swap data repository as set 
forth in this section. This obligation commences on the applicable 
compliance date set forth in the preamble to this part. The reporting 
obligations of registered entities and swap counterparties with respect 
to swaps executed prior to the applicable compliance date and in 
existence on or after July 21, 2010, the date of enactment of the Dodd-
Frank Act, are set forth in part 46 of this chapter. This section and 
Sec.  45.3 establish the general swap data reporting obligations of 
swap dealers, major swap participants, non-SD/MSP counterparties, swap 
execution facilities, designated contract markets, and derivatives 
clearing organizations to report swap data to a swap data repository. 
In addition to the reporting obligations set forth in this section and 
Sec.  45.3, registered entities and swap counterparties are subject to 
other reporting obligations set forth in this chapter, including, 
without limitation, the following: Swap dealers, major swap 
participants, and non-SD/MSP counterparties are also subject to the 
reporting obligations with respect to corporate affiliations reporting 
set forth in Sec.  45.6; swap execution facilities, designated contract 
markets, swap dealers, major swap participants, and non-SD/MSP 
counterparties are subject to the reporting obligations with respect to 
real time reporting of swap data set forth in part 43 of this chapter; 
and, where applicable, swap dealers, major swap participants, and non-
SD/MSP counterparties are subject to the reporting obligations with 
respect to large traders set forth in parts 17 and 18 of this chapter.
    (a) Continuation data reporting method. For each swap, regardless 
of asset class, reporting counterparties and derivatives clearing 
organizations required to report swap continuation data must do so in a 
manner sufficient to ensure that all data in the swap data repository 
concerning the swap remains current and accurate, and includes all 
changes to the primary economic terms of the swap occurring during the 
existence of the swap. Reporting entities and counterparties fulfill 
this obligation by reporting either life cycle event data or state data 
for the swap within the applicable deadlines set forth in this section. 
Reporting counterparties and derivatives clearing organizations 
required to report swap continuation data for a swap may fulfill their 
obligation to report either life cycle event data or state data by 
reporting:
    (1) Life cycle event data to a swap data repository that accepts 
only life cycle event data reporting;
    (2) State data to a swap data repository that accepts only state 
data reporting; or
    (3) Either life cycle event data or state data to a swap data 
repository that accepts both life cycle event data and state data 
reporting.
    (b) Continuation data reporting for cleared swaps. For all swaps 
cleared by a derivatives clearing organization, required continuation 
data must be reported as provided in this section.
    (1) Life cycle event data or state data reporting. The derivatives 
clearing organization must report to the swap data repository either:
    (i) All life cycle event data for the swap, reported on the same 
day that any life cycle event occurs with respect to the swap; or
    (ii) All state data for the swap, reported daily.
    (2) Valuation data reporting. Valuation data for the swap must be 
reported as follows:
    (i) By the derivatives clearing organization, daily; and
    (ii) If the reporting counterparty is a swap dealer or major swap 
participant, by the reporting counterparty, daily. Non-SD/MSP reporting 
counterparties are not required to report valuation data for cleared 
swaps.
    (c) Continuation data reporting for uncleared swaps. For all swaps 
that are not cleared by a derivatives clearing organization, the 
reporting counterparty must report all required swap continuation data 
as provided in this section.
    (1) Life cycle event data or state data reporting. The reporting 
counterparty for the swap must report to the swap data repository 
either all life cycle event data for the swap or all state data for the 
swap, within the applicable deadline set forth in paragraphs (c)(1)(i) 
or (ii) of this section.
    (i) If the reporting counterparty is a swap dealer or major swap 
participant:
    (A) Life cycle event data must be reported on the same day that any 
life cycle event occurs, with the sole

[[Page 2203]]

exception that life cycle event data relating to a corporate event of 
the non-reporting counterparty must be reported no later than the 
second business day after the day on which such event occurs.
    (B) State data must be reported daily.
    (ii) If the reporting counterparty is a non-SD/MSP counterparty:
    (A) Life cycle event data must be reported no later than: the end 
of the second business day following the date of any life cycle event 
during the first year after the applicable compliance date; and the end 
of the first business day following the date of any life cycle event 
thereafter; with the sole exception that life cycle event data relating 
to a corporate event of the non-reporting counterparty must be reported 
no later than the end of the third business day following the date of 
such event during the first year after the compliance date, and no 
later than the end of the second business day following such event 
thereafter.
    (B) State data must be reported daily.
    (2) Valuation data reporting. Valuation data for the swap must be 
reported by the reporting counterparty for the swap as follows:
    (i) If the reporting counterparty is a swap dealer or major swap 
participant, the reporting counterparty must report all valuation data 
for the swap, daily.
    (ii) If the reporting counterparty is a non-SD/MSP counterparty, 
the reporting counterparty must report the current daily mark of the 
transaction as of the last day of each fiscal quarter. This report must 
be transmitted to the swap data repository within 30 calendar days of 
the end of each fiscal quarter. If a daily mark of the transaction is 
not available for the swap, the reporting counterparty satisfies this 
requirement by reporting the current valuation of the swap recorded on 
its books in accordance with applicable accounting standards.


Sec.  45.5  Unique swap identifiers.

    Each swap subject to the jurisdiction of the Commission shall be 
identified in all recordkeeping and all swap data reporting pursuant to 
this part by the use of a unique swap identifier, which shall be 
created, transmitted, and used for each swap as provided in paragraphs 
(a) through (c) of this section.
    (a) Swaps executed on a swap execution facility or designated 
contract market. For each swap executed on a swap execution facility or 
designated contract market, the swap execution facility or designated 
contract market shall create and transmit a unique swap identifier as 
provided in paragraphs (a)(1) and (2) of this section.
    (1) Creation. The swap execution facility or designated contract 
market shall generate and assign a unique swap identifier at, or as 
soon as technologically practicable following, the time of execution of 
the swap, and prior to the reporting of required swap creation data. 
The unique swap identifier shall consist of a single data field that 
contains two components:
    (i) The unique alphanumeric code assigned to the swap execution 
facility or designated contract market by the Commission for the 
purpose of identifying the swap execution facility or designated 
contract market with respect to unique swap identifier creation; and
    (ii) An alphanumeric code generated and assigned to that swap by 
the automated systems of the swap execution facility or designated 
contract market, which shall be unique with respect to all such codes 
generated and assigned by that swap execution facility or designated 
contract market.
    (2) Transmission. The swap execution facility or designated 
contract market shall transmit the unique swap identifier 
electronically as follows:
    (i) To the swap data repository to which the swap execution 
facility or designated contract market reports required swap creation 
data for the swap, as part of that report;
    (ii) To each counterparty to the swap, as soon as technologically 
practicable after execution of the swap;
    (iii) To the derivatives clearing organization, if any, to which 
the swap is submitted for clearing, as part of the required swap 
creation data transmitted to the derivatives clearing organization for 
clearing purposes.
    (b) Off-facility swaps with a swap dealer or major swap participant 
reporting counterparty. For each off-facility swap where the reporting 
counterparty is a swap dealer or major swap participant, the reporting 
counterparty shall create and transmit a unique swap identifier as 
provided in paragraphs (b)(1) and (2) of this section.
    (1) Creation. The reporting counterparty shall generate and assign 
a unique swap identifier as soon as technologically practicable after 
execution of the swap and prior to both the reporting of required swap 
creation data and the transmission of data to a derivatives clearing 
organization if the swap is to be cleared. The unique swap identifier 
shall consist of a single data field that contains two components:
    (i) The unique alphanumeric code assigned to the swap dealer or 
major swap participant by the Commission at the time of its 
registration as such, for the purpose of identifying the swap dealer or 
major swap participant with respect to unique swap identifier creation; 
and
    (ii) An alphanumeric code generated and assigned to that swap by 
the automated systems of the swap dealer or major swap participant, 
which shall be unique with respect to all such codes generated and 
assigned by that swap dealer or major swap participant.
    (2) Transmission. The reporting counterparty shall transmit the 
unique swap identifier electronically as follows:
    (i) To the swap data repository to which the reporting counterparty 
reports required swap creation data for the swap, as part of that 
report;
    (ii) To the non-reporting counterparty to the swap, as soon as 
technologically practicable after execution of the swap; and
    (iii) To the derivatives clearing organization, if any, to which 
the swap is submitted for clearing, as part of the required swap 
creation data transmitted to the derivatives clearing organization for 
clearing purposes.
    (c) Off-facility swaps with a non-SD/MSP reporting counterparty. 
For each off-facility swap for which the reporting counterparty is a 
non-SD/MSP counterparty, the swap data repository to which primary 
economic terms data is reported shall create and transmit a unique swap 
identifier as provided in paragraphs (c)(1) and (2) of this section.
    (1) Creation. The swap data repository shall generate and assign a 
unique swap identifier as soon as technologically practicable following 
receipt of the first report of required swap creation data concerning 
the swap. The unique swap identifier shall consist of a single data 
field that contains two components:
    (i) The unique alphanumeric code assigned to the swap data 
repository by the Commission at the time of its registration as such, 
for the purpose of identifying the swap data repository with respect to 
unique swap identifier creation; and
    (ii) An alphanumeric code generated and assigned to that swap by 
the automated systems of the swap data repository, which shall be 
unique with respect to all such codes generated and assigned by that 
swap data repository.
    (2) Transmission. The swap data repository shall transmit the 
unique swap identifier electronically as follows:
    (i) To the counterparties to the swap, as soon as technologically 
practicable following creation of the unique swap identifier; and
    (ii) To the derivatives clearing organization, if any, to which the 
swap is submitted for clearing, as soon as technologically practicable 
following creation of the unique swap identifier.

[[Page 2204]]

    (d) Allocations. For swaps involving allocation, unique swap 
identifiers shall be created and transmitted as follows.
    (1) Initial swap between reporting counterparty and agent. The 
unique swap identifier for the initial swap transaction between the 
reporting counterparty and the agent shall be created as required by 
paragraph (a) through (c) of this section, and shall be transmitted as 
follows:
    (i) If the unique swap identifier is created by a swap execution 
facility or designated contract market, the swap execution facility or 
designated contract market must include the unique swap identifier in 
its swap creation data report to the swap data repository, and must 
transmit the unique identifier to the reporting counterparty and to the 
agent.
    (ii) If the unique swap identifier is created by the reporting 
counterparty, the reporting counterparty must include the unique swap 
identifier in its swap creation data report to the swap data 
repository, and must transmit the unique identifier to the agent.
    (2) Post-allocation swaps. The reporting counterparty must create a 
unique swap identifier for each of the individual swaps resulting from 
allocation, as soon as technologically practicable after it is informed 
by the agent of the identities of its actual counterparties, and must 
transmit each such unique swap identifier to:
    (i) The non-reporting counterparty for the swap in question.
    (ii) The agent.
    (iii) The derivatives clearing organization, if any, to which the 
swap is submitted for clearing, as part of the required swap creation 
data transmitted to the derivatives clearing organization for clearing 
purposes.
    (iv) The same swap data repository to which the initial swap 
transaction is reported, as part of the report of required swap 
creation data to the swap data repository.
    (e) Use. Each registered entity or swap counterparty subject to the 
jurisdiction of the Commission shall include the unique swap identifier 
for a swap in all of its records and all of its swap data reporting 
concerning that swap, from the time it creates or receives the unique 
swap identifier as provided in this section, throughout the existence 
of the swap and for as long as any records are required by the CEA or 
Commission regulations to be kept by that registered entity or 
counterparty concerning the swap, regardless of any life cycle events 
or any changes to state data concerning the swap, including, without 
limitation, any changes with respect to the counterparties to or the 
ownership of the swap. This requirement shall not prohibit the use by a 
registered entity or swap counterparty in its own records of any 
additional identifier or identifiers internally generated by the 
automated systems of the registered entity or swap counterparty, or the 
reporting to a swap data repository, the Commission, or another 
regulator of such internally generated identifiers in addition to the 
reporting of the unique swap identifier.


Sec.  45.6  Legal entity identifiers

    Each counterparty to any swap subject to the jurisdiction of the 
Commission shall be identified in all recordkeeping and all swap data 
reporting pursuant to this part by means of a single legal entity 
identifier as specified in this section.
    (a) Definitions. As used in this section:
    Control (``controlling,'' ``controlled by,'' ``under common control 
with'') means, for the purposes of Sec.  45.6, the possession, direct 
or indirect, of the power to direct or cause the direction of the 
management and policies of a person, whether through the ownership of 
voting interest, by contract, or otherwise. A person is presumed to 
control another person if the person: is a director, general partner or 
officer exercising executive responsibility (or having similar status 
or functions); directly or indirectly has the right to vote 25 percent 
or more of a class of voting interest or has the power to sell or 
direct the sale of 25 percent or more of a class of voting interest; 
or, in the case of a partnership, has the right to receive upon 
dissolution, or has contributed, 25 percent or more of the capital.
    Legal identifier system means an LEI utility conforming with the 
requirements of this section that issues or is capable of issuing an 
LEI conforming with the requirements of this section, and is capable of 
maintaining LEI reference data as required by this section.
    Level one reference data means the minimum information needed to 
identify, on a verifiable basis, the legal entity to which a legal 
entity identifier is assigned. Level one reference data shall include, 
without limitation, all of the data elements included in ISO Standard 
17442. Examples of level one reference data include, without 
limitation, a legal entity's official legal name, its place of 
incorporation, and the address and contact information of its corporate 
headquarters.
    Level two reference data means information concerning the corporate 
affiliations or company hierarchy relationships of the legal entity to 
which a legal entity identifier is assigned. Examples of level two 
reference data include, without limitation, the identity of the legal 
entity's ultimate parent.
    Parent means, for the purposes of Sec.  45.6, a legal person that 
controls a counterparty to a swap required to be reported pursuant to 
this section, or that controls a legal entity identified or to be 
identified by a legal entity identifier provided by the legal 
identifier system designated by the Commission pursuant to this 
section.
    Self-registration means submission by a legal entity of its own 
level one or level two reference data, as applicable.
    Third-party registration means submission of level one or level two 
reference data, as applicable, for a legal entity that is or may become 
a swap counterparty, made by an entity or organization other than the 
legal entity identified by the submitted reference data. Examples of 
third-party registration include, without limitation, submission by a 
swap dealer or major swap participant of level one or level two 
reference data for its swap counterparties, and submission by a 
national numbering agency, national registration agency, or data 
service provider of level one or level two reference data concerning 
legal entities with respect to which the agency or service provider 
maintains information.
    Ultimate parent means, for the purposes of Sec.  45.6, a legal 
person that controls a counterparty to a swap required to be reported 
pursuant to this section, or that controls a legal entity identified or 
to be identified by a legal entity identifier provided by the legal 
identifier system designated by the Commission pursuant to this 
section, and that itself has no parent.
    (b) International standard for the legal entity identifier. The 
legal entity identifier used in all recordkeeping and all swap data 
reporting required by this part, following designation of the legal 
entity identifier system as provided in paragraph (c)(2) of this 
section, shall be issued under, and shall conform to, ISO Standard 
17442, Legal Entity Identifier (LEI), issued by the International 
Organisation for Standardisation.
    (b) Technical principles for the legal entity identifier. The legal 
entity identifier used in all recordkeeping and all swap data reporting 
required by this part shall conform to the technical principles set 
forth in paragraphs (b)(1) through (6) of this section.
    (1) Uniqueness. Only one legal entity identifier shall be assigned 
to any legal entity, and no legal entity identifier shall ever be 
reused. Each entity within a corporate organization or group structure 
that acts as a counterparty in

[[Page 2205]]

any swap shall have its own legal entity identifier.
    (2) Neutrality. To ensure the persistence of the legal entity 
identifier, it shall have a format consisting of a single data field, 
and shall contain either no embedded intelligence or as little embedded 
intelligence as practicable. Entity characteristics of swap 
counterparties identified by legal entity identifiers shall constitute 
separate elements within a reference data system as set forth in 
paragraphs (a), (c)(2), (d), and (e) of this section.
    (3) Reliability. The legal entity identifier shall be supported by 
a trusted and auditable method of verifying the identity of the legal 
entity to which it is assigned, both initially and at appropriate 
intervals thereafter. The issuer of legal entity identifiers shall 
maintain minimum reference or identification data sufficient to verify 
that a user has been correctly identified. Issuance and maintenance of 
the legal entity identifier, and storage and maintenance of all 
associated data, shall involve robust quality assurance practices and 
system safeguards. At a minimum, such system safeguards shall include 
the system safeguards applied to swap data repositories by part 49 of 
this chapter.
    (4) Open Source. The schema for the legal entity identifier shall 
have an open standard that ensures to the greatest extent practicable 
that the legal entity identifier is compatible with existing automated 
systems of financial market infrastructures, market participants, and 
regulators.
    (5) Extensibility. The legal entity identifier shall be capable of 
becoming the single international standard for unique identification of 
legal entities across the financial sector on a global basis. 
Therefore, it shall be sufficiently extensible to cover all existing 
and potential future legal entities of all types that may be 
counterparties to swap, OTC derivative, or other financial 
transactions; that may be involved in any aspect of the financial 
issuance and transactions process; or that may be subject to required 
due diligence by financial sector entities.
    (6) Persistence. The legal entity identifier assigned to an entity 
shall persist despite all corporate events. When a corporate event 
results in a new entity, the new entity shall receive a new legal 
entity identifier, while the previous legal entity identifier or 
identifiers continue to identify the predecessor entity or entities in 
the record.
    (c) Governance principles for the legal entity identifier. The 
legal entity identifier used in all recordkeeping and all swap data 
reporting required by this part shall conform to the governance 
principles set forth in paragraphs (c)(1) through (4) of this section.
    (1) International governance. The issuance of the legal entity 
identifier used pursuant to this section, and any legal entity 
identifier utility formed for the purpose of issuing legal entity 
identifiers that are used pursuant to this section, shall be subject to 
international supervision as follows:
    (i) With respect to operations, by a governance structure that 
includes the Commission and other financial regulators in any 
jurisdiction requiring use of the legal entity identifier pursuant to 
applicable law. The governance structure shall have authority 
sufficient to ensure, and shall ensure, that issuance and maintenance 
of the legal entity identifier system adheres on an ongoing basis to 
the principles set forth in this section.
    (ii) With respect to adherence to ISO Standard 17442, by the 
International Organisation for Standardisation.
    (2) Reference data access. Access to reference data associated with 
the legal entity identifier shall enable use of the legal entity 
identifier as a public good, while respecting applicable law regarding 
data confidentiality. Accordingly:
    (i) Reference data associated with the legal entity identifier that 
is public under applicable law shall be available publicly and free of 
charge. Such data shall include, without limitation, level one 
reference data (i.e., the minimum reference data needed to verify the 
identity of the legal entity receiving each legal entity identifier), 
and a current directory of all issued legal entity identifiers.
    (ii) Collection and maintenance of, and access to, reference data 
associated with the legal entity identifier shall comply with 
applicable laws on data protection and confidentiality.
    (3) Non-profit operation and funding. Funding of both start-up and 
ongoing operation of the legal entity identifier system, including, 
without limitation, any legal entity identifier utility formed for the 
purpose of issuing legal entity identifiers that are used pursuant to 
this section, shall be conducted on a non-profit, reasonable cost-
recovery basis, and shall be subject to international governance as 
provided in paragraph (c)(1) of this section.
    (4) Unbundling and non-restricted use. Issuance of the legal entity 
identifier shall not be tied to other services, if any, offered by the 
issuer, and information concerning the issuance process for new legal 
entity identifiers must be available publicly and free of charge. 
Restrictions shall not be imposed on use of the legal entity identifier 
by any person in its own products and services, or on use of the legal 
entity identifier and associated reference data by any financial 
regulator. Any intellectual property created as part of the legal 
entity identifier system shall be treated in a manner consistent with 
open source principles.
    (5) Commercial advantage prohibition. The legal entity identifier 
utility providing legal entity identifiers for use in compliance with 
this part shall not make any commercial or business use (other than the 
operation of the utility) of any reference data associated with the 
legal entity identifier that is not available to the public free of 
charge. This restriction shall also apply to any entity or person that 
participates in the utility, that is legally or otherwise affiliated or 
associated with the utility, or that provides third-party services to 
the utility or to any component, partner, affiliate, or associate 
thereof.
    (e) Designation of the legal entity identifier system. (1) The 
Commission shall determine, as provided in paragraphs (e)(1)(i) through 
(iii) of this section, whether a legal entity identifier system that 
satisfies the requirements set forth in this section is available to 
provide legal entity identifiers for registered entities and swap 
counterparties required to comply with this part.
    (i) In making this determination, the Commission shall consider, 
without limitation, the following factors:
    (A) Whether the LEI provided by the LEI utility is issued under, 
and conforms to, ISO Standard 17442, Legal Entity Identifier (LEI).
    (B) Whether the LEI provided by the LEI utility complies with all 
of the technical principles set forth in this rule.
    (C) Whether the LEI utility complies with all of the governance 
principles set forth in this rule.
    (D) Whether the LEI utility has demonstrated that it in fact can 
provide LEIs complying with this section for identification of swap 
counterparties in swap data reporting commencing as of the compliance 
dates set forth in Sec.  45.5.
    (E) The acceptability of the LEI utility to industry participants 
required to use the LEI in complying with this part.
    (ii) In making this determination, the Commission shall consider 
all candidates meeting the criteria set forth in paragraph (e)(1)(i) of 
this section, but shall not consider any candidate that does not 
demonstrate that it in fact can provide LEIs for identification of swap

[[Page 2206]]

counterparties in swap data reporting commencing as of the compliance 
dates set forth in this part.
    (iii) The Commission shall make this determination at a time it 
believes is sufficiently prior to the compliance dates set forth this 
part to enable issuance of LEIs far enough in advance of those 
compliance dates to enable compliance with this part.
    (2) If the Commission determines pursuant to paragraph (e)(1) of 
this section that such a legal entity identifier system is available, 
the Commission shall designate the legal entity identifier system as 
the provider of legal entity identifiers to be used in recordkeeping 
and swap data reporting pursuant to this part, by means of a Commission 
order that is published in the Federal Register and on the Web site of 
the Commission, as soon as practicable after such determination is 
made. The order shall include notice of this designation, the contact 
information of the LEI utility, and information concerning the 
procedure and requirements for obtaining legal entity identifiers.
    (3) If the Commission determines pursuant to paragraph (e)(1) of 
this section that such a legal entity identifier system is not yet 
available, the Commission shall publish notice of the determination in 
the Federal Register and on the Web site of the Commission, as soon as 
practicable after the determination is made. If the Commission later 
determines, pursuant to paragraphs (e)(1)(i) and (ii) of this section, 
that such a legal entity identifier system has become available, the 
Commission shall designate the legal entity identifier system as the 
provider of legal entity identifiers to be used in recordkeeping and 
swap data reporting pursuant to this part, by means of a Commission 
order that is published in the Federal Register and on the Web site of 
the Commission, as soon as practicable after such determination is 
made. The order shall include notice of this designation, the contact 
information of the LEI utility, and information concerning the 
procedure and requirements for obtaining legal entity identifiers.
    (e) Reference data reporting. (1) Reporting of level one reference 
data. Level one reference data for each counterparty to any swap 
subject to the jurisdiction of the Commission shall be reported, by 
means of self-registration, third-party registration, or both, into a 
public level one reference database maintained by the issuer of the 
legal entity identifier designated by the Commission pursuant to 
paragraph (d) of this section. Such level one reference data shall be 
reported at a time sufficient to ensure that the counterparty's legal 
entity identifier is available for inclusion in recordkeeping and swap 
data reporting as required by this section. All subsequent changes and 
corrections to level one reference data previously reported shall be 
reported to the issuer, by means of self-registration, third-party 
registration, or both, as soon as technologically practicable following 
occurrence of any such change or discovery of the need for a 
correction.
    (2) Reporting of level two reference data. (i) Level two reference 
data for each counterparty to any swap subject to the jurisdiction of 
the Commission, consisting of the identity of the counterparty's 
ultimate parent, shall be reported, by means of self-registration, 
third-party registration, or both, into a level two reference database. 
Where applicable law forbids such reporting, that fact and the citation 
of the law in question shall be reported in place of the data to which 
such law applies.
    (ii) All non-public level two reference data reported to the level 
two reference database shall be confidential, non-public, and available 
only to financial regulators in any jurisdiction requiring use of the 
legal entity identifier pursuant to applicable law.
    (iii) The Commission shall determine the location of the level two 
reference database by means of a Commission order that is published in 
the Federal Register and on the Web site of the Commission, as soon as 
practicable after such determination is made. The order shall include 
notice of the location of the level two reference database, and 
information concerning the procedure and requirements for reporting 
level two reference data to the database.
    (iv) The obligation to report level two reference data does not 
apply until the Commission has determined the location of the level two 
reference database as provided in paragraph (e)(2)(iii) of this 
section.
    (v) After the Commission determines the location of the level two 
reference database pursuant to paragraph (e)(2)(iii) of this section, 
required level two reference data shall be reported at a time 
sufficient to ensure that it is included in the database when the 
counterparty's legal entity identifier is included in recordkeeping and 
swap data reporting as required by this section.
    (vi) All subsequent changes and corrections to required level two 
reference data previously reported shall be reported into the level two 
reference database, by means of self-registration, third-party 
registration, or both, as soon as technologically practicable following 
occurrence of any such change or discovery of the need for a 
correction.
    (f) Use of the legal entity identifier system by registered 
entities and swap counterparties. (1) When a legal entity identifier 
system has been designated by the Commission pursuant to paragraph (e) 
of this section, each registered entity and swap counterparty shall use 
the legal entity identifier provided by that system in all 
recordkeeping and swap data reporting pursuant to this part.
    (2) Before a legal entity identifier system has been designated by 
the Commission, each registered entity and swap counterparty shall use 
a substitute counterparty identifier created and assigned by a swap 
data repository in all recordkeeping and swap data reporting pursuant 
to this part, as follows:
    (i) When a swap involving one or more counterparties for which no 
substitute counterparty identifier has yet been created and assigned is 
reported to a swap data repository, the swap data repository shall 
create a substitute counterparty identifier for each such counterparty 
as provided in paragraph (f)(2)(ii) of this section, and assign the 
substitute counterparty identifier to that counterparty, as soon as 
technologically practicable after that swap is first reported to the 
swap data repository. In lieu of creating a substitute identifier as 
provided in paragraph (f)(2)(ii), the swap data repository may assign a 
unique substitute identifier provided by a third party service 
provider, if such identifier complies with all of the principles for 
LEIs set forth in this part.
    (ii) Each such substitute counterparty identifier created by a swap 
data repository shall consist of a single data field that contains two 
components, including:
    (A) The unique alphanumeric code assigned to the swap data 
repository by the Commission for the purpose of identifying the swap 
data repository; and
    (B) An alphanumeric code generated and assigned to that 
counterparty by the automated systems of the swap data repository, 
which shall be unique with respect to all such substitute counterparty 
identifier codes generated and assigned by that swap data repository.
    (iii) The swap data repository shall transmit each substitute 
counterparty identifier thus created to each counterparty to the swap, 
to each other registered entity associated with the swap, to each 
registered entity or swap counterparty who has made any report of any 
swap data to the swap data repository, and to each swap data repository 
registered with the

[[Page 2207]]

Commission, as soon as technologically practicable after creation and 
assignment of the substitute counterparty identifier.
    (iv) Once any swap data repository has created and assigned such a 
substitute counterparty identifier to a swap counterparty and has 
transmitted it as required by paragraph (f)(2)(iii) of this section, 
all registered entities and swap counterparties shall use that 
substitute counterparty identifier to identify that counterparty in all 
swap data recordkeeping and reporting, until such time as the 
Commission designates a legal entity identifier system pursuant to 
paragraph (e) of this section.
    (3) For swaps reported pursuant to this part prior to Commission 
designation of a legal entity identifier system, after such designation 
each swap data repository shall map the legal entity identifiers for 
the counterparties to the substitute counterparty identifiers in the 
record for each such swap.
    (4) Prior to October 15, 2012, if a legal entity identifier system 
has been designated by the Commission as provided in this section, but 
a reporting counterparty's automated systems are not yet prepared to 
include legal entity identifiers in recordkeeping and swap data 
reporting pursuant to this part, the counterparty shall be excused from 
complying with paragraph (f)(1) of this section, and shall instead 
comply with paragraph (f)(2) of this section, until its automated 
systems are prepared with respect to legal entity identifiers, at which 
time it must commence compliance with paragraph (f)(1) of this section. 
This paragraph shall have no effect on or after October 15, 2012.


Sec.  45.7  Unique product identifiers.

    Each swap subject to the jurisdiction of the Commission shall be 
identified in all recordkeeping and all swap data reporting pursuant to 
this part by means of a unique product identifier and product 
classification system as specified in this section. Each swap 
sufficiently standardized to receive a unique product identifier shall 
be identified by a unique product identifier. Each swap not 
sufficiently standardized for this purpose shall be identified by its 
description using the product classification system.
    (a) Requirements for the unique product identifier and product 
classification system. The unique product identifier and product 
classification system shall identify and describe the swap asset class 
and the sub-type within that asset class to which the swap belongs, and 
the underlying product for the swap, with sufficient distinctiveness 
and specificity to enable the Commission and other financial regulators 
to fulfill their regulatory responsibilities and to assist in real time 
reporting of swaps as provided in the Act and part 43 of this chapter. 
The level of distinctiveness and specificity which the unique product 
identifier will provide shall be determined separately for each swap 
asset class.
    (b) Designation of the unique product identifier and product 
classification system. (1) The Commission shall determine when a unique 
product identifier and product classification system that is acceptable 
to the Commission and satisfies the requirements set forth in this 
section is available for use in compliance with this section.
    (2) When the Commission determines that such a unique product 
identifier and product classification system is available, the 
Commission shall designate the unique product identifier and product 
classification system to be used in recordkeeping and swap data 
reporting pursuant to this part, by means of a Commission order that is 
published in the Federal Register and on the Web site of the 
Commission, as soon as practicable after such determination is made. 
The order shall include notice of this designation, the contact 
information of the issuer of such unique product identifiers, and 
information concerning the procedure and requirements for obtaining 
unique product identifiers and using the product classification system.
    (c) Use of the unique product identifier and product classification 
system by registered entities and swap counterparties. (1) When a 
unique product identifier and product classification system has been 
designated by the Commission pursuant to paragraph (b) of this section, 
each registered entity and swap counterparty shall use the unique 
product identifier and product classification system in all 
recordkeeping and swap data reporting pursuant to this part.
    (2) Before a unique product identifier and product classification 
system has been designated by the Commission, each registered entity 
and swap counterparty shall use the internal product identifier or 
product description used by the swap data repository to which a swap is 
reported in all recordkeeping and swap data reporting pursuant to this 
part.


Sec.  45.8  Determination of which counterparty must report.

    The determination of which counterparty is the reporting 
counterparty for a swap shall be made as provided in this section.
    (a) If only one counterparty is a swap dealer, the swap dealer 
shall be the reporting counterparty.
    (b) If neither counterparty is a swap dealer, and only one 
counterparty is a major swap participant, the major swap participant 
shall be the reporting counterparty.
    (c) If both counterparties are non-SD/MSP counterparties, and only 
one counterparty is a financial entity as defined in CEA section 
2(h)(7)(C), the counterparty that is a financial entity shall be the 
reporting counterparty.
    (d) If both counterparties are swap dealers, or both counterparties 
are major swap participants, or both counterparties are non-SD/MSP 
counterparties that are financial entities as defined in CEA section 
2(h)(7)(C), or both counterparties are non-SD/MSP counterparties and 
neither counterparty is a financial entity as defined in CEA section 
2(h)(7)(C):
    (1) For a swap executed on or pursuant to the rules of a swap 
execution facility or designated contract market, the counterparties 
shall agree which counterparty shall be the reporting counterparty. The 
counterparties shall make this agreement after the swap execution 
facility or designated contract market notifies the counterparties, as 
provided in paragraph (h)(2) of this section, that paragraph (d) of 
this section applies to them, and not later than the end of the first 
business day following the date of execution of the swap. After this 
agreement is reached, the reporting counterparty shall report to the 
swap data repository that it is the reporting counterparty.
    (2) For an off-facility swap, the counterparties shall agree as one 
term of their swap which counterparty shall be the reporting 
counterparty.
    (e) Notwithstanding the provisions of paragraphs (a) through (d) of 
this section, if both counterparties to a swap are non-SD/MSP 
counterparties and only one counterparty is a U.S. person, that 
counterparty shall be the reporting counterparty.
    (f) Notwithstanding the provisions of paragraphs (a) through (e) of 
this section, if neither counterparty to a swap is a U.S. person, but 
the swap is executed on a swap execution facility or designated 
contract market or otherwise executed in the United States, or is 
cleared by a derivatives clearing organization:
    (1) For such a swap executed on or pursuant to the rules of a swap 
execution facility or designated contract market, the counterparties 
shall agree which counterparty shall be the reporting counterparty. The

[[Page 2208]]

counterparties shall make this agreement after the swap execution 
facility or designated contract market notifies the counterparties, as 
provided in paragraph (h)(2) of this section, that neither counterparty 
is a U.S. person, and not later than the end of the first business day 
following the date of execution of the swap. After this agreement is 
reached, the reporting counterparty shall report to the swap data 
repository that it is the reporting counterparty.
    (2) For an off-facility swap, the counterparties shall agree as one 
term of their swap which counterparty shall be the reporting 
counterparty.
    (g) If a reporting counterparty selected pursuant to paragraphs (a) 
through (f) of this section ceases to be a counterparty to a swap due 
to an assignment or novation, the reporting counterparty for reporting 
of required swap continuation data following the assignment or novation 
shall be selected from the two current counterparties as provided in 
paragraphs (g)(1) through (4) of this section.
    (1) If only one counterparty is a swap dealer, the swap dealer 
shall be the reporting counterparty and shall fulfill all counterparty 
reporting obligations.
    (2) If neither counterparty is a swap dealer, and only one 
counterparty is a major swap participant, the major swap participant 
shall be the reporting counterparty and shall fulfill all counterparty 
reporting obligations.
    (3) If both counterparties are non-SD/MSP counterparties, and only 
one counterparty is a U.S. person, that counterparty shall be the 
reporting counterparty and shall fulfill all counterparty reporting 
obligations.
    (4) In all other cases, the counterparty that replaced the previous 
reporting counterparty by reason of the assignment or novation shall be 
the reporting counterparty, unless otherwise agreed by the 
counterparties.
    (h) For all swaps executed on or pursuant to the rules of a swap 
execution facility or designated contract market, the rules of the swap 
execution facility or designated contract market must require each swap 
counterparty to provide sufficient information to the swap execution 
facility or designated contract market to enable the swap execution 
facility or designated contract market to report all swap creation data 
as provided in this part.
    (1) To achieve this, the rules of the swap execution facility or 
designated contract market must require each market participant placing 
an order with respect to any swap traded on the swap execution facility 
or designated contract market to include in the order, without 
limitation:
    (i) The legal entity identifier of the market participant placing 
the order, if available.
    (ii) A yes/no indication of whether the market participant is a 
swap dealer with respect to the product with respect to which the order 
is placed.
    (iii) A yes/no indication of whether the market participant is a 
major swap participant with respect to the product with respect to 
which the order is placed.
    (iv) A yes/no indication of whether the market participant is a 
financial entity as defined in CEA section (2)(h)(7)(C).
    (v) A yes/no indication of whether the market participant is a U.S. 
person.
    (vi) If applicable, an indication that the market participant will 
elect the clearing requirement exception in CEA section (2)(h)(7) for 
any swap resulting from the order.
    (vii) If the swap will be allocated:
    (A) An indication that the swap will be allocated.
    (B) The legal entity identifier of the agent.
    (C) An indication of whether the swap is a post-allocation swap.
    (D) If the swap is a post-allocation swap, the unique swap 
identifier of the original transaction between the reporting 
counterparty and the agent.
    (2) To achieve this, the swap execution facility or designated 
contract market must use the information obtained pursuant to paragraph 
(h)(1) of this section to identify the counterparty that is the 
reporting counterparty pursuant to the CEA and this section, wherever 
possible. If the swap execution facility or designated contract market 
cannot identify the reporting counterparty from the information 
available to it as specified in paragraph (h) of this section, the swap 
execution facility or designated contract market shall:
    (i) Notify each counterparty, as soon as technologically 
practicable after execution of the swap, that it cannot identify 
whether that counterparty is the reporting counterparty, and, if 
applicable, that neither counterparty is a U.S. person; and
    (ii) Transmit to each counterparty the LEI (or substitute 
identifier as provided in this section) of the other counterparty.


Sec.  45.9  Third-party facilitation of data reporting.

    Registered entities and swap counterparties required by this part 
to report required swap creation data or required swap continuation 
data, while remaining fully responsible for reporting as required by 
this part, may contract with third-party service providers to 
facilitate reporting.


Sec.  45.10  Reporting to a single swap data repository.

    All swap data for a given swap must be reported to a single swap 
data repository, which shall be the swap data repository to which the 
first report of required swap creation data is made pursuant to this 
part.
    (a) Swaps executed on a swap execution facility or designated 
contract market. To ensure that all swap data for a swap executed on or 
pursuant to the rules of a swap execution facility or designated 
contract market is reported to a single swap data repository:
    (1) The swap execution facility or designated contract market that 
reports required swap creation data as required by Sec.  45.3 shall 
report all such data to a single swap data repository. As soon as 
technologically practicable after execution, the swap execution 
facility or designated contract market shall transmit to both 
counterparties to the swap, and to the derivatives clearing 
organization, if any, that will clear the swap, both:
    (i) The identity of the swap data repository to which required swap 
creation data is reported by the swap execution facility or designated 
contract market; and
    (ii) The unique swap identifier for the swap, created pursuant to 
Sec.  45.5.
    (2) Thereafter, all required swap creation data and all required 
swap continuation data reported for the swap reported by any registered 
entity or counterparty shall be reported to that same swap data 
repository (or to its successor in the event that it ceases to operate, 
as provided in part 49 of this chapter).
    (b) Off-facility swaps with a swap dealer or major swap participant 
reporting counterparty. To ensure that all swap data for such swaps is 
reported to a single swap data repository:
    (1) If the reporting counterparty reports primary economic terms 
data to a swap data repository as required by Sec.  45.3:
    (i) The reporting counterparty shall report primary economic terms 
data to a single swap data repository.
    (ii) As soon as technologically practicable after execution, but no 
later than as required pursuant to Sec.  45.3, the reporting 
counterparty shall transmit to the other counterparty to the swap both 
the identity of the swap data repository to which primary economic 
terms data is reported by the reporting counterparty, and the unique 
swap

[[Page 2209]]

identifier for the swap created pursuant to Sec.  45.5.
    (iii) If the swap will be cleared, the reporting counterparty shall 
transmit to the derivatives clearing organization at the time the swap 
is submitted for clearing both the identity of the swap data repository 
to which primary economic terms data is reported by the reporting 
counterparty, and the unique swap identifier for the swap created 
pursuant to Sec.  45.5.
    (2) If the reporting counterparty is excused from reporting primary 
economic terms data as provided in Sec.  45.3(b) or (c):
    (i) Paragraph (b)(1) of this section shall not apply.
    (ii) At the time the swap is submitted for clearing, the reporting 
counterparty shall transmit to the derivatives clearing organization 
the unique swap identifier for the swap created pursuant to Sec.  45.5, 
and notify the derivatives clearing organization that the reporting 
counterparty has not reported any required swap creation data for the 
swap to a swap data repository.
    (iii) The derivatives clearing organization shall report all 
required swap creation data for the swap to a single swap data 
repository. As soon as technologically practicable after clearing, the 
derivatives clearing organization shall transmit to both counterparties 
to the swap the identity of the swap data repository to which required 
swap creation data is reported by the derivatives clearing 
organization, and shall transmit to the non-reporting counterparty the 
unique swap identifier for the swap.
    (3) Thereafter, all required swap creation data and all required 
swap continuation data reported for the swap, by any registered entity 
or counterparty, shall be reported to the swap data repository to which 
swap data has been reported pursuant to paragraph (b)(1) or (b)(2) of 
this section (or to its successor in the event that it ceases to 
operate, as provided in part 49 of this chapter).
    (c) Off-facility swaps with a non-SD/MSP reporting counterparty. To 
ensure that all swap data for such swaps is reported to a single swap 
data repository:
    (1) If the reporting counterparty reports primary economic terms 
data to a swap data repository as required by Sec.  45.3:
    (i) The reporting counterparty shall report primary economic terms 
data to a single swap data repository.
    (ii) As soon as technologically practicable after execution, but no 
later than as required pursuant to Sec.  45.3, the reporting 
counterparty shall transmit to the other counterparty to the swap the 
identity of the swap data repository to which primary economic terms 
data was reported by the reporting counterparty.
    (iii) If the swap will be cleared, the reporting counterparty shall 
transmit to the derivatives clearing organization at the time the swap 
is submitted for clearing the identity of the swap data repository to 
which primary economic terms data was reported by the reporting 
counterparty.
    (2) If the reporting counterparty will be excused from reporting 
primary economic terms data as provided in Sec.  45.3(b) or (c):
    (i) Paragraph (c)(1) of this section shall not apply.
    (ii) At the time the swap is submitted for clearing, the reporting 
counterparty shall notify the derivatives clearing organization that 
the reporting counterparty has not reported any required swap creation 
data for the swap to a swap data repository.
    (iii) The derivatives clearing organization shall report all 
required swap creation data for the swap to a single swap data 
repository. As soon as technologically practicable after clearing, the 
derivatives clearing organization shall transmit to both counterparties 
to the swap the identity of the swap data repository to which required 
swap creation data is reported by the derivatives clearing 
organization.
    (3) The swap data repository to which the swap is reported as 
provided in paragraph (c) of this section shall transmit the unique 
swap identifier created pursuant to Sec.  45.5 to both counterparties 
and to the derivatives clearing organization, if any, as soon as 
technologically practicable after creation of the unique swap 
identifier.
    (4) Thereafter, all required swap creation data and all required 
swap continuation data reported for the swap, by any registered entity 
or counterparty, shall be reported to the swap data repository to which 
swap data has been reported pursuant to paragraph (c)(1) or (2) of this 
section (or to its successor in the event that it ceases to operate, as 
provided in part 49 of this chapter).


Sec.  45.11  Data reporting for swaps in a swap asset class not 
accepted by any swap data repository.

    (a) Should there be a swap asset class for which no swap data 
repository registered with the Commission currently accepts swap data, 
each registered entity or counterparty required by this part to report 
any required swap creation data or required swap continuation data with 
respect to a swap in that asset class must report that same data to the 
Commission.
    (b) Data reported to the Commission pursuant to this section shall 
be reported at times announced by the Commission and in an electronic 
file in a format acceptable to the Commission.
    (c) Delegation of authority to the Chief Information Officer: The 
Commission hereby delegates to its Chief Information Officer, until the 
Commission orders otherwise, the authority set forth in paragraph (c) 
of this section, to be exercised by the Chief Information Officer or by 
such other employee or employees of the Commission as may be designated 
from time to time by the Chief Information Officer. The Chief 
Information Officer may submit to the Commission for its consideration 
any matter which has been delegated in this paragraph. Nothing in this 
paragraph prohibits the Commission, at its election, from exercising 
the authority delegated in this paragraph. The authority delegated to 
the Chief Information Officer by paragraph (c) of this section shall 
include:
    (1) The authority to determine the manner, format, coding 
structure, and electronic data transmission standards and procedures 
acceptable to the Commission for the purposes of paragraphs (a) and (b) 
of this section.
    (2) The authority to determine whether the Commission may permit or 
require use by reporting entities or counterparties in reporting 
pursuant to this section of one or more particular data standards (such 
as FIX, FpML, ISO 20022, or some other standard), in order to 
accommodate the needs of different communities of users.
    (3) The dates and times at which required swap creation data or 
required swap continuation data shall be reported pursuant to this 
section.
    (d) The Chief Information Officer shall publish from time to time 
in the Federal Register and on the Web site of the Commission the 
format, data schema, electronic data transmission methods and 
procedures, and dates and times for reporting acceptable to the 
Commission with respect to swap data reporting pursuant to this 
section.


Sec.  45.12  Voluntary supplemental reporting

    (a) For purposes of this section, the term voluntary, supplemental 
report means any report of swap data to a swap data repository that is 
not required to be made pursuant to this part or any other part in this 
chapter.
    (b) A voluntary, supplemental report may be made only by a 
counterparty to the swap in connection with which the voluntary, 
supplemental report is made, or by a third-party service provider 
acting on behalf of a counterparty to the swap.

[[Page 2210]]

    (c) A voluntary, supplemental report may be made either to the swap 
data repository to which all required swap creation data and all 
required swap continuation data is reported for the swap pursuant to 
Sec. Sec.  45.3 and 45.10, or to a different swap data repository.
    (d) A voluntary, supplemental report must contain:
    (1) An indication that the report is a voluntary, supplemental 
report.
    (2) The unique swap identifier created pursuant to Sec. Sec.  45.5 
and 45.9. Therefore, no voluntary, supplemental report may be made 
until after the unique swap identifier has been created pursuant to 
Sec. Sec.  45.5 and 45.9 and has been transmitted to the counterparty 
making the voluntary, supplemental report.
    (3) The identity of the swap data repository to which all required 
swap creation data and all required swap continuation data is reported 
for the swap pursuant to Sec. Sec.  45.3 and 45.10, if the voluntary 
supplemental report is made to a different swap data repository.
    (4) The legal entity identifier (or substitute identifier) required 
by Sec.  45.6 for the counterparty making the voluntary, supplemental 
report.
    (5) If applicable, an indication that the voluntary, supplemental 
report is made pursuant to the laws or regulations of any jurisdiction 
outside the United States.
    (e) If a counterparty that has made a voluntary, supplemental 
report discovers any errors in the swap data included in the voluntary, 
supplemental report, the counterparty must report a correction of each 
such error to the swap data repository to which the voluntary, 
supplemental report was made, as soon as technologically practicable 
after discovery of any such error.


Sec.  45.13  Required data standards.

    (a) Data maintained and furnished to the commission by swap data 
repositories. A swap data repository shall maintain all swap data 
reported to it in a format acceptable to the Commission, and shall 
transmit all swap data requested by the Commission to the Commission in 
an electronic file in a format acceptable to the Commission.
    (b) Data reported to swap data repositories. In reporting swap data 
to a swap data repository as required by this part, each reporting 
entity or counterparty shall use the facilities, methods, or data 
standards provided or required by the swap data repository to which the 
entity or counterparty reports the data. A swap data repository may 
permit reporting entities and counterparties to use various facilities, 
methods, or data standards, provided that its requirements in this 
regard enable it to meet the requirements of paragraph (a) of this 
section with respect to maintenance and transmission of swap data.
    (c) Delegation of authority to the Chief Information Officer. The 
Commission hereby delegates to its Chief Information Officer, until the 
Commission orders otherwise, the authority set forth in this paragraph 
(c), to be exercised by the Chief Information Officer or by such other 
employee or employees of the Commission as may be designated from time 
to time by the Chief Information Officer. The Chief Information Officer 
may submit to the Commission for its consideration any matter which has 
been delegated in this paragraph (c). Nothing in this paragraph 
prohibits the Commission, at its election, from exercising the 
authority delegated in this paragraph. The authority delegated to the 
Chief Information Officer by this paragraph (c) shall include:
    (1) The authority to determine the manner, format, coding 
structure, and electronic data transmission standards and procedures 
acceptable to the Commission for the purposes of paragraph (a) of this 
section.
    (2) The authority to determine whether the Commission may permit or 
require use by reporting entities or counterparties, or by swap data 
repositories, of one or more particular data standards (such as FIX, 
FpML, ISO 20022, or some other standard), in order to accommodate the 
needs of different communities of users, or to enable swap data 
repositories to comply with paragraph (a) of this section.
    (d) The Chief Information Officer shall publish from time to time 
in the Federal Register and on the Web site of the Commission the 
format, data schema, and electronic data transmission methods and 
procedures acceptable to the Commission.


Sec.  45.14  Reporting of errors and omissions in previously reported 
data.

    (a) Each registered entity and swap counterparty required by this 
part to report swap data to a swap data repository, to any other 
registered entity or swap counterparty, or to the Commission 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. With respect 
to swaps for which required swap continuation data is reported using 
the snapshot reporting method, reporting counterparties fulfill the 
requirement to report errors or omissions in state data previously 
reported by making appropriate corrections in their next daily report 
of state data as required by this part.
    (b) Each counterparty to a swap that is not the reporting 
counterparty as determined pursuant to Sec.  45.8, 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 
paragraph (a) of this section.
    (c) Unless otherwise approved by the Commission, or by the Chief 
Information Officer pursuant to Sec.  45.13, each registered entity or 
swap counterparty reporting corrections to errors or omissions in data 
previously reported as required by this section shall report such 
corrections in the same format as it reported the erroneous or omitted 
data. Unless otherwise approved by the Commission, or by the Chief 
Information Officer pursuant to Sec.  45.13, a swap data repository 
shall transmit corrections to errors or omission in data previously 
transmitted to the Commission in the same format as it transmitted the 
erroneous or omitted data.
BILLING CODE 6351-01-P

Appendix 1 to Part 45--Tables of Minimum Primary Economic Terms Data

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BILLING CODE 6351-01-C

    Issued in Washington, DC, on December 20, 2011, by the 
Commission.
David A. Stawick,
Secretary of the Commission.

Appendices To Swap Data Recordkeeping and Reporting Requirements--
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 voted in the negative.

Appendix 2--Statement of Chairman Gary Gensler

    I support the final rule establishing swap data recordkeeping 
and reporting requirements for registered entities and 
counterparties involved in swaps transactions. The final rule will 
ensure that complete, timely, and accurate data on all swaps is 
available to the Commodity Futures Trading Commission and other 
regulators.
    The final rule requires that data be consistently maintained and 
reported to swap data repositories (SDRs) by swap execution 
facilities, designated contract markets, derivatives clearing 
organizations, swap dealers, major swap participants, and other swap 
counterparties. It requires reporting when the transaction is 
executed and over the lifetime of the swap.
    The rule has a streamlined data reporting regime--the entities 
with the easiest, fastest, and cheapest access to the data will 
report to SDRs. It also extends and phases in reporting deadlines, 
particularly for counterparties that are not swap dealers or major 
swap participants.
    The rule's Legal Entity Identifier, Unique Swap Identifier and 
Unique Product Identifier regimes will be crucial regulatory tools 
for linking data together across counterparties, asset classes, 
repositories, and transactions. They also will improve risk 
management, operational efficiency, and data processing for market 
participants. The rule phases in the start of compliance by both 
asset class and counterparty type.

[FR Doc. 2011-33199 Filed 1-12-12; 8:45 am]
BILLING CODE 6351-01-P