[Federal Register Volume 77, Number 156 (Monday, August 13, 2012)]
[Rules and Regulations]
[Pages 48060-48061]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-19664]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 43

RIN 3038-AD08


Real-Time Public Reporting of Swap Transaction Data; Correction

AGENCY: Commodity Futures Trading Commission.

ACTION: Final rule; correction.

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[[Page 48061]]

SUMMARY: The Commodity Futures Trading Commission (``CFTC'' or 
``Commission'') published the Real-Time Public Reporting of Swap 
Transaction Data (``Real-Time Public Reporting'') rule and an 
accompanying preamble in the Federal Register on Monday, January 9, 
2012 (77 FR 1182). This document makes an editorial correction to 
language of the preamble that conflicted with the rule text of the 
final rule.

DATES: Effective Date: These corrections are effective August 13, 2012.

FOR FURTHER INFORMATION CONTACT: Nancy Markowitz, Deputy Director, 202-
418-5453, nmarkowitz@cftc.gov, Laurie Gussow, Attorney-Advisor, 202-
418-7623, lgussow@cftc.gov, Division of Market Oversight, Commodity 
Futures Trading Commission, Three Lafayette Center, 1155 21st Street 
NW., Washington, DC 20581.

SUPPLEMENTARY INFORMATION:

I. Background

    The Commission published the final rule entitled Real-Time Public 
Reporting of Swap Transaction Data (``Final Rule'') in the Federal 
Register on January 9, 2012, (77 FR 1182), adopting rules to implement 
a framework for the real-time public reporting of swap transactions and 
pricing data for all swap transactions. The final rule, which became 
effective on March 9, 2012, contains a sentence in a footnote that 
created an inconsistency as to the type of swap transactions that may 
be considered ``publicly reportable swap transactions'' under the Final 
Rule. The sentence is corrected in this release to eliminate the 
inconsistent language in the footnote and, thus, make clear that 
certain, and not all, covered transactions as described in Sections 23A 
and 23B of the Federal Reserve Act may be considered ``publicly-
reportable swap transactions.''

II. Summary of the Correction to the Real-Time Public Reporting Rule

    The Commission received inquiries whether it considered all 
``covered transactions'' between affiliates, as defined in Sections 23A 
and 23B of the Federal Reserve Act \1\ to be ``publicly reportable swap 
transactions.'' As published, the last sentence of footnote 44 of the 
Final Rule reads: ``The Commission considers any covered transaction 
between affiliates as described in Sections 23A and 23B of the Federal 
Reserve Act to be publicly reportable swap transactions.'' This 
sentence unintentionally conflicts with the text of Sec.  43.2 defining 
``publicly reportable swap transaction,'' and with the preamble of the 
Final Rule.
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    \1\ Section 608 of the Dodd-Frank Act adds to paragraph 7 of the 
definition of ``covered transaction'' in Section 23A of the Federal 
Reserve Act (12 U.S.C. 371(c)): ``A derivative transaction, as 
defined in paragraph (3) of section 5200(b) of the Revised Statutes 
of the United States (12 U.S.C. 84(b)), with an affiliate, to the 
extent that the transaction causes a member bank or a subsidiary to 
have credit exposure to the affiliate.'' Hence, all derivatives 
transactions will be subjected to Section 23A of the Federal Reserve 
Act to the extent that they cause the bank to have credit exposure 
to the affiliate. Section 23B of the Federal Reserve Act contains an 
arm's-length requirement stating that a member bank and its 
subsidiaries may engage in any covered transaction with an affiliate 
only ``on terms and under circumstances, including credit standards, 
that are substantially the same, or at least as favorable to such 
bank or its subsidiary, as those prevailing at the time for 
comparable transactions with or involving other nonaffiliated 
companies, or in the absence of comparable transactions, on terms 
and under circumstances, including credit standards, that in good 
faith would be offered to, or would apply to, nonaffiliated 
companies.''
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    Section 43.2 defines the term ``publicly reportable swap 
transaction,'' and also provides an example of certain swap 
transactions that do not fall within the definition. Under Sec.  43.2, 
in paragraph (2)(i) of the definition of ``publicly reportable swap 
transaction,'' certain inter-affiliate trades may not be reportable as 
the rule excludes from the definition of reportable swap transactions: 
``Internal swaps between one hundred percent owned subsidiaries of the 
same parent entity.'' Paragraph (3) of the definition states that the 
examples of transactions set forth paragraph (2) of the definition that 
do not fall within the publicly reportable swap transaction definition 
``represent swaps that are not at arm's length and thus are not 
publicly reportable swap transactions, notwithstanding that they do 
result in a corresponding change in the market risk position between 
two parties.'' Indeed, there may be covered transactions as defined in 
Sections 23A and 23B of the Federal Reserve Act that are not at ``arm's 
length'' transactions under Part 43, but which nevertheless result in a 
corresponding change in market risk between the two parties. Under 
Sec.  43.2, those types of covered transactions would not be ``publicly 
reportable swap transactions.''
    Further, correction of the footnote 44 sentence will remove any 
conflict with the preamble language. The preamble language immediately 
preceding the footnote states: ``As adopted, the definition of a 
publicly reportable swap transaction also provides, by way of example, 
that internal transactions to move risk between wholly-owned 
subsidiaries of the same parent, without having credit exposure to the 
other party would not presently require public dissemination because 
such swaps are not arm's-length transactions.'' Again, there may be 
covered transactions as defined in Sections 23A and 23B of the Federal 
Reserve Act that may be internal transactions to move risk between 
wholly-owned subsidiaries of the same parent, without having credit 
exposure to the other party. Those transactions thus do not require 
public dissemination because they are not arm's-length transactions.
    Accordingly, this document revises the language of the last 
sentence of footnote 44 on page 1187 of the Federal Register to read as 
follows: ``Certain covered transactions between affiliates as described 
in Sections 23A and 23B of the Federal Reserve Act may be considered to 
be publicly reportable swap transactions.''
    For compliance purposes, this correction of the footnote sentence 
will result in a more accurate reflection of the regulatory language 
that the determination of whether a covered transaction under Section 
23A or 23B of the Federal Reserve Act is a publicly reportable swap 
transaction should be made by the parties to the swap, rather than the 
Commission. In turn, the Commission's review of such determination will 
be based upon the standards as set forth in Sec.  43.2.

III. Correction

    In FR Doc. 2011-33173 appearing on page 1182 in the Federal 
Register on Monday, January 9, 2012, the following correction is made:
    On page 1187, revise the last sentence of footnote 44 to read, 
``Certain covered transactions between affiliates as described in 
Sections 23A and 23B of the Federal Reserve Act may be considered to be 
publicly reportable swap transactions.''

    Dated: August 7, 2012.
Sauntia S. Warfield,
Assistant Secretary of the Commission.
[FR Doc. 2012-19664 Filed 8-10-12; 8:45 am]
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