[Federal Register Volume 81, Number 123 (Monday, June 27, 2016)]
[Rules and Regulations]
[Pages 41736-41786]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-14414]
[[Page 41735]]
Vol. 81
Monday,
No. 123
June 27, 2016
Part III
Commodity Futures Trading Commission
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17 CFR Part 45
Amendments to Swap Data Recordkeeping and Reporting Requirements for
Cleared Swaps; Final Rule
Federal Register / Vol. 81 , No. 123 / Monday, June 27, 2016 / Rules
and Regulations
[[Page 41736]]
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COMMODITY FUTURES TRADING COMMISSION
17 CFR Part 45
RIN 3038-AE12
Amendments to Swap Data Recordkeeping and Reporting Requirements
for Cleared Swaps
AGENCY: Commodity Futures Trading Commission.
ACTION: Final rule.
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SUMMARY: The Commodity Futures Trading Commission (``Commission'' or
``CFTC'') is adopting final regulations relating to swap data reporting
in connection with cleared swaps for swap data repositories (``SDRs''),
derivatives clearing organizations (``DCOs''), designated contract
markets (``DCMs''), swap execution facilities (``SEFs''), swap dealers
(``SDs''), major swap participants (``MSPs''), and swap counterparties
who are neither SDs nor MSPs. Commodity Exchange Act (``CEA'' or
``Act'') provisions relating to swap data recordkeeping and reporting
were added by the Dodd-Frank Wall Street Reform and Consumer Protection
Act (``Dodd-Frank Act''). These regulations adopt without change
revisions to the Commission regulations as proposed in the Notice of
Proposed Rulemaking (``NPRM'') issued August 31, 2015. These revisions
clarify regulations to clearly delineate the swap data reporting
requirements associated with each of the swaps involved in a cleared
swap transaction. Additionally, these revisions leave the choice of SDR
for each swap in a cleared swap transaction to the entity submitting
the first report on such swap.
DATES: This rule is effective July 27, 2016 except for the removal of
Sec. 45.4(b)(2)(ii) which is effective June 27, 2016.
Compliance Date: The compliance date for all revisions and
additions to part 45 of the Commission's regulations under this final
rule is December 27, 2016. Until such date, all existing reporting
obligations under part 45 (other than those contained in removed
paragraph (b)(2)(ii) of Sec. 45.4), including existing obligations on
reporting continuation data on original swaps and creation and
continuation data on clearing swaps, shall remain in effect.
FOR FURTHER INFORMATION CONTACT: Daniel Bucsa, Deputy Director,
Division of Market Oversight, 202-418-5435, [email protected]; Andrew
Ridenour, Special Counsel, Division of Market Oversight, 202-418-5438,
[email protected]; Owen J. Kopon, Attorney-Advisor, Division of Market
Oversight, 202-418-5360, [email protected]; Benjamin DeMaria, Special
Counsel, Division of Market Oversight, 202-418-5988, [email protected];
Aaron Brodsky, Special Counsel, Division of Market Oversight, 202-418-
5349, [email protected]; or Esen Onur, Economist, Office of the Chief
Economist, 202-418-6146, [email protected].
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
A. Introduction
B. Statutory Authority
C. Regulatory History--Final Part 45 Rulemaking
D. Consultation With Other U.S. Financial Regulators
E. Summary of Proposed Revisions and Additions to Part 45
II. Revised and New Regulations
A. Definitions--Amendments to Sec. 45.1
B. Swap Data Reporting: Creation Data--Amendments to Sec. 45.3
C. Swap Data Reporting: Continuation Data--Amendments to Sec.
45.4
D. Unique Swap Identifiers--Amendments to Sec. 45.5
E. Determination of Which Counterparty Must Report--Amendments
to Sec. 45.8
F. Reporting to a Single Swap Data Repository--Amendments to
Sec. 45.10
G. Examples of Cleared Swap Reporting Workflows Under the
Adopted Revisions
H. Primary Economic Terms Data--Amendments to Appendix 1 to Part
45--Tables of Minimum Primary Economic Terms
III. Related Matters
A. Regulatory Flexibility Act
B. Paperwork Reduction Act
C. Cost-Benefit Considerations
D. Antitrust Considerations
IV. Compliance Dates
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 amended the CEA \2\ to
establish a comprehensive new regulatory framework for swaps and
security-based 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 SDs and 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, Public Law 111-203, 124 Stat. 1376 (2010). The text of the
Dodd-Frank Act may be accessed at http://www.cftc.gov/LawRegulation/DoddFrankAct/index.htm.
\2\ 7 U.S.C. 1, et seq.
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B. Statutory Authority
To enhance transparency, promote standardization, and reduce
systemic risk, section 727 of the Dodd-Frank Act added to the CEA
section 2(a)(13)(G),\3\ which requires all swaps, whether cleared or
uncleared, to be reported to SDRs.\4\ SDRs are 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 available to the Commission and other regulators.\5\
Section 21(b) of the CEA,\6\ added by section 728 of the Dodd-Frank
Act, directs the Commission to prescribe standards for swap data
recordkeeping and reporting, which are to apply to both registered
entities and counterparties involved with swaps,\7\ and which are to be
comparable to standards for clearing organizations in connection with
their clearing of swaps.\8\
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\3\ 7 U.S.C. 2(a)(13)(G).
\4\ See also 7 U.S.C. 1a(40)(E), 1a(48).
\5\ Regulations governing core principles and registration
requirements for, and the duties of, SDRs are the subject of part 49
of this chapter.
\6\ 7 U.S.C. 24a(b).
\7\ 7 U.S.C. 24a(b)(1)(A).
\8\ 7 U.S.C. 24a(b)(3).
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C. Regulatory History--Final Part 45 Rulemaking
On December 20, 2011, the Commission adopted part 45 of the
Commission's regulations (``Final Part 45 Rulemaking'').\9\ Part 45
implements the requirements of section 21 of the CEA by setting forth
the manner and content of reporting to SDRs, and requires electronic
reporting both when a swap is initially executed, referred to as
``creation'' data,\10\ and over the course
[[Page 41737]]
of the swap's existence, referred to as ``continuation'' data.\11\
Additionally, part 45 sets forth varying reporting timeframes depending
on the type of reporting, counterparty, execution, or product.\12\
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\9\ See Swap Data Recordkeeping and Reporting Requirements,
Final Rule, 77 FR 2136 (Jan. 13, 2012).
\10\ See 17 CFR 45.1 (defining ``required swap creation data''
as all primary economic terms data for a swap in the swap asset
class in question, and all confirmation data for the swap.).
``Primary economic terms data'' is defined as 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, while
``confirmation data'' is defined as all of the terms of a swap
matched and agreed upon by the counterparties in confirming the
swap. Id. For cleared swaps, confirmation data also includes the
internal identifiers assigned by the automated systems of the DCO to
the two transactions resulting from novation to the clearing house.
Id. See also 17 CFR 45.3.
\11\ See 17 CFR 45.1 (defining ``required swap continuation
data'' as 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). See also 17 CFR 45.4.
\12\ See 17 CFR 45.3(a), 45.3(b), 45.3(c), and 45.3(d).
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As part of the Commission's ongoing efforts to improve swap
transaction data quality and to improve the Commission's ability to
utilize the data for regulatory purposes, Commission staff has
continued to evaluate issues in connection with reporting under part
45, including those related to cleared swaps in particular. To this
end, Commission staff formed an interdivisional staff working group
(``IDWG'') to identify, and to recommend resolutions to, reporting
challenges associated with certain swaps transaction data recordkeeping
and reporting provisions, including the provisions adopted in the Final
Part 45 Rulemaking.\13\
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\13\ See Press Release, CFTC to Form an Interdivisional Working
Group to Review Regulatory Reporting (Jan. 21, 2014), available at
http://www.cftc.gov/PressRoom/PressReleases/pr6837-14.
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Based in large part on those efforts, the Commission published a
request for comment on a variety of swap data reporting and
recordkeeping provisions to help determine how such provisions were
being applied, and to determine whether or what clarifications or
enhancements to these provisions may be appropriate (the ``IDWG Request
for Comment'').\14\ One of the subjects of the IDWG Request for Comment
was the reporting of cleared swaps, and, in particular, the manner in
which the swap data reporting rules should address cleared swaps.\15\
After considering the comments submitted in response to the IDWG
Request for Comment relating to the reporting of cleared swaps,\16\ the
Commission issued a Notice of Proposed Rulemaking (the ``NPRM'') in
which it proposed changes to part 45 as they relate to the reporting of
cleared swaps transactions.\17\ In response to the NPRM, the Commission
received 17 comments letters addressing its proposed revisions to part
45.\18\ This release will address the comments received on specific
aspects of the NPRM, and on specific issues raised in the IDWG Request
for Comment, in connection with explaining each of the amended
regulations adopted herein.\19\
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\14\ See Review of Swap Data Recordkeeping and Reporting
Requirements, Request for Comment, 79 FR 16689 (Mar. 26, 2014). The
IDWG Request for Comment was referred to simply as the ``Request for
Comment'' in the NPRM. The Commission has changed the short form
citation for that document in the final release to distinguish it
from the subsequent request for comment related to draft technical
specifications, referenced throughout this release.
\15\ 79 FR 16689, 16694.
\16\ The comment file for responses to the IDWG Request for
Comment is available at http://comments.cftc.gov/PublicComments/CommentList.aspx?id=1484. Commenters responding to the IDWG Request
for Comment included: The American Gas Association, May 27, 2014;
American Petroleum Institute, May 27, 2014; Americans for Financial
Reform, May 27, 2014 (``AFR''); Australian Bankers' Association, May
27, 2014 (``ABA''); Better Markets, Inc., May 27, 2014, (``Better
Markets''); B&F Capital Markets, Inc., May 27, 2014; CME Group, May
27, 2014 (``CME''); Coalition for Derivatives End-Users, May 27,
2014 (``CDEU''); Coalition of Physical Energy Companies, May 27,
2014; Commercial Energy Working Group, May 27, 2014 (``CEWG'');
Commodity Markets Council, May 27, 2014 (``CMC''); The Depository
Trust & Clearing Corporation, May 27, 2014 (``DTCC''); EDF Trading
North America, LLC, May 27, 2014; Edison Electric Institute, May 27,
2014 (``EEI''); Financial InterGroup Holdings Ltd, May 27, 2014;
Financial Services Roundtable (``FSR''), May 27, 2014; Fix Trading
Community, May 27, 2014; The Global Foreign Exchange Division of the
Global Financial Markets Association, May 27, 2014 (``GFMA''); HSBC,
May 27, 2014; Interactive Data Corporation, May 27, 2014; ICE Trade
Vault, LLC, May 27, 2014 (``ITV''); International Energy Credit
Association, May 27, 2014; International Swaps and Derivatives
Association, Inc., May 23, 2014 (``ISDA''); Japanese Bankers
Association, May 27, 2014 (``JBA''); Just Energy Group Inc., May 27,
2014; LCH.Clearnet Group Limited, May 29, 2014 (``LCH''); Managed
Funds Association, May 27, 2014 (``MFA''); Markit, May 27, 2014;
Natural Gas Supply Association, May 27, 2014 (``NGSA''); NFP
Electric Associations (National Rural Electric Cooperative
Association, American Public Power Association, and Large Public
Power Council), May 27, 2014 (``NFPEA''); OTC Clearing Hong Kong
Limited, May 27, 2014 (``OTC Hong Kong''); Securities Industry and
Financial Markets Association Asset Management Group, May 27, 2014
(``SIFMA''); SWIFT, May 27, 2014; Swiss Re, May 27, 2014; Thomson
Reuters (SEF) LLC, May 27, 2014 (``TR SEF''); and TriOptima, May 27,
2014. Discussions of comments on reporting of cleared swaps received
in response to the IDWG Request for Comment are included in the
preamble to the NPRM.
\17\ See Amendments to Swap Data Recordkeeping and Reporting
Requirements for Cleared Swaps, Notice of Proposed Rulemaking, 80 FR
52544 (Aug. 31, 2015).
\18\ The comment file for responses to the NPRM is available at
http://comments.cftc.gov/PublicComments/CommentList.aspx?id=1614.
Commenters to the NPRM included: Better Markets, October 30, 2015;
CME, October 30, 2015; COPE, October 30, 2015; CEWG, October 30,
2015; CMC, October 30, 2015; DTCC, October 30, 2015; EEI/EPSA,
October 30, 2015; Eurex Clearing AG (``Eurex''); FSR, October 30,
2015; ITV, October 30, 2015; ISDA, October 30, 2015; JBA, October
30, 2015; LCH, October 30, 2015; MFA and Alternative Investment
Management Association (``AIMA''), October 30, 2015; Markit, October
30, 2015; and North American Derivatives Exchange, Inc., October 30,
2015 (``Nadex'').
\19\ Unless otherwise noted, references to ``commenters''
throughout this release refer to those who submitted comment letters
to the NPRM.
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The swap data reporting framework adopted in the original Final
Part 45 Rulemaking was largely based on the mechanisms for the trading
and execution of uncleared swaps. Under such a regime, swap data
reporting was premised upon the existence of one continuous swap for
reporting and data representation purposes. The Commission has since
had additional opportunities to consult with industry and has observed
how the part 45 regulations function in practice with respect to swaps
that are cleared, including how the implementation of part 45 interacts
with the implementation of part 39 of the Commission's regulations,
which contains provisions applicable to DCOs.
In particular, Sec. 39.12(b)(6) provides that upon acceptance of a
swap by a DCO for clearing, that original swap is extinguished and
replaced by equal and opposite swaps, with the DCO as the counterparty
to each resulting swap.\20\ The original swap that is extinguished upon
acceptance for clearing is commonly referred to by market participants
as the ``alpha'' swap and the equal and opposite swaps that replace the
original swap are commonly referred to as ``beta'' and ``gamma'' swaps.
The process of extinguishing the ``alpha'' swap and creating the
``beta'' and ``gamma'' swaps is generally referred to as a novation.
The Commission has observed that certain provisions of part 45 could
better accommodate the cleared swap framework set forth in Sec.
39.12(b)(6). The new regulations in this release are intended to
provide clarity to swap counterparties and registered entities of their
part 45 reporting obligations with respect to the swaps involved in a
cleared swap transaction. These amendments and new regulations are also
intended to improve the efficiency of data collection and maintenance
associated with the reporting of the
[[Page 41738]]
swaps involved in a cleared swap transaction.
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\20\ See 17 CFR 39.12(b)(6) (requiring a DCO that clears swaps
to have rules providing that, upon acceptance of a swap by the DCO
for clearing: (i) The original swap is extinguished; (ii) the
original swap is replaced by an equal and opposite swap between the
[DCO] and each clearing member acting as principal for a house
trading or acting as agent for a customer trade). The Commission
reaffirmed its position regarding the composition of a cleared swap
in a statement regarding Chicago Mercantile Exchange (``CME'') Rule
1001. See Statement of the Commission on the Approval of CME Rule
1001 (Mar. 6, 2013), at 6, available at http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/statementofthecommission.pdf.
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D. Consultation With Other U.S. Financial Regulators
In developing these rules, Commission staff has engaged in
extensive consultations with other U.S. financial regulators, including
the Securities and Exchange Commission (``SEC''), the Federal Reserve
Board of Governors, the Federal Housing Finance Agency, the Federal
Deposit Insurance Corporation, Office of Comptroller of the Currency,
and the Farm Credit Administration. As noted in the NPRM,\21\ the
Commission endeavored to harmonize the regulations in this release with
the approach proposed by the SEC in its release proposing certain new
rules and rule amendments to Regulation SBSR--Reporting and
Dissemination of Security-Based Swap Information (``Regulation
SBSR'').\22\
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\21\ 80 FR 52544, 52545-46.
\22\ See Regulation SBSR--Reporting and Dissemination of
Security-Based Swap Information, 80 FR 14740 (Mar. 19, 2015).
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E. Summary of Revisions and Additions to Part 45
The Commission is making revisions and additions to Sec. Sec.
45.1, 45.3, 45.4, 45.5, 45.8, 45.10, and appendix 1 to part 45 in order
to provide clarity to swap counterparties as well as to registered
entities regarding their respective part 45 reporting obligations in
connection with each of the swaps involved in a cleared swap
transaction.\23\ The Commission is adopting the following amendments,
each of which is discussed in greater detail in Section II of this
release:
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\23\ The Commission is also amending the part 45 authority
citation to replace a reference to 7 U.S.C. 24 with a reference to 7
U.S.C. 24a.
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Amendments to Sec. 45.1 revise the definition of
``derivatives clearing organization'' to update a cross-reference and
to clarify that the definition covers only registered DCOs. Revised
Sec. 45.1 also adds new definitions for ``original swaps'' and
``clearing swaps.'' These terms are used throughout amended part 45 to
help clarify reporting obligations for the swaps involved in a cleared
swap transaction.
Amendments to Sec. 45.3 modify and clarify DCO creation
data reporting obligations for swaps that result from the clearing
process; establish which entity has the obligation to choose the SDR to
which creation data is reported; eliminate confirmation data reporting
obligations for swaps that are intended to be submitted to a DCO for
clearing at the time of execution; and make conforming changes.
Amendments to Sec. 45.4 modify and clarify continuation
data reporting obligations for original swaps, including the obligation
of a clearing DCO to report original swap terminations to the SDR to
which the original swap was reported; modify and clarify the obligation
to report data providing for the linking of original and clearing swaps
and the original and clearing swap SDRs; remove the requirement for SD/
MSP reporting counterparties to report daily valuation data for cleared
swaps; and make conforming changes.
Amendments to Sec. 45.5 set forth a DCO's obligations to
create, transmit, and use unique swap identifiers (``USIs'') to
identify clearing swaps.
Amendments to Sec. 45.8 provide that the DCO will be the
reporting counterparty for clearing swaps.
Amendments to Sec. 45.10 provide that all swap data for a
given clearing swap, and all swap data for each clearing swap that
replaces a particular original swap (and each equal and offsetting
clearing swap that is created upon execution of the same transaction
and that does not replace an original swap), must be reported to a
single SDR. Amendments also make conforming changes.
Amendments to appendix 1 modify certain existing primary
economic term (``PET'') data fields and certain explanatory notes in
the Comment sections for existing PET data fields, and add several new
PET data fields to account for the clarifications provided in this
release for the reporting of clearing swaps.
II. Revised and New Regulations
Throughout Section II of this release, the Commission will discuss
each amendment and the related comments. The Commission is also
including several examples to demonstrate how cleared swap reporting
workflows would function under the new regulations.
The Commission received some general comments on the proposed
amendments to part 45 relating to data quality. Better Markets was
generally supportive of the proposals, and commented that the NPRM
integrated many of the technical public comments on the concept release
to address the small but important fixes on reporting of cleared swap
transactions.\24\ COPE was also generally supportive of the NPRM on the
``guiding principal'' that end-users should not be unduly burdened by
the Commission's swap reporting regulations.\25\ COPE requested that
the Commission clarify that, under the proposed amendments, end-users
would not have reporting obligations on swaps executed pursuant to the
rules of a SEF or DCM and then cleared by a DCO.\26\
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\24\ See Better Markets Oct. 30, 2015 Letter, at 2.
\25\ See COPE Oct. 30, 2015 Letter, at 2.
\26\ See COPE Oct. 30, 2015 Letter, at 2. In response to COPE's
request for clarification, the Commission notes that under the final
rule being adopted, a non-SD/MSP would likely have no reporting
obligations on a swap executed on a SEF or DCM that is intended to
be cleared at the time of execution. However, the original swap
reporting counterparty as determined by the reporting hierarchy
under Sec. 45.8 could have obligations to report any amendments or
modifications of PET data fields, as well as any continuation data
on a swap between the execution of the swap and its acceptance for
clearing, such as a novation, allocation or termination. In such
circumstances, the reporting counterparty on the original swap would
have a reporting obligation under either Sec. 45.3 or Sec. 45.4,
respectively. Separately, end-users may also have obligations to
correct errors or omissions discovered in swap data for which the
end-user is the reporting counterparty pursuant to Sec. 45.14(a),
or to notify the reporting counterparty of such errors or omissions
if the end-user is not the reporting counterparty pursuant to Sec.
45.14(b).
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A. Definitions--Amendments to Sec. 45.1
1. Existing Sec. 45.1
Existing Sec. 45.1 defines ``derivatives clearing organization''
for purposes of part 45 by cross-referencing section 1a(9) of the CEA
\27\ and any Commission regulations implementing that section,
including but not limited to Sec. 39.5. Existing Sec. 45.1 does not
include definitions of either ``original swap'' or ``clearing swap.''
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\27\ 7 U.S.C. 1a(9).
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2. Proposed Amendments and Additions to Sec. 45.1
i. ``Derivatives Clearing Organization''
The Commission proposed to revise the definition of ``derivatives
clearing organization'' in Sec. 45.1 so that it cross-references the
definition provided in Sec. 1.3(d) of the Commission's regulations and
so that it explicitly refers to a DCO registered with the Commission
under section 5b(a) of the CEA.\28\ This modification redefines a
``derivatives clearing organization'' for purposes of part 45 to mean a
derivatives clearing organization, as defined by Sec. 1.3(d) of this
chapter, that is registered with the Commission.\29\
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\28\ 7 U.S.C. 7a-1(a).
\29\ See 80 FR 52544, 52547.
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ii. ``Original Swap'' and ``Clearing Swap''
The Commission proposed to add definitions of ``original swap'' and
``clearing swap'' to part 45 so that the part 45 reporting rules will
be more consistent with the regulations
[[Page 41739]]
applicable to DCOs set forth in Sec. 39.12(b)(6).\30\
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\30\ See 80 FR 52544, 52547.
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The Commission proposed to define ``original swap'' as a swap that
has been accepted for clearing by a derivatives clearing organization
and ``clearing swap'' as a swap created pursuant to the rules of a
derivatives clearing organization that has a derivatives clearing
organization as a counterparty, including any swap that replaces an
original swap that was extinguished upon acceptance of such original
swap by the derivatives clearing organization for clearing.
As noted above, while original swaps are commonly referred to as
``alpha'' swaps and while the equal and opposite swaps that replace the
original swap are commonly referred to as ``beta'' and ``gamma'' swaps,
the Commission will use the proposed defined terms ``original swap''
and ``clearing swap'' throughout this section of the release.
3. Comments
The Commission received comments on the proposed definitions from a
variety of market participants. Many commenters were supportive of the
proposed amendments to the definitions and the clarification that they
provide. Other commenters supported clarification of the definitions,
but suggested further modifications to the proposed definitions.
i. Derivatives Clearing Organization
Both ISDA and FSR commented that the proposed definition of
``derivatives clearing organization'' should be expanded to include
derivatives clearing organizations that are exempt from registering
with the Commission.\31\ These commenters suggested that the reporting
obligations should apply to the central counterparty regardless of
whether that counterparty is registered with the Commission. ISDA also
commented that the reporting obligations should apply to those
derivatives clearing organizations that are currently in the process of
registering with the Commission.\32\
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\31\ See ISDA Oct. 30, 2015 Letter, at 2-3; FSR Oct. 30, 2015
Letter, at 5.
\32\ See ISDA Oct. 30, 2015 Letter, at 2-3.
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ii. Clearing Swap
With respect to the proposed definition of ``clearing swap,'' ISDA
reiterated its comment that the definition should include all swaps
that are cleared through registered derivatives clearing organizations
as well as those that are cleared through derivatives clearing
organizations that are in the process of registering or are exempt from
registration.\33\ LCH commented that the definition of clearing swap is
incomplete as it may not capture cleared trades between a clearing
member and its client in a principal clearing model, because the DCO is
not a party to that transaction.\34\
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\33\ See Id. at 3.
\34\ See LCH Oct. 30, 2015 Letter, at 2.
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iii. Original Swap
Regarding the definition of ``original swap,'' ISDA commented that
it is supportive of the proposed definition and agrees that swaps
submitted for clearing should be classified as original swaps.\35\ LCH
commented that the definition of original swap is sufficiently clear
and complete.\36\ ISDA requested clarification on guidance issued by
the Commission's Divisions of Clearing and Risk and Market
Oversight,\37\ specifically as to whether there is an original swap
associated with CDS Clearing-Related Swaps that are created through a
firm or forced trade process.\38\ EEI/EPSA sought clarification from
the Commission that the definition of original swap includes both off-
facility swaps that are submitted for clearing, rejected, then
resubmitted and accepted for clearing, and swaps that are not intended
to be cleared when executed but are cleared at some point subsequent to
execution.\39\
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\35\ See ISDA Oct. 30, 2015 Letter, at 3.
\36\ See LCH Oct. 30, 2015 Letter, at 2.
\37\ See CFTC Letter No. 15-51 (Sept. 18, 2015).
\38\ ISDA also commented that it is not clear whether the
associated clearing swaps are publicly reportable swap transactions
for Part 43 purposes. See ISDA Oct. 30, 2015 Letter, at 3.
\39\ See EEI/EPSA Oct. 30, 2015 Letter, at 3.
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4. Final Rule
Having reviewed all relevant comments, the Commission has
determined to adopt the definitions as proposed in the NPRM. The
Commission has noted the comments received from market participants on
the limitation of ``derivatives clearing organization'' to DCOs
registered with the Commission. The Commission notes that, as of the
date of this release, it has granted exemptive relief to four non-U.S.
central counterparties from registering as a DCO with the Commission,
under section 5b(h) of the CEA, pursuant to Commission Orders (``DCO
Exemptive Orders'').\40\ The DCO Exemptive Orders include reporting
obligations that are consistent with those imposed on registered DCOs
under amended part 45.\41\ Therefore, the Commission believes that it
is sufficient for the obligations on derivatives clearing organizations
in part 45 to apply only to registered DCOs and, as a result, the
definition of ``derivatives clearing organization'' under amended
regulation 45.1 will cover only registered DCOs, as proposed.
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\40\ As of the date of this final release, the Commission has
issued DCO Exemptive Orders to ASX Clear (Futures) Pty Ltd.
(``ASX''), Japan Securities Clearing Corp., Korea Exchange Inc., and
OTC Clear Hong Kong Ltd. (``OTC Clear''). The Commission amended
ASX's DCO Exemptive Order on January 28, 2016 to require ASX to
report the termination of any swap accepted for clearing by ASX to
the SDR to which the original swap was reported.
\41\ The Commission also notes ISDA's comment concerning
entities that are in the process of registering as a DCO. Because
there is no temporary or provisional registration of DCOs, such
entities should not be entering into swaps that must be reported
under part 45 without full registration.
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The Commission notes general support for the definition of
``clearing swap.'' The Commission notes that the newly-defined term
``clearing swap'' would include any swap to which the DCO is a
counterparty, regardless of whether such swap is replacing an original
swap.\42\ While a cleared swap transaction generally comprises an
original swap that is terminated upon novation and the equal and
opposite swaps that replace it, the Commission is aware of certain
circumstances in which a cleared swap transaction may not involve the
replacement of an original swap.\43\ Accordingly, the revised
definition of ``clearing swap'' is intended to encompass: (1) Swaps to
which the DCO is a counterparty and that replace an original swap
(i.e., swaps commonly known as betas and gammas) and (2) all other
swaps to which the DCO is a counterparty (even if such swap does not
replace an original swap).
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\42\ The Commission has noted LCH's request for guidance
concerning reporting clearing swaps under the principal model of
clearing more commonly used outside of the United States. The
Commission declines to include such guidance at this time, but would
note that this issue of reporting principal versus agency model
clearing swaps is under consideration as part of the Technical
Specifications Request for Comment issued by the Commission's Office
of Data and Technology and the Division of Market Oversight on
December 22, 2015 relating to draft technical specifications for
certain swap data elements (``Technical Specifications Request for
Comment''). See Draft Technical Specifications for Certain Swap Data
Elements, Request for Comment (Dec. 22, 2015), available at http://www.cftc.gov/idc/groups/public/@newsroom/documents/file/specificationsswapdata122215.pdf.
\43\ For example, in the preamble to the part 39 adopting
release, the Commission noted that ``open offer'' systems are
acceptable under Sec. 39.12(b)(6), stating that: Effectively, under
an open offer system there is no ``original'' swap between executing
parties that needs to be novated; the swap that is created upon
execution is between the DCO and the clearing member, acting either
as principal or agent. Derivatives Clearing Organization General
Provisions and Core Principles, Final Rule 76 FR 69334, 69361 (Nov.
8, 2011).
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[[Page 41740]]
The Commission also notes the broad support for the newly-defined
term ``original swap.'' \44\ In addressing ISDA's request for
clarification on firm or forced trades at the DCO, the Commission notes
that guidance from its Divisions of Clearing and Risk and Market
Oversight states that swaps arising out of a DCO's firm or forced trade
process would constitute ``clearing swaps.'' \45\ The Divisions'
guidance also states that DCOs should be the reporting counterparty of
such swaps.
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\44\ See ISDA Oct. 30, 2015 Letter, at 3; LCH Oct. 30, 2015
Letter, at 2.
\45\ CFTC Letter No. 15-51 (Sept. 18, 2015).
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The proposed definition of original swap will provide clarity with
respect to certain continuation data reporting requirements for such
swaps by tying such obligations to a specific point in time in the life
of a swap that is either intended to be submitted to a DCO for clearing
at the time of execution, or that is not intended to be cleared at the
time of execution but is later submitted to a DCO for clearing. The
Commission notes that under the proposed definition, a swap that is
submitted to a DCO for clearing can become an original swap by virtue
of the DCO's acceptance of such swap for clearing, irrespective of: (1)
Whether such swap is executed on or pursuant to the rules of a SEF or
DCM or off-facility; (2) whether or not such swap is subject to the
clearing requirement; and (3) whether such swap is intended to be
cleared at the time of execution or not intended to be cleared at the
time of execution, but subsequently submitted to a DCO for
clearing.\46\
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\46\ See 17 CFR 39.12(b)(6). Clearing swaps would not be
executed on or pursuant to the rules of a SEF or DCM as such swaps
are created pursuant to the rules of a DCO.
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In addressing EEI/EPSA's comment on whether the term ``original
swaps'' would include off-facility swaps rejected and then resubmitted
for clearing, or swaps not intended to be cleared at execution but
subsequently submitted for clearing, the Commission notes that a swap
becomes an ``original swap'' once it is accepted for clearing by a DCO.
The definition would apply regardless of whether the swap had
previously been rejected for clearing, or whether it was not intended
to be cleared at the time of execution.
B. Swap Data Reporting: Creation Data--Amendments to Sec. 45.3
1. Existing Sec. 45.3
Regulation 45.3 requires reporting to an SDR of two types of
``creation data'' generated in connection with a swap's creation:
``primary economic terms data'' (``PET data'') and ``confirmation
data.'' Additionally, Sec. 45.3 governs what creation data must be
reported, who must report it, and deadlines for its reporting.
The swap data reporting requirements under Sec. 45.3 concerning
both PET data and confirmation data differ for reporting counterparties
and entities depending on whether the swap is executed on or pursuant
to the rules of a SEF or DCM (Sec. 45.3(a)), is subject to mandatory
clearing and executed off-facility (Sec. 45.3(b)), or is not subject
to mandatory clearing and executed off-facility (Sec. 45.3(c) and
(d)). Regulation 45.3 also addresses specific creation data reporting
requirements in circumstances where a swap is accepted for clearing by
a DCO,\47\ including the excusal of the reporting counterparty from
reporting creation data in certain circumstances.\48\
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\47\ See 17 CFR 45.3(a)(2), (b)(2), (c)(1)(ii), (c)(2)(ii), and
(d)(2).
\48\ See 17 CFR 45.3(b)(1), (c)(1)(i), (c)(2)(i), and (d)(1).
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2. Proposed Amendments to Sec. 45.3
As noted above, the Commission has observed how the part 45
regulations function in practice with respect to swaps that are
cleared. While CEA section 2(a)(13)(G) requires each swap (whether
cleared or uncleared) to be reported to a registered SDR, the
Commission believes that the interplay between the Sec. 45.3 reporting
requirements applicable to SEFs, DCMs and reporting counterparties, and
the reporting requirements applicable to DCOs, should be clarified in
the context of a cleared swap transaction. Accordingly, the Commission
proposed several amendments to Sec. 45.3 to better delineate the
creation data reporting requirements associated with each swap involved
in a cleared swap transaction.
i. Proposed Revised References to Clearing Requirement Exceptions and
Exemptions
References to the end-user exception to the swap clearing
requirement set forth in section 2(h)(7) of the CEA are included in
existing Sec. Sec. 45.3 and 45.8. Following the publication of the
Final Part 45 Rulemaking, the Commission codified the end-user
exception in Sec. 50.50 and published two exemptions to the swap
clearing requirement: The inter-affiliate exemption in Sec. 50.52, and
the financial cooperative exemption in Sec. 50.51. Therefore, the
Commission proposed revisions to the introductory language of Sec.
45.3, Sec. Sec. 45.3(b)-(d), and 45.8(h)(1)(vi) to reflect that
exceptions to, and exemptions from, the clearing requirement are now
codified in part 50 of the Commission's regulations.\49\
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\49\ See 80 FR 52544, 52548.
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ii. Proposed Addition of Sec. 45.3(e)--Clearing Swaps
Paragraphs (a)-(d) of Sec. 45.3 govern creation data reporting in
connection with swaps executed on or pursuant to the rules of a SEF or
DCM and for off-facility swaps, but do not separately address creation
data reporting for swaps created through the clearing process by a DCO
(i.e., clearing swaps). Accordingly, the Commission proposed
renumbering existing paragraph (e) (Allocations) of Sec. 45.3 as
paragraph (f), and adding new paragraph (e) to Sec. 45.3, which will
exclusively govern creation data reporting requirements for clearing
swaps. The Commission also proposed revising the introductory language
of Sec. 45.3 to clarify that paragraphs (a)-(d) apply to all swaps
except clearing swaps, while paragraph (e) applies to clearing
swaps.\50\ The Commission did not propose to change the existing
requirements for who reports creation data for those swaps that become
original swaps. Creation data for such swaps will continue to be
reported by the reporting counterparty, as determined pursuant to Sec.
45.8, or by the SEF/DCM in the case of on-facility swaps.
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\50\ See 80 FR 52544, 52548-49.
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Under the proposed revisions to Sec. 45.3(e), a DCO would be
required as reporting counterparty under new Sec. 45.8(i) \51\ to
report all required swap creation data for each clearing swap, either
as soon as technologically practicable after an original swap is
accepted by the DCO for clearing (in the event that the clearing swap
replaced an original swap), or as soon as technologically practicable
after execution of a clearing swap (in the event that the clearing swap
does not replace an original swap). Additionally, under the proposed
revisions to Sec. 45.3(e), required swap creation data for clearing
swaps must be provided to a registered SDR electronically by the DCO
and must include all PET data and all confirmation data for each
clearing swap.
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\51\ The Commission proposed adding Sec. 45.8(i), which
establishes the DCO as the reporting counterparty for all clearing
swaps. This change is discussed in greater detail in Section II.E.
of this release. The Commission also proposed conforming amendments
to Sec. 45.4(b)(1) and (2) to add the phrase ``as reporting
counterparty'' after ``derivatives clearing organization'' to make
clear that the DCO will be the reporting counterparty for purposes
of those provisions. See Section II.C.
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As noted above, CEA section 2(a)(13)(G) \52\ requires each swap
[[Page 41741]]
(whether cleared or uncleared) to be reported to a registered SDR.
Proposed revisions to paragraphs (a)-(d) and new paragraph (e) of Sec.
45.3 will thus cover creation data reporting requirements for all
swaps: Revised Sec. 45.3(a) applies to each swap executed on or
pursuant to the rules of a SEF or DCM, revised Sec. 45.3(b)-(d)
applies to ``all off-facility swaps,'' and proposed new Sec. 45.3(e)
would apply to clearing swaps. The proposed amendments to Sec.
45.3(a)-(d) would thus exclude clearing swaps. Under the proposed
amendments to Sec. 45.3, a SEF/DCM or counterparty other than the DCO
will not have swap data reporting obligations with respect to clearing
swaps. Additionally, revised Sec. 45.3(a)-(d) will govern the creation
data reporting requirements for swaps, including swaps commonly known
as ``alpha'' swaps, regardless of whether they later become original
swaps by virtue of their acceptance for clearing.\53\
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\52\ 7 U.S.C. 2(a)(13)(G).
\53\ Swaps created by a DCO under Sec. 39.12(b)(6) are a type
of clearing swap as defined in this release, and thus could not be
executed on or pursuant to the rules of a SEF or DCM. Additionally,
a DCO would not report creation data for a swap that was executed on
or pursuant to the rules of a SEF or DCM, or for an off-facility
swap that is submitted to the DCO for clearing, because, under Sec.
45.3(a)-(d), the SEF/DCM or reporting counterparty would be
responsible for reporting creation data for such swaps after
execution. Under the revisions to Sec. 45.3, a DCO will not have
creation data reporting obligations for swaps that are not clearing
swaps. The Commission notes that the revisions to Sec. 45.3 in this
release are consistent with the prior no action relief and guidance
issued by Commission staff relating to firm or forced trades at
DCOs. See CFTC Letter No. 15-51 (Sept. 18, 2015); CFTC No-Action
Letter No. 14-119 (Sept. 29, 2014).
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iii. Proposed Removal of Provisions
As noted above, several provisions of existing Sec. 45.3 impose
certain creation data reporting requirements on a DCO in circumstances
where a swap is accepted for clearing by a DCO. To ensure consistency
with Sec. 39.12(b)(6), the Commission proposed to remove these
creation data reporting provisions (current Sec. Sec. 45.3(a)(2),\54\
(b)(2), (c)(1)(ii), (c)(2)(ii), and (d)(2)), and replacing them with
new proposed Sec. 45.3(e), as described above.\55\
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\54\ The Commission is also renumbering Sec. 45.3(a)(1) as
Sec. 45.3(a).
\55\ See 80 FR 52544, 52548-49.
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Additionally, the Commission proposed to remove portions of
Sec. Sec. 45.3(b)(1), (c)(1)(i), (c)(2)(i), and (d)(1).\56\
Previously, where both a DCO and reporting counterparty had obligations
under Sec. 45.3 for reporting creation data for the same swap, the
reporting counterparty would be excused from reporting creation data if
the swap is accepted for clearing before any PET data is reported by
the reporting counterparty. Under the proposed regulation, these
excusal provisions are no longer necessary because the proposed rules
require DCOs to report creation data only for clearing swaps, and not
for swaps accepted for clearing (i.e., original swaps).
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\56\ See 80 FR 52544, 52549.
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iv. Proposed Removal of Certain Confirmation Data Reporting
Requirements
Existing Sec. Sec. 45.3(a)-(d) requires the SEF/DCM (under Sec.
45.3(a)) or the reporting counterparty (under Sec. Sec. 45.3(b)-(d))
to report both PET and confirmation data in order to comply with
creation data reporting obligations. The Commission believes that the
confirmation data requirements for clearing swaps in new Sec. 45.3(e)
will provide the Commission with a sufficient representation of the
confirmation data for a cleared swap transaction, because the original
swap is extinguished upon acceptance for clearing and replaced by equal
and opposite clearing swaps.
Accordingly, for swaps that are intended to be submitted to a DCO
for clearing at the time of execution, the Commission proposed to amend
Sec. Sec. 45.3(a), (b), (c)(1)(iii), (c)(2)(iii), and (d)(2) to remove
the existing confirmation data reporting requirements.\57\
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\57\ See 80 FR 52544, 52549-50.
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v. Proposed Revisions to Sec. 45.3(f)--Allocations
The Commission proposed renumbering existing Sec. 45.3(e), which
governs creation data reporting for swaps involving allocation, as
Sec. 45.3(f).\58\ The Commission also proposed replacing the phrase
``original swap transaction'' in Sec. Sec. 45.3(f)(2) and
45.8(h)(1)(vii)(D), and in the PET data tables found in appendix 1 to
part 45, with ``initial swap transaction'' to avoid confusion with the
term ``original swap,'' which is defined in Sec. 45.1.\59\
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\58\ The Commission also proposed renumbering Sec. 45.3
paragraphs (f), (g), and (h) as paragraphs (g), (h), and (i),
respectively.
\59\ See 80 FR 52544, 52550.
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vi. Proposed Addition of Sec. 45.3(j): Choice of SDR
The Commission proposed adding Sec. 45.3(j) in order to explicitly
establish which entity has the obligation to choose the SDR to which
the required swap creation data is reported.\60\ New Sec. 45.3(j)
provides that: For swaps executed on or pursuant to the rules of a SEF
or DCM (including swaps that may later become original swaps), the SEF
or DCM has the obligation to choose the SDR; for all other swaps
(including off-facility swaps and/or clearing swaps) the reporting
counterparty (as determined in Sec. 45.8) will have the obligation to
choose the SDR.\61\
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\60\ See 80 FR 52544, 52550.
\61\ Regulation 45.3(j) generally reflects the language included
in the preamble to the original Final Part 45 Rulemaking, which
provides 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. See 77 FR 2136, 2146 (Jan. 13, 2012). Under
the new rule, the DCO will have the obligation to choose the SDR for
clearing swaps.
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Under the proposed addition of Sec. 45.3(j) and the proposed
revisions to Sec. 45.10,\62\ the entity with the obligation to report
the initial required swap creation data will select the SDR to which
all subsequent swap creation and continuation data for that swap will
be reported by choosing the SDR to which such initial required swap
creation data is reported. Thereafter, all required swap creation data
and all required swap continuation data for a given swap will be
reported to the same SDR used by the registered entity or
counterparty.\63\
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\62\ Revisions to Sec. 45.10 are discussed in Section II.F
below. As will be discussed in Section II.F below, by operation of
Sec. 45.10, DCOs will be obligated to report all required
continuation data for original swaps to the registered SDR (as
selected by the SEF, DCM, or reporting counterparty pursuant to
proposed Sec. 45.3(j)) to which required creation data for the swap
was reported pursuant to Sec. Sec. 45.3(a)-(d).
\63\ See Proposed Sec. 45.10. See also Section II.F.2, infra.
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Finally, the Commission notes that it is aware of certain
situations wherein SEFs, DCMs and reporting counterparties for off-
facility swap transactions may report the part 43 data for a swap to an
SDR prior to reporting the part 45 required creation data for the same
swap. In such situations, the registered entity or reporting
counterparty has effectively chosen the SDR for the swap prior to
submitting the part 45 data, since, pursuant to revisions to Sec.
45.10 adopted in this release, all swap data reported pursuant to parts
43 and 45 for a given swap is required to be reported to a single
SDR.\64\ For example, if a swap is executed on or pursuant to the rules
of SEF A, and SEF A immediately upon execution reports the part 43 data
to SDR B, prior to reporting part 45 data, SEF A has effectively chosen
SDR B as the SDR for all required creation data for the swap, because
revised Sec. 45.10 requires that all part 43 and 45 swap data for a
given swap must be reported to a single SDR.\65\ Accordingly, in this
example,
[[Page 41742]]
part 45 required creation data must be reported to SDR B.
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\64\ Id.
\65\ Id.
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vii. Proposed Removal of Expired Compliance Date References
The Commission proposed to remove the references to the expired
compliance dates in Sec. Sec. 45.3(b)(1)(i), (b)(1)(ii), (b)(2),
(b)(2)(ii), (c)(1)(i)(A), (c)(1)(i)(B), (c)(2)(i)(A), (c)(2)(i)(B),
(d)(1), and (d)(3), and in the introductory language to Sec. 45.3.\66\
These references to phase-in compliance dates are no longer necessary
as they have expired.
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\66\ See 80 FR 52544, 52550.
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3. Comments
The Commission received a number of comments in response to its
proposed revisions to Sec. 45.3. Many of these comments focused on the
proposed reporting of creation data associated with clearing swaps and
related reporting obligations concerning original swaps. Other comments
addressed the new choice of SDR provision set out in Sec. 45.3(j).
And, finally, some commenters discussed the new clearing swaps rules in
the context of principal model clearing.\67\
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\67\ FSR requested that the Commission codify no action relief
issued by the Division of Clearing and Risk and the Division of
Market Oversight on April 5, 2013, providing relief to non-SD/MSPs
from reporting requirements for swaps between wholly-owned
affiliates. See FSR Oct. 30, 2015 Letter, at 5 (referencing CFTC No-
Action Letter No. 13-09 (Apr. 5, 2013)). This request is beyond the
scope of the NPRM and will not be addressed in this release.
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i. Creation Data Reporting for Clearing Swaps
With respect to the reporting of clearing swaps, commenters
generally supported the Commission's proposal to require DCOs to report
creation data for clearing swaps.\68\ FSR and CMC agreed that the DCO
is in the best position to report creation data for clearing swaps.\69\
ISDA,\70\ DTCC, and LCH also noted support for requiring DCOs to report
data for clearing swaps.\71\ CME likewise supported the requirement for
DCOs to report creation data for clearing swaps, recommending that the
DCO be assigned all reporting obligations for original and clearing
swaps.\72\ Markit recommended an alternative approach whereby the
reporting counterparty to the original swap would be permitted to
choose whether it reports creation data for the clearing swaps, while
allowing the reporting counterparty to delegate the reporting
responsibilities to a DCO.\73\
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\68\ See FSR Oct. 30, 2015 Letter, at 2; CMC Oct. 30, 2015
Letter, at 2; ISDA Oct. 30, 2015 Letter, at 4; LCH Oct. 30, 2015
Letter, at 2; DTCC Oct. 30, 2015 Letter, at 3.
\69\ See FSR Oct. 30, 2015 Letter, at 2; CMC Oct. 30, 2015
Letter, at 2.
\70\ ISDA also commented that currently not all DCOs report
clearing swaps in a consistent manner in instances where an
affiliate of a clearing member enters into a swap that is
subsequently cleared through its affiliated clearing member. ISDA
suggested that the Commission make clear that the submission of a
swap for clearing should not result in a change in the name of the
counterparty that is reported to an SDR and that the report
submitted by the DCO for the clearing swap has to reflect the
relevant affiliate and not the clearing member as the legal
counterparty to the clearing swap with the derivatives clearing
organization. See ISDA Oct. 30, 2015 Letter, at 12. While noting
this comment, the Commission declines to address this as beyond the
scope of the NPRM.
\71\ See ISDA Oct. 30, 2015 Letter, at 4; DTCC Oct. 30, 2015
Letter, at 3 (distinguishing between reporting obligations and the
ability to select the SDR to which data related to clearing swaps is
reported); LCH Oct. 30, 2015 Letter, at 2.
\72\ See CME Oct. 30 2015 Letter, at 3.
\73\ See Markit Oct. 30 2015 Letter, at 5.
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LCH requested that the Commission change references to ``execution
of a clearing swap'' in proposed Sec. 45.3(e) to ``creation of a
clearing swap'' in order to more clearly address compression events.
LCH also suggested cross-referencing re-numbered Sec. 45.3(f) to new
Sec. 45.3(e), to cover situations where block trades are allocated
post-clearing.\74\
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\74\ See LCH Oct. 30, 2015 Letter, at 2.
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ii. Removal of Confirmation Data Reporting Requirements for Intended To
Be Cleared Swaps
With respect to swaps that become original swaps, commenters were
generally supportive of the Commission's proposal to eliminate the
requirement for reporting confirmation data on intended to be cleared
swaps.\75\ FSR commented that the reporting of confirmation data for
clearing swaps should provide sufficient confirmation data for a
cleared swap transaction.\76\ Markit, on the other hand, commented that
eliminating the requirement for reporting confirmation data for swaps
that are intended to be cleared, while still maintaining the
requirement to report primary economic terms data, will not benefit
reporting workflows and that there is little incremental cost to report
confirmation data as reporting systems are set up to capture that
information already.\77\
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\75\ See FSR Oct. 30, 2015 Letter, at 3; ISDA Oct. 30, 2015
Letter, at 4; EEI/EPSA Oct. 30, 2015 Letter, at 3.
\76\ See FSR Oct. 30, 2015 Letter, at 3.
\77\ See Markit Oct. 30, 2015 Letter, at 2-3.
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iii. Creation Data Reporting for Swaps That Become Original Swaps
While the proposed amendments to part 45, aside from the removal of
the excusal provisions noted above, do not change creation data
reporting requirements for swaps that become original swaps, several
commenters commented on which entity should be responsible for
reporting creation data for swaps that will become original swaps. Some
commenters suggested that if reporting of creation data for swaps that
become original swaps continues, the DCO, rather than the reporting
counterparty, should be responsible for reporting the creation data for
that swap.\78\ CME commented that assigning all the reporting
obligations for original and clearing swaps to the DCO is a better and
simpler way to address alpha swap reporting, and would eliminate the
need to reconcile original and clearing swaps across SDRs.\79\ CMC
similarly commented that DCOs are best positioned to report on swaps
that they accept or reject for clearing and should assume all reporting
obligations for cleared swaps, including all reporting of swaps that
are intended to be cleared.\80\ AIMA likewise suggested that if the
Commission continues to require the reporting of original swaps,
assigning the reporting obligations to the DCO will remove reporting
burdens and the risk of data fragmentation across SDRs.\81\
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\78\ See e.g., CME Oct. 30, 2015 Letter, at 2-3; CMC Oct. 30,
2015 Letter, at 2-3; AIMA Oct. 30, 2015 Letter, at 6; CEWG Oct. 30,
2015 Letter, at 3.
\79\ See CME Oct. 30, 2015 Letter, at 3.
\80\ See CMC Oct. 30, 2015 Letter, at 2.
\81\ See AIMA Oct. 30, 2015 Letter, at 6.
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Other commenters recommended that the Commission continue requiring
the reporting counterparty to report creation data for those swaps that
will become original swaps.\82\ LCH commented that the reporting
counterparty should always be a party to the transaction and therefore,
in the case of a swap that will become an original swap, the DCO would
not be better suited than the SEF, DCM, or reporting counterparty to
report the creation data.\83\ Eurex suggested that assigning the
reporting obligation of original swap creation data to the DCO may
present a timeliness issue depending on when the DCO receives the
necessary information from the counterparties.\84\ ISDA likewise agreed
that the obligation to report swaps that become original swaps should
remain with the reporting counterparty for that swap.\85\
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\82\ See ISDA Oct. 30, 2015 Letter, at 4; LCH Oct. 30, 2015
Letter, at 2; Eurex Oct. 30, 2015 Letter, at 4.
\83\ See LCH Oct. 30, 2015 Letter, at 2.
\84\ See Eurex Oct. 30, 2015 Letter, at 4.
\85\ ISDA also commented in support of the Commission's proposal
to remove the provisions in Sec. 45.3 that excused a reporting
counterparty from reporting creation data for a swap accepted for
clearing before the primary economic terms reporting deadline. See
ISDA Oct. 30, 2015 Letter, at 4.
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[[Page 41743]]
Some commenters suggested that the reporting of any creation data
for swaps that will become original swaps is unnecessary.\86\ AIMA
commented that eliminating reporting for swaps that are intended to be
cleared at the time of execution will significantly reduce complexity
in the reporting regime and streamline the reported data.\87\ AIMA also
commented that the Commission's proposed reporting approach for
original swaps will not reduce data fragmentation.\88\ Similarly, EEI/
EPSA suggested that there is little to no benefit to original swap
reporting for swaps that are intended to be cleared at the time of
execution and that counterparties should not be required to report any
creation data for such swaps.\89\ Other commenters, in response to the
IDWG Request for Comment, supported the continued reporting of creation
data for swaps that will become original swaps.\90\
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\86\ See AIMA Oct. 30, 2015 Letter, at 2-6; EEI/EPSA Oct. 30,
2015 Letter, at 3; CEWG Oct. 30, 2015 Letter, at 2.
\87\ See AIMA Oct. 30, 2015 Letter, at 3.
\88\ See AIMA Oct. 30, 2015 Letter, at 4 (noting that reporting
original swap creation data to one SDR and reporting clearing swap
data to a different SDR may undermine data quality for the
Commission's supervisory purposes).
\89\ See EEI/EPSA Oct. 30, 2015 Letter, at 3.
\90\ See NPRM, 80 FR 52544, 52549 at nn. 37-39 (citing DTCC May
27, 2014 Letter at 17-18; AFR May 27, 2014 Letter at 5; Markit May
27, 2014 Letter at 25; TR SEF May 27, 2014 Letter at 10).
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iv. Choice of SDR Provisions
The Commission received a number of comments on its proposal
regarding the selection of the SDR to which the required swap creation
data should be reported. Some commenters were supportive of the
Commission's proposed addition of Sec. 45.3(j) and proposed
modifications to Sec. 45.10 relating to the choice of the SDR for a
particular swap. As discussed below, other commenters suggested
modifications to the Commission's proposal and changes to the manner in
which the SDR is selected for a particular swap.
With respect to clearing swaps, commenters were divided as to which
entity should have the ability to select the SDR. FSR, LCH, and ISDA
all supported allowing the DCO to select the SDR for purposes of
reporting creation data for clearing swaps, as the DCO has the sole
obligation to report clearing swaps.\91\ CME and LedgerX similarly
supported the proposal to allow DCOs to select the SDR for clearing
swaps.\92\ CME supports the Commission's proposal to assign all
clearing swap reporting obligations, and the right to select the SDR to
which it reports, to the DCO. CME also recommended that the Commission
assign all original swap reporting obligations, and associated SDR
selection rights, to the DCO, which would, in CME's opinion, ensure
that all data for a cleared swap transaction is housed in the same SDR,
thereby avoiding data fragmentation.\93\
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\91\ See FSR Oct. 30, 2015 Letter, at 2; LCH Oct. 30, 2015
Letter, at 2; ISDA Oct. 30, 2015 Letter, at 4.
\92\ See CME Oct. 30, 2015 Letter, at 1-2; LedgerX Oct. 30, 2015
Letter, at 1.
\93\ See CME Oct. 30, 2015 Letter, at 2-3.
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Other commenters suggested that the reporting counterparty to the
swap that becomes the original swap should select the SDR to which the
clearing swaps are reported. DTCC commented that the DCO for a clearing
swap should have the obligation to report the clearing swap to the SDR
selected by the reporting counterparty to the swap that became the
original swap, or selected by the SEF or DCM for on-facility swaps.\94\
DTCC commented that this ``single SDR approach'' would be vital for
providing a full audit trail and the ability to efficiently aggregate
data.\95\ DTCC also commented that allowing the DCO to select the SDR
for clearing swaps creates a competition problem due to vertically
integrated SDRs and DCOs.\96\ DTCC explained that permitting a DCO to
report to an affiliated SDR when the original swap data had been
reported to another SDR, allows DCOs to bundle services and further
entrenches DCOs' vertical integration of trade execution, clearing, and
data reporting.\97\ Markit recommended that the Commission allow the
reporting counterparty to the swap that becomes the original swap to
select the SDR to which the clearing swap is reported, while also
allowing that reporting counterparty to delegate the selection of the
swap data repository to the DCO. Markit commented that this
counterparty choice approach would result in a more competitive DCO
marketplace.\98\
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\94\ See DTCC Oct. 30, 2015 Letter, at 3.
\95\ See id. at 4.
\96\ See id. at 7.
\97\ See id.
\98\ See Markit Oct. 30, 2015 Letter, at 5.
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Other commenters suggested that, for on-facility swaps that are not
cleared by a DCO, the party responsible for reporting continuation data
for the swap should not be bound by the SEF or DCM's choice of SDR for
the reporting of creation data.\99\ ISDA commented that in such cases
the selection of the SDR should not be assigned to the entity that has
the first obligation to report, but rather should be assigned to the
entity that has the longest, recurring, or most frequent obligation to
report.\100\
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\99\ See ISDA Oct. 30, 2015 Letter, at 4-5; JBA Oct. 30, 2015
Letter, at 1.
\100\ See ISDA Oct. 30, 2015 Letter, at 4-5.
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v. Reporting of Principal Model Cleared Swaps
Finally, a few comments focused on swaps that are cleared through a
principal, rather than agency, model. Eurex commented that it is not
clear under the proposal which entity is to be reported as the
counterparty to the DCO with regard to a clearing swap in the principal
model.\101\
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\101\ See Eurex Oct. 30, 2015 Letter, at 9; see also FSR Oct.
30, 2015 Letter, at 5.
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4. Final Rule
The Commission has considered the comments that it received in
response to the proposed changes to Sec. 45.3. As discussed above,
some of the proposed changes to Sec. 45.3 received widespread support
among commenters, while other proposed changes received both support
and objection from commenters. The Commission has decided to adopt the
changes to Sec. 45.3 as proposed in the NPRM for the following
reasons.\102\
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\102\ The Commission has made one non-substantive conforming
change to final Sec. 45.3(b), changing the phrase ``exception or
exemption from the clearing requirement'' to ``exception to, or
exemption from, the clearing requirement,'' to make this provision
consistent with other uses of the phrase throughout Sec. 45.3.
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i. Creation Data Reporting for Clearing Swaps
As discussed above, the Commission's proposal to require DCOs to
report creation data for clearing swaps received support from
commenters.\103\ The Commission agrees with these commenters that the
DCO is in the best position to report creation data for clearing swaps.
As for Markit's proposed counterparty choice alternative, the
Commission recognizes the flexibility that Markit's proposal could
offer parties to the clearing swap. However, the Commission believes
Markit's proposal would likely result in additional complexity in the
reporting process and could obscure, to the Commission, which entity
has the ultimate responsibility for reporting the clearing swap. After
considering the comments received, the Commission continues to believe
that the DCO is the entity with the easiest and quickest access to full
information with respect to PET data and confirmation data for clearing
swaps. Commission regulation
[[Page 41744]]
Sec. 39.12(b)(6) requires DCOs to have rules providing that, upon
acceptance of a swap by the DCO for clearing, the original swap is
extinguished and replaced by an equal and opposite swap between the DCO
and each clearing member acting as either principal for a house trade
or agent for a customer trade.\104\ Because the DCO must replace an
original swap with clearing swaps when accepting the original swap for
clearing, the Commission believes that the DCO should be the entity
that reports creation data for clearing swaps, and adopts its proposal
to require DCOs to report creation data for clearing swaps.
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\103\ See FSR Oct. 30, 2015 Letter, at 2; CMC Oct. 30, 2015
Letter, at 2; ISDA Oct. 30, 2015 Letter, at 4; DTCC Oct. 30, 2015
Letter, at 3; LCH Oct. 30, 2015 Letter, at 2.
\104\ See 17 CFR 39.12(b)(6).
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The Commission notes LCH's comments that, when establishing the
timing requirement for reporting clearing swaps that do not replace
original swaps in Sec. 45.3(e), the term ``creation of a clearing
swap'' may better capture compression events than ``execution of a
clearing swap.'' The Commission believes that the phrase ``execution of
a clearing swap,'' for purposes of part 45, is sufficiently clear to
cover reporting obligations for all clearing swaps that do not replace
original swaps. The Commission also believes that the adopted reporting
requirements for clearing swaps would cover post-clearing allocations
of block trades raised by LCH. If a block trade is allocated after
clearing, then any allocations of that block would have a DCO as one
counterparty. Thus, such post-allocation swaps would be clearing swaps
and must be reported by the DCO pursuant to Sec. 45.3(e).
ii. Removal of Confirmation Data Reporting Requirements for Intended To
Be Cleared Swaps
Under the new rules, SEFs/DCMs and reporting counterparties will
continue to be required to report PET data as part of their creation
data reporting, but will be required to report confirmation data only
for swaps that, at the time of execution, are not intended to be
submitted to a DCO for clearing. For swaps that, at the time of
execution, are intended to be submitted to a DCO for clearing, SEFs/
DCMs and reporting counterparties will not be required to report
confirmation data. If the swap is accepted for clearing by a DCO, the
DCO will be required to report confirmation data for the clearing swaps
pursuant to proposed Sec. 45.3(e).\105\
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\105\ The Commission notes that this change only impacts certain
confirmation data reporting and recordkeeping requirements in Sec.
45.3, and does not alter existing obligations to generate or
exchange confirmations under other Commission regulations.
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With respect to swaps that will become original swaps, the
Commission received widespread support of the proposed elimination of
the requirement to report confirmation data associated with these
swaps.\106\ One commenter did suggest that there is little incremental
cost to continuing to require reporting of confirmation data for swaps
that will become original swaps.\107\ However, the Commission continues
to believe that the confirmation data requirements for clearing swaps
provide the Commission with a sufficient representation of the
confirmation data for a cleared swap transaction, as the original swap
is extinguished upon acceptance for clearing and replaced by equal and
opposite clearing swaps. Accordingly, the Commission is adopting its
proposal to remove the confirmation data reporting requirement for
swaps that are intended to be cleared at the time of execution.
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\106\ See FSR Oct. 30, 2015 Letter, at 3; ISDA Oct. 30, 2015
Letter, at 4; EEI/EPSA Oct. 30, 2015 Letter, at 3.
\107\ See Markit Oct. 30, 2015 Letter, at 2-3.
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iii. Creation Data Reporting for Swaps That Become Original Swaps
With the exception of the removal of excusal provisions, the
Commission has not proposed to change the existing requirement to
report creation data for swaps that will become original swaps. As
noted in the NPRM, CEA section 2(a)(13)(G) requires each swap, whether
cleared or uncleared, to be reported to a registered SDR.\108\ The
Commission did, however, receive some comments urging the Commission to
eliminate the existing requirement to report swaps that will become
original swaps. The Commission also received, in response to the IDWG
Request for Comment, comments in support of continued reporting of
creation data for swaps that will become original swaps.\109\
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\108\ See 80 FR 52544, 52548.
\109\ See NPRM, 80 FR 52544, 52549, nn. 37-39 (citing DTCC May
27, 2014 Letter at 17-18; AFR May 27, 2014 Letter at 5; Markit May
27, 2014 Letter at 25; TR SEF May 27, 2014 Letter at 10).
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Having reviewed the comments regarding reporting of swaps that
become original swaps, the Commission continues to interpret CEA
section 2(a)(13)(G) as requiring all swaps to be reported, which would
include swaps that become original swaps as distinct swaps from
resulting clearing swaps under Sec. 39.12(b)(6). Further, the
Commission continues to believe that original swaps contain essential
information regarding the origins of cleared swap transactions for
market surveillance and audit-trail purposes, including but not limited
to the identity of the original counterparties, the execution venue,
and the timestamp of the original transaction between the original
counterparties. Such essential information could not be easily
determined if only resulting clearing swaps were to be reported. The
Commission's ability to trace the history of a cleared swap transaction
from execution between the original counterparties to clearing novation
relies on this information. The Commission also notes that the
continued reporting of swaps that become original swaps is consistent
with the SEC's proposed Regulation SBSR--Reporting and Dissemination of
Security-Based Swap Information.\110\ Finally, the continued reporting
of original swaps, including original swap terminations, will aid the
Commission's ability to analyze cleared swap activity and review swap
activity for compliance with the clearing requirement. For these
reasons the Commission, in this final rule, continues to require
reporting of swaps that will become original swaps.
---------------------------------------------------------------------------
\110\ See Regulation SBSR, 80 FR 14740.
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The Commission received divided comments as to which entity should
be responsible for reporting creation data for those swaps that will
become original swaps. Some commenters suggested that the DCO should be
the reporting counterparty,\111\ while other commenters recommended
that the reporting counterparty report creation data for those swaps
that will become original swaps.\112\ After careful consideration of
the comments received on this issue, the Commission believes that the
creation data reporting requirements for those swaps that will become
original swaps should remain as they currently exist, aside from the
removal of excusal provisions noted above. The Commission recognizes
that reporting counterparties and registered entities have invested
substantial time and resources to report swaps (both cleared and not
cleared) to SDRs and that DCOs have invested substantial resources to
report clearing swaps. The Commission believes that maintaining the
existing requirement for the reporting counterparty, rather than for
the DCO, to report creation data of the swap that will become an
original swap will help to prevent disruption of established industry
workflows. The Commission also continues to believe that the SEF/DCM or
reporting
[[Page 41745]]
counterparty has the easiest and fastest access to initial creation
data for swaps that become original swaps.
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\111\ See CME Oct. 30, 2015 Letter, at 2-3; CMC Oct. 30, 2015
Letter, at 2-3; AIMA Oct. 30, 2015 Letter, at 6; CEWG Oct. 30, 2015
Letter, at 2.
\112\ See ISDA Oct. 30, 2015 Letter, at 4; LCH Oct. 30, 2015
Letter, at 2; Eurex Oct. 30, 2015 Letter, at 4.
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As discussed in its Final Part 45 Rulemaking, the Commission
believes that requiring all swaps that become original swaps to be
reported only to SDRs chosen by the DCO of the resulting clearing swaps
could create an uneven playing field between DCO affiliated SDRs and
non-DCO affiliated SDRs.\113\ Likewise, if the reporting counterparty
or SEF/DCM were to report creation data, or select the SDR to which
such data is reported, an SDR in which swap dealers have an ownership
interest may obtain a dominant market position. This Final Rule avoids
injecting the Commission into a market decision by maintaining the
requirement that creation data for swaps that become original swaps is
reported by the reporting counterparty for that swap, or the SEF/DCM,
and the resulting clearing swaps are reported by the DCO.
---------------------------------------------------------------------------
\113\ See 77 FR 2136, 2149.
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The Commission acknowledges the data fragmentation concerns raised
by those that recommend DCOs report original swap creation data,
however, the Commission also recognizes that requiring the DCOs, rather
than the original reporting counterparty, to report original swap
creation data may also present challenges. For example, Eurex noted
that there could be a timeliness issue depending on when the DCO
receives necessary information from counterparties to report creation
data.\114\ The Commission also is concerned that, should DCOs report
original swaps, potential delays in clearing could delay real-time
swaps reporting pursuant to part 43. The Commission believes that
accurate and timely reporting of the required data fields by all
parties, in particular the clearing swap PET fields and data elements
specific to terminations of original swaps, will alleviate data
fragmentation concerns for those situations where the original swap and
clearing swaps are reported to different SDRs.
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\114\ See Eurex Oct. 30, 2015 Letter, at 4.
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iv. Choice of SDR Provisions
The Commission received a variety of comments on its proposed
addition of Sec. 45.3(j) and modifications to Sec. 45.10 regarding
the choice of the SDR for a particular swap. With respect to clearing
swaps, some commenters recommended that the DCO should select the
SDR,\115\ while other commenters suggested the reporting counterparty
to the original swap should select the SDR to which the clearing swap
must be reported.\116\ The Commission has considered these comments and
continues to believe, as discussed above, that placing the obligation
to choose the SDR on the registered entity or counterparty that is
required to first report the required swap creation data, rather than
on another entity, will result in more efficient data reporting.
Allowing the first entity to report data on a swap to choose the SDR
will allow reporting entities to select an SDR to which they have
established connections; giving another entity the ability to choose
the SDR could require the first reporting entities to connect to
multiple SDRs. The Commission also believes allowing the first
reporting registered entity or counterparty to choose the SDR will also
promote competition among SDRs to provide SDR services to a broad array
of reporting entities.
---------------------------------------------------------------------------
\115\ See FSR Oct. 30, 2015 Letter, at 2; LCH Oct. 30, 2015
Letter, at 2; ISDA Oct. 30, 2015 Letter, at 4; CME Oct. 30, 2015
Letter, at 2-3 (CME also suggested that the DCO select the SDR to
which original swaps are reported); LedgerX Oct. 30, 2015 Letter, at
1.
\116\ See DTCC Oct. 30, 2015 Letter, at 3; Markit Oct. 30, 2015
Letter, at 5 (Markit also suggested the counterparty have the option
to delegate the selection of the SDR to the DCO).
---------------------------------------------------------------------------
Requiring this method of SDR selection also avoids inserting anyone
other than a party to the swap (or facility where the transaction is
executed) into the decision as to how a registered entity or
counterparty fulfills its regulatory obligation to report initial
required swap creation data. As with the ``first-touch'' approach taken
with respect to the creation of USIs in part 45,\117\ the Commission
believes that the entity with the first reporting obligation should
select the SDR for that report. The Commission believes that this
method of SDR selection will avoid delays in real-time reporting for
part 43 purposes. If DCOs were to select the SDR for an original swap,
the DCO would not be in a position to make such selection until after a
swap was accepted for clearing. Any delays in clearing would translate
into delays in reporting for both part 43 real-time reporting and part
45 reporting.
---------------------------------------------------------------------------
\117\ See Final Part 45 Rulemaking, 77 FR 2136, 2158.
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The registered entity or counterparty that is required to report a
swap pursuant to Sec. 45.8 may select an SDR to which its
technological systems are most suited or to which it already has an
established relationship, providing for the efficient and accurate
reporting of swap data. The Commission notes that this Final Rule does
not prohibit a registered entity or counterparty from choosing an SDR
based on consideration of market preference or other factors, however,
the obligation to choose the SDR will rest solely with the registered
entity or counterparty set forth in amended Sec. 45.8. The Commission
recognizes that this may result in original swaps and clearing swaps
being reported to different SDRs, however, the Commission believes that
the required data fields, such as original swap USI included in
clearing swap reporting, and clearing swap USIs included in original
swap reporting, will allow the Commission to efficiently and accurately
link data across SDRs and perform its regulatory mandate.
The Commission has also noted ISDA's proposed alternative that the
entity with the ``longest, recurring, or most frequent obligation to
report'' be given choice of SDR. In particular, ISDA expressed concern
that market participants would be required, due to the made available
to trade mandate, to trade certain swaps at a particular SEF, and
therefore be required to report to that SEF's chosen SDR. However, the
Commission notes that any swaps made available to trade would be
subject to the clearing mandate. As discussed above, counterparties to
cleared, on-facility swaps would likely have no reporting
obligations.\118\ Therefore, the concern raised by ISDA would not
likely impact a large percentage of on-facility swaps. Moreover, ISDA
notes that its proposed alternative would require amending various
other provisions in part 45, including assignment of reporting
counterparty designation and USI creation. Additionally, the Commission
notes that the ``longest, recurring, or most frequent obligation to
report'' may be difficult to determine at the outset of a swap,
creating potential confusion as to who could select the SDR. Because
amended Sec. 45.3(j) codifies current industry practice,\119\ the
Commission believes the choice of SDR provisions adopted in this final
rule create the least disruption in the market while achieving the goal
of consistent and timely swaps reporting.
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\118\ See supra, n. 26, discussing reporting obligations for
counterparties to cleared, on-facility swaps.
\119\ See NPRM, 80 FR 52544, 52550.
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v. Reporting of Principal Model Clearing Swaps
The Commission has noted comments from Eurex on reporting of
clearing swaps under the principal clearing model. The Commission is
aware of issues surrounding the reporting of principal model clearing
swaps, but is
[[Page 41746]]
not providing further guidance at this time.
C. Swap Data Reporting: Continuation Data--Amendments to Sec. 45.4
1. Existing Sec. 45.4
Regulation 45.4 governs the reporting of swap continuation data to
an SDR during a swap's existence through its final termination or
expiration. This provision establishes the manner in which continuation
data, including life cycle event data or state data, and valuation
data,\120\ must be reported (Sec. 45.4(a)), and sets forth specific
continuation data reporting requirements for both cleared (Sec.
45.4(b)) and uncleared (Sec. 45.4(c)) swaps. For cleared swaps, Sec.
45.4(b) currently requires that life cycle event data or state data be
reported by the DCO, and that valuation data be reported by both the
DCO and by the reporting counterparty (if the reporting counterparty is
an SD or MSP).
---------------------------------------------------------------------------
\120\ ``Required swap continuation data'' is defined in Sec.
45.1 and includes ``life cycle event data'' or ``state data''
(depending on which reporting method is used) and ``valuation
data.'' Each of these data types is defined in Sec. 45.1. ``Life
cycle event data'' means all of the data elements necessary to fully
report any life cycle event. ``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. ``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 if applicable. 17 CFR 45.1.
---------------------------------------------------------------------------
For uncleared swaps, Sec. 45.4(c) requires the reporting
counterparty to report all required swap continuation data, including
life cycle event data or state data, and valuation data.
2. Proposed Amendments to Sec. 45.4
The Commission understands that Sec. 45.4 could be clarified
regarding continuation data reporting responsibilities for each of the
swaps involved in a cleared swap transaction. Accordingly, the
Commission proposed several amendments to Sec. 45.4 to better
delineate the continuation data reporting requirements associated with
each swap involved in a cleared swap transaction.\121\ In particular,
the Commission proposed conforming changes to existing Sec. 45.4(a),
revisions to existing Sec. 45.4(b) and to existing Sec. 45.4(c)
(proposed to be renumbered as Sec. 45.4(d)), and the addition of new
Sec. 45.4(c). Each proposed amendment is discussed in detail below.
---------------------------------------------------------------------------
\121\ See 80 FR 52544, 52551.
---------------------------------------------------------------------------
i. Proposed Conforming Changes to Sec. 45.4(a)
The Commission proposed to revise the heading of Sec. 45.4(a) to
read ``Continuation data reporting method generally'' to reflect that
the continuation data reporting method requirements in Sec. 45.4(a)
apply to all swaps, regardless of asset class or whether the swap is an
original swap, clearing swap or uncleared swap, whereas the
continuation data reporting requirements in proposed Sec. 45.4(b),
(c), and (d) would apply to clearing swaps, original swaps, and
uncleared swaps, respectively.\122\
---------------------------------------------------------------------------
\122\ See 80 FR 52544, 52551.
---------------------------------------------------------------------------
ii. Proposed Revisions to Sec. 45.4(b)
Regulation 45.4(b) currently governs continuation data reporting
obligations for ``cleared swaps,'' but does not distinguish among the
different swaps involved in a cleared swap transaction (i.e. original
and clearing swaps). The Commission thus proposed to revise the
introductory language of Sec. 45.4(b) to replace the terms ``cleared
swaps'' and ``swaps cleared by a derivatives clearing organization,''
which were not defined in the Final Part 45 Rulemaking, with the
defined term ``clearing swaps.'' \123\
---------------------------------------------------------------------------
\123\ See 80 FR 52544, 52551-52.
---------------------------------------------------------------------------
The Commission proposed to remove existing Sec. 45.4(b)(2)(ii),
which requires a reporting counterparty that is an SD or MSP to report
valuation data for cleared swaps daily, in addition to the valuation
data that is required to be reported by the DCO pursuant to Sec.
45.4(b)(2)(i). For clearing swaps, the DCO would be the only swap
counterparty required to report continuation data, including valuation
data.\124\
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\124\ This proposal would codify certain no-action letters
issued by the Commission's Division of Market Oversight. See CFTC
No-Action Letter No. 12-55 (Dec. 17, 2012); CFTC No-Action Letter
No. 13-34 (Jun. 26, 2013); and CFTC No-Action Letter No. 14-90 (Jun.
30, 2014). Staff no-action relief from the requirements of Sec.
45.4(b)(2)(ii) has been in effect since the initial compliance date
for part 45 reporting.
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iii. Proposed Addition of Sec. 45.4(c): Continuation Data Reporting
for Original Swaps
Existing Sec. 45.4(c) governs continuation data reporting for
uncleared swaps. The Commission proposed renumbering Sec. 45.4(c) as
Sec. 45.4(d) (for reasons discussed below), and proposed the addition
of a new Sec. 45.4(c), which would set forth the continuation data
reporting requirements for original swaps.\125\
---------------------------------------------------------------------------
\125\ See 80 FR 52544, 52552.
---------------------------------------------------------------------------
Specifically, proposed Sec. 45.4(c) would require a DCO to report
all required continuation data for original swaps, including original
swap terminations, to the original swap SDR pursuant to Sec. 45.3(a)
through (d).\126\ As proposed, Sec. 45.4(c) would also reference the
existing requirement that all continuation data must be reported in the
manner provided in Sec. 45.13(b), and that the SDR, in order to comply
with Sec. 49.10, must also ``accept and record'' such data, including
original swap terminations.\127\ The proposed addition of a reference
to Sec. 49.10 is consistent with an IDWG commenter's request for
clarification regarding the obligation of the SDR to accept and process
the termination message from the DCO.\128\
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\126\ As discussed above, under the proposed revisions to
Sec. Sec. 45.3(a)-(d), a SEF/DCM or reporting counterparty would be
required to report creation data for all swaps except clearing swaps
(including for swaps that later become original swaps by virtue of
their acceptance for clearing by a DCO). See Section II.B.4., supra.
See also Sec. Sec. 45.10 (a)-(c) (providing that all required swap
continuation data reported for a swap must be reported to the same
SDR to which required swap creation data was first reported pursuant
to Sec. 45.3). The Commission notes that pursuant to existing
regulation Sec. 45.13, each reporting entity and/or counterparty is
required to use the facilities, methods, or data standards provided
or required by the SDR to which the entity or counterparty reports
the data. 17 CFR 45.13.
\127\ SDR regulation Sec. 49.10(a) provides that an SDR shall
accept and promptly record all swap data in its selected asset class
and other regulatory information that is required to be reported
pursuant to part 45 and part 43 by DCMs, DCOs, SEFs, SDs, MSPs and/
or non-swap dealer/non-major swap participant counterparties.
Section 49.10(a)(1) further provides that for purposes of accepting
all swap data as required by part 45 and part 43, the registered SDR
shall adopt policies and procedures, including technological
protocols, which provide for electronic connectivity between the SDR
and DCMs, DCOs, SEFs, SDs, MSPs and/or certain other non-swap
dealer/non-major swap participant counterparties who report such
data. It further states that the technological protocols established
by a SDR shall provide for the receipt of swap creation data, swap
continuation data, real-time public reporting data, and all other
data and information required to be reported to such SDR.
Additionally, Sec. 49.10(a)(1) provides that the SDR shall ensure
that its mechanisms for swap data acceptance are reliable and
secure. 17 CFR 49.10. The Commission also proposed conforming
changes to the introductory language of Sec. 45.3 and Sec. 45.4 to
make clear that all required swap creation and continuation data
must be reported to the relevant SDR in the manner provided in Sec.
45.13, and pursuant to Sec. 49.10, which sets forth rules governing
the acceptance and recording of such data.
\128\ See ITV May 27, 2014 Letter, at 4 (noting that failure to
accept the termination message can produce inaccurate swap data due
to double reporting and that the rejection of the termination
message could distort notional amounts and market risks, and stating
that amending the reporting rules to place the reporting obligation
on the DCO for intended to be cleared swaps simplifies the reporting
flows and places the responsibility on the party best-suited to
accurately report cleared swap data).
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As proposed, Sec. 45.4(c)(1) would require a DCO to report all
life cycle event data for an original swap on the same day that any
life cycle event occurs, or to report all state data for the original
swap, daily.
The continuation data reporting requirements of proposed Sec.
45.4(c)
[[Page 41747]]
would apply to a swap that has been submitted to a DCO for clearing and
that becomes an original swap by virtue of the DCO's acceptance of such
swap for clearing. The DCO's continuation data reporting obligations
for a swap to which it is not a counterparty (i.e., for swaps other
than clearing swaps) will only be triggered if a swap is accepted for
clearing (and thus becomes an original swap). If a swap is submitted to
a DCO for clearing and is not accepted for clearing, then the DCO will
not have continuation data reporting obligations for the swap, because
the swap is not an original swap or a clearing swap.
iv. Proposed Additional Continuation Data Fields To Be Reported by DCOs
Proposed Sec. 45.4(c) would require DCOs to report additional data
fields when reporting continuation data on original swaps.\129\ These
fields would be the LEI of the SDR to which the DCO reported clearing
swaps replacing the original swap; the USI of the original swap being
replaced; and the USIs of each clearing swap that is replacing the
original swap. As discussed in the NPRM,\130\ the Commission proposed
these additional data fields to enable the Commission to track the
complete life of a cleared swap transaction. Inclusion of these data
fields in continuation data on the original swap, taken in conjunction
with existing requirements to reporting original swap information in
reports clearing swaps, will aid the Commission in linking the original
swap and all clearing swaps replacing it.
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\129\ See 80 FR 52544, 52552-53.
\130\ See 80 FR 52544, 52532-33.
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v. Proposed Revisions to Sec. 45.4(d)
As mentioned above, the Commission proposed to renumber Sec.
45.4(c) (Continuation data reporting for uncleared swaps) as Sec.
45.4(d). The Commission also proposed to amend Sec. 45.4(d), which
applies to all swaps that are not cleared by a derivatives clearing
organization, to add the phrase ``including swaps executed on or
pursuant to the rules of a swap execution facility or designated
contract market.''\131\ This proposed change would clarify the existing
requirement that reporting counterparties report all required swap
continuation data for an uncleared swap, irrespective of whether the
swap was executed off-facility (in which case the reporting
counterparty must report required swap creation data), or whether the
swap was executed on or pursuant to the rules of a SEF or DCM (in which
case the SEF or DCM must report the required swap creation data).\132\
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\131\ See 80 FR 52544, 52553.
\132\ See 17 CFR 45.3(b)-(d) (creation data reporting
requirements for off-facility swaps) and 17 CFR 45.3(a) (creation
data reporting requirements for swaps executed on or pursuant to the
rules of a SEF or DCM). See also Section II.B.4.iii supra.
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Finally, the Commission proposed to modify the introductory
language to Sec. 45.4 and Sec. 45.4(d)(1)(ii)(A) to remove outdated
references to compliance dates that have already expired.\133\
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\133\ See 80 FR 52544, 52553.
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3. Comments Received
The Commission received numerous comments on its proposed revisions
to Sec. 45.4.\134\ Below is a summary of comments for each of the
primary revisions and additions to Sec. 45.4.
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\134\ The Commission did not receive any comment directly
addressing the conforming changes to Sec. 45.4(a) or renumber and
amended Sec. 45.4(d). The Commission received a comment from FSR on
continuation data for amortizing swaps. See FSR Oct. 30, 2015
Letter, at 4. Because the NPRM was limited to revisions of Sec.
45.4 as it relates to clearing swaps, FSR's request is beyond the
scope of this rulemaking.
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i. Comments on Proposed Revisions to Sec. 45.4(b)
The proposed amendment to Sec. 45.4(b)(2), requiring only DCOs to
submit valuation data for clearing swaps, was widely supported in the
comment letters. Although one commenter contended that valuation data
from SD/MSP swap counterparties is valuable information and that the
Commission should require such information from SD/MSP counterparties
for all swaps, cleared or uncleared,\135\ many commenters to the IDWG
Request for Comment and NPRM stated that only the DCO should have the
responsibility to report valuation data for cleared swaps, and that the
Commission should eliminate the requirement for an SD or MSP to report
valuation data for cleared swaps.\136\ One commenter noted that
valuation data and mark-to-market value data provided by DCOs are
sufficient for the Commission to understand clearing swap valuations,
particularly because the DCO's valuation method is the industry
standard.\137\
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\135\ See Markit May 27, 2014 Letter, at 10-11 (arguing that the
Commission might receive valuable information from valuations
reported by counterparties).
\136\ See ABA May 27, 2014 Letter, at 2; CME May 27, 2014
Letter, at 9-10; FSR May 27, 2014 Letter, at 2; ITV May 27, 2014
Letter, at 2, 10, 15; ISDA May 27, 2014 Letter, at 13-14; JBA May
27, 2014 Letter, at 2-3; MFA May 27, 2014 Letter, at 2, 4; NGSA May
27, 2014 Letter, at 4-5; AIMA Oct. 30, 2015 Letter, at 6; ISDA Oct.
30, 2015 Letter, at 5; JBA Oct. 30, 2015 Letter, at 2; FSR Oct. 30,
2015 Letter, at 3.
\137\ See Eurex Oct. 30, 2015 Letter, at 6. Eurex also stated
that information on posted collateral could be a useful data point
for the Commission, but the original counterparties would be in a
better position than the DCO to report such information. Eurex also
stated that DCOs could provide information on margin, but that such
data would require more effort.
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ii. Comments on Proposed Revisions to Sec. 45.4(c)
Commenters were split on support of proposed Sec. 45.4(c), which
would require the DCO to report continuation data on the original swaps
once they are accepted for clearing to the SDR to which the original
swap was originally reported. ISDA strongly supported the revision,
stating that it would eliminate the issue of cleared ``alpha'' swaps
that had not been terminated, which negatively affects data quality.
ISDA commented that DCOs should be allowed to report continuation data
as either lifecycle event data or state data.\138\ DTCC, in its
response to the IDWG Request for Comment, also supported requiring DCOs
to report terminations of original swaps.\139\ However, DTCC commented
that some DCOs fail to submit termination of original swaps to DTCC
according to DTCC's technical standards.\140\ CEWG commented that DCOs
were in the best position to report all data on original and clearing
swaps, although it believes the original swap should not be
reported.\141\
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\138\ See ISDA Oct. 30, 2015 Letter, at 5.
\139\ See DTCC May 27, 2014 Letter, at 7 (stating that when an
alpha swap is novated, the Commission should require a DCO to submit
information about the beta and gamma swaps in addition to the
termination notice for the alpha swap).
\140\ See DTCC Oct. 30, 2015 Letter, at 8.
\141\ See CEWG Oct. 30, 2015 Letter, at 3. See Section II.B.3,
above, for discussion of CEWG's and other commenters' positions on
reporting of creation data for an original swap.
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CME commented that under the proposed division of reporting
obligations for original swaps and clearing swaps, DCOs are dependent
on original swap counterparties providing sufficient information on the
original swaps to fulfill reporting obligations on terminations of the
original swap.\142\ CME noted that counterparties rarely provided this
information, meaning that DCOs cannot effectively terminate original
swaps. As an alternative, CME proposed that DCOs should be the
reporting party for creation and continuation data for both original
and clearing swaps.\143\
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\142\ See CME Oct. 30, 2015 Letter, at 3.
\143\ See CME Oct. 30, 2015 Letter, at 3.
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In contrast, some commenters recommended that the clearing member,
and not the DCO, should report termination of the original swap to the
[[Page 41748]]
SDR.\144\ Eurex stated that the clearing member would already have
information on the original swap and a connection to the SDR where the
original swap was reported, putting the original reporting party in the
best position to report a termination.\145\ LCH commented that having
the original reporting party report any continuation events would avoid
reporting gaps on events occurring between creation and clearing.\146\
LCH commented that requiring DCOs to submit cancelations of original
swaps would be inconsistent with reporting obligations under the
European Markets Infrastructure Regulation (``EMIR'').\147\ LCH also
commented that the choice of original swap SDR could become an
eligibility criterion for clearing, and that DCOs could potentially
reject swaps from clearing based on the original swap SDR.\148\ Eurex
and LCH both noted that the requirement would force DCOs to connect to
all registered SDRs and report terminations according to the technical
requirements of each SDR.\149\ As an alternative, Eurex proposed that
DCOs be allowed to select the SDR to which they report the termination
of the original swap.\150\
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\144\ See OTC Hong Kong May 27, 2014 Letter, at 2-3. OTC Hong
Kong stated that requiring the original counterparty to report
termination of the alpha would be more cost-effective because the
original reporting counterparty is already required to report
creation data and life cycle event data of such alpha to an SDR, and
thus would already have in place a technical and operational
interface with the SDR of its choice. The commenter also stated that
imposing an additional requirement on a DCO to report termination of
the alpha does not appear to increase or improve the quantity and
quality of information already available to the Commission, and that
the burden on DCOs of the additional reporting requirement appears
to outweigh the benefits to the Commission. See also LCH May 29,
2014 Letter, at 8 (stating that reporting entities should already
report terminations under the obligation to report continuation
data); LedgerX Oct. 30, 2015 Letter, at 3.
\145\ See Eurex Oct. 30, 2015 Letter, at 3.
\146\ See LCH Oct. 30, 2015 Letter, at 3.
\147\ See id.
\148\ See id.
\149\ Eurex Oct. 30, 2015 Letter, at 4-5; LCH Oct. 30, 2015
Letter, at 3.
\150\ Eurex also suggested that reporting of terminations could
be foregone entirely, as an original swap, by definition, has been
accepted for clearing and ceases to exist. See Eurex Oct. 30, 2015
Letter, at 5.
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Regarding timing of reporting continuation data for original swaps,
ISDA supported the provision in new Sec. 45.4(c) allowing DCOs to
report continuation data on original swaps daily and via either
lifecycle event data or state data.\151\ The Japanese Bankers
Association commented that original swaps should be terminated as soon
as technologically practicable, to align reporting on clearing swaps
with reporting on cleared futures transactions under Sec. 1.74.\152\
Eurex commented that terminations were the only lifecycle events for
original swaps that would need to be reported as continuation
data.\153\
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\151\ ISDA Oct. 30, 2015 Letter, at 5.
\152\ JBA Oct. 30, 2015 Letter, at 2; see also LedgerX Oct. 30,
2015 Letter, at 3 (commenting that termination of original swap
should be reported as soon as technologically practicable, but
commenting that reporting party of original swap should have
obligation to report termination).
\153\ Eurex Oct. 30, 2015 Letter, at 6. ISDA noted that bunched
orders may be cleared either pre- or post-allocation, potentially
creating multiple clearing swaps for a single original swap. See
ISDA Oct. 30, 2015 Letter, at 6. ISDA commented that, where
allocation is done after clearing, DCOs should report the USI of the
pre-allocation swap as the ``prior ISO'' on clearing swaps for the
allocations. Eurex commented that, in the event of default by a
clearing member, it attempts to auction off the clearing swap. See
Eurex Oct. 30, 2015 Letter, at 3. Eurex commented that it was
unclear whether the novation of an auctioned clearing swap should be
reported to the original swap SDR.
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DTCC requested that the Commission offer guidance on how SDRs,
DCOs, and any other affected entities should address previously
reported cleared swaps for which the original swap had not been
terminated.\154\
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\154\ See DTCC Oct. 30, 2015 Letter, at 9.
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iii. Comments on Proposed Additional Continuation Data Fields To Be
Reported by DCOs
Several commenters asserted that the most cost-effective method for
establishing a link between the original swaps and the swaps that
replace the original swap upon acceptance for clearing is to include
the USI of the original swap as a prior USI for the beta and gamma
swaps.\155\ Several commenters to the IDWG Request for Comment
supported the concept of requiring that the DCO provide USIs for
clearing swaps to the counterparties to those swaps under proposed
Section 45.5(d)(2).\156\ ISDA, DTCC and Markit generally supported the
requirement that DCOs include the USI of the original swap when
reporting clearing swaps, but objected to requiring additional fields
linking original and clearing swaps as redundant.\157\ LCH suggested
that there should be a standardized format for reporting terminations
of original swaps that must be accepted by all SDRs.\158\
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\155\ See CME May 27, 2014 Letter, at 10 (``The most effective
and efficient method for achieving linkage for all such events that
have a one-to-one relationship (i.e., assignment or exercise) or a
one-to-many relationship (i.e., clearing, novation, allocation) is
by the inclusion of a prior USI(s).)''; DTCC letter appendix at 3
(stating that a new swap can generally be linked to an existing
swaps through the use of a ``prior USI'' data field); ISDA May 23,
2014 Letter, at 11 (``Related swaps sent to different SDRs can also
be linked via use of the USI. . . .''); Markit May 27, 2014 Letter,
at 8 (arguing that the most effective method to establish a link
between new and existing swaps is to store the USI of the original
swap as a prior USI).
\156\ See AIMA Oct. 30, 2015 Letter, at 7; Eurex Oct. 30, 2015
Letter, at 7; ISDA Oct. 30, 2015 Letter, at 7. ITV also commented on
requirements for SDRs to transmit USIs to non-reporting
counterparties for swaps between non-swap dealers or major swap
participants, not executed on a DCM or SEF under existing Section
45.5(c)(2). ITV Oct. 30, 2015 Letter, at 4. Because the NPRM did not
propose to amend Sec. 45.5(c)(2), this comment is beyond the scope
of the proposed rule.
\157\ See ISDA Oct. 30, 2015 Letter, at 6; DTCC Oct. 30, 2015
Letter, at 8; Markit Oct. 30, 2015 Letter, at 3.
\158\ See LCH Oct. 30, 2015 Letter, at 4.
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4. Final Rule Text
Having considered the comments received, the Commission has decided
to adopt the amendments to Sec. 45.4 as proposed.
i. Conforming Changes to Sec. 45.4(a)
Receiving no comments on the conforming changes to Sec. 45.4(a),
the Commission adopts these changes as proposed. The changes clarify
that the standards for reporting continuation data in Sec. 45.4(a)
apply to all continuation events regardless of asset class or whether
the swap is uncleared, an original swap, or a clearing swap.
ii. Revisions to Sec. 45.4(b)
The Commission notes support among market participants for the
amendment to Sec. 45.4 removing the requirement that SDs and MSPs
report valuation data for clearing swaps. The Commission adopts this
revision, codifying existing no-action relief,\159\ as proposed.
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\159\ See CFTC Letter 15-38 (Jun. 12, 2015).
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iii. Addition of Sec. 45.4(c)--Continuation Data Reporting for
Original Swaps
The Commission notes the different opinions offered by commenters
on the proposed addition of Sec. 45.4(c), which would require DCOs to
report continuation data, including terminations, of original swaps.
The Commission has considered the alternative approaches to reporting
original swap terminations that were proposed by commenters, such as
requiring original swap reporting parties to report terminations;
requiring DCOs to report both original and clearing swaps; and allowing
DCOs to select the SDR for original swap terminations. The Commission
believes that its proposed method best incorporates existing industry
practice, whereby DCOs generally report clearing swaps as well as
submitting termination messages on original swaps, thereby limiting
additional costs. It may be more burdensome for the counterparties to
the original swaps to report terminations because they would have
[[Page 41749]]
to receive messages from the DCO confirming that the original swap was
accepted for clearing, then translate that message from the DCO into a
termination message to the SDR. This may be particularly burdensome for
commercial end-users executing swaps on SEFs or DCMs who might
otherwise have no reporting obligations and who may not have the
infrastructure in place to report as quickly or as efficiently as
DCOs.\160\
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\160\ See supra, n. 26, for discussion of reporting obligations
for on-facility cleared swaps.
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On the other hand, requiring DCOs to report creation and
continuation data for both original and clearing swaps could slow the
reporting of original swaps for part 43 and part 45 purposes. DCOs
would need to receive messages from the counterparties, or from the SEF
or DCM where executed on-facility, with all information necessary to
report the swap that becomes an original swap. The DCO would then need
to transmit such information to the SDR of its choice. Introducing an
extra step in reporting would inherently slow reporting, which must be
done as soon as technologically practicable particularly for
transparency reasons. At the same time, requiring DCOs to report
original swaps for part 43 and part 45 purposes would require DCOs to
obtain information beyond what would be needed for clearing purposes,
thus increasing the burden on DCOs.
Finally, the Commission has considered the alternative proposal
that DCOs be allowed to report an original swap termination to an SDR
other than that where the original swap was reported. Adoption of this
alternative approach could result in significant data fragmentation, as
data on a single swap could be housed at more than one SDR.
Additionally, this alternative approach would render useless any
position reports generated by an SDR, as the SDR (or market participant
accessing its own data on an SDR) could not determine if the swaps it
housed are still in effect, thereby removing a potential validation
tool for market participants.\161\
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\161\ The Commission notes that the approach adopted could
generate some degree of data fragmentation, as reports on the
original swaps may be housed at a different SDR from reports on its
clearing swaps. However, the Commission believes this issue can be
overcome for its regulatory purposes--namely risk analysis and
market surveillance--if the Commission is able to pull accurate data
on individual swaps from each of the registered SDRs. Moreover,
accurate reporting of original swap USIs and SDR identities in
clearing swaps reporting, and accurate clearing swaps USIs and SDR
identities in original swaps terminations, would allow for easy
tracking of the lifecycle of a cleared swap transaction.
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Having considered these alternatives as suggested by commenters,
the Commission has determined to adopt the amendments to Sec. 45.4 as
it has proposed. The Commission believes that DCOs are in the best
position to report the termination of an original swap because the DCO,
through the clearing process, has all information needed to report such
terminations. By virtue of its decision to accept a swap for clearing
and to extinguish the swap upon acceptance,\162\ a DCO will be the
first entity to know that clearing occurred and that the original swap
should be terminated, putting the DCO in the best position to report
terminations quickly. DCOs can build original swap terminations into
their systems architecture, allowing for fast, consistent, and accurate
terminations.\163\
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\162\ See 17 CFR 39.12(b)(6). Through its rules, the DCO
determines whether or not a swap that is submitted for clearing
becomes an original swap.
\163\ The Commission has also considered LCH's comment that EMIR
puts the original swap termination obligation on the original swap
parties. Placing reporting obligations on one party under CFTC
regulations, and on another party under EMIR, would not create a
direct conflict as both parties would be able to satisfy their
respective regulatory obligations. The Commission recognizes that
this situation could result in two termination messages for the same
original swap, but this should not have a negative impact on the
quality of SDR data.
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DCOs will also have all information needed to terminate the
original swap based on the swap submitted for clearing. Data required
for such termination messages would either be generated by the DCO
itself (such as clearing swap USIs and clearing swap SDR LEIs) or could
be included in any message submitting a swap for clearing (such as the
USI of the original swap and the LEI of the original swap SDR). While
CME commented that clearing members have not consistently included
original swap USI and LEI of the original swap SDR in messages
transmitted to the DCO for clearing, the Commission notes that DCOs
could require their clearing members to provide such information. As
proposed, Sec. 45.4(c) would require DCOs to report these fields. DCOs
must obtain the relevant information from their clearing members.
iv. Addition of Continuation Data Fields To Be Reported by DCOs
The Commission has considered the comments opposing the creation of
required continuation data fields to be reported by DCOs for original
swaps. The Commission has also considered ISDA's comment regarding the
potential redundancy of having USIs of clearing swaps transmitted in
the termination message for the original swap, as well as having the
USI of the original swap in the creation data for the clearing swaps.
The Commission believes that reporting the clearing swaps USIs as
continuation data for the original swap is an efficient mechanism for
linking clearing swaps to the original swap that they replace and
should be used for this purpose. New Sec. 45.4(c)(2) will thus require
DCOs to include the following additional enumerated data elements when
reporting continuation data for original swaps pursuant to proposed
Sec. 45.4(c)(1): (i) The legal entity identifier (``LEI'') of the SDR
to which each clearing swap for a particular original swap was reported
by the DCO pursuant to new Sec. 45.3(e); (ii) the USI of the original
swap that was replaced by the clearing swaps; \164\ and (iii) the USI
for the clearing swaps that replace the original swap.
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\164\ See existing Sec. Sec. 45.5(a)(2)(iii), (b)(2)(iii), &
(c)(2)(ii) (requiring the entity that created the USI to transmit
the USI of a swap to the DCO, 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).
Proposed revisions to Sec. 45.5 are described in Section II.D of
this release.
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As adopted, these data fields will enable the DCO to fulfill its
continuation data reporting obligations, enable the SDR to maintain the
accuracy and completeness of swap transaction data, enable the
Commission to track the life of a cleared swap transaction, and enable
the Commission to monitor compliance with the clearing mandate. In
particular, inclusion within an original swap termination message the
LEI of the clearing swap SDR will permit the Commission and other
regulators to ascertain the SDR where the clearing swaps associated
with a particular original swap reside, which will enable the
Commission and other regulators to review and more effectively
associate data available at multiple SDRs in circumstances where the
reporting entity or counterparty selects one SDR for the original swap
and the DCO selects a different SDR for the clearing swaps under Sec.
45.3.
Inclusion of the original swap's USI is necessary to enable the
original swap SDR to associate continuation data reported by the DCO
with the initial creation data reported by a SEF/DCM or reporting
counterparty pursuant to Sec. 45.3(a) through (d).\165\ These data
will
[[Page 41750]]
allow SDRs to validate termination messages reported by DCOs by
ensuring that the termination message has the same USI as the original
report. Similarly, in the case of clearing swaps that replace an
original swap, inclusion of the USIs of the clearing swaps will permit
the Commission and other regulators to identify the specific clearing
swaps that replaced an original swap, thereby presenting a full history
of the cleared swap transaction.
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\165\ For instance, inclusion of the USI of the original swap in
DCO continuation data reporting will permit the SDR receiving such
continuation data to associate data regarding a life cycle event
such as termination with the existing data maintained for the swap.
This will help ensure that data in the SDR remains current and
accurate and will enable the Commission and other regulators to
ascertain whether a swap remains in existence or has been
extinguished upon acceptance for clearing by a DCO.
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Together, the revisions to Sec. 45.4(b) and the addition of Sec.
45.4(c) will require the reporting of continuation data for original
swaps and clearing swaps. Accordingly, the Commission expects that
records of original swaps that have been terminated would include the
USIs for the clearing swaps that replaced the original swap and the LEI
of the clearing swap SDR, such that review of an original swap would
permit the identification of the resulting clearing swaps and the SDR
where they resides. These provisions will reflect the regulations
applicable to DCOs outlined in part 39 of the Commission's regulations
and will clearly delineate the continuation data reporting obligations
associated with each swap involved in a cleared swap transaction.\166\
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\166\ See 17 CFR 39.12(b)(6). Part 45 currently requires all
swap data and information reported to and maintained by an SDR
regarding a given swap to be ``current and accurate'' and to include
``all changes'' to a swap. See 17 CFR 45.4(a).
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The Commission is mindful of LCH's suggestion that there be an
industry-wide standard for original swap termination messages and
DTCC's comment that termination reports often do not comply with SDR
specifications. To help DCOs comply with the requirements of amended
Sec. 45.4, the Commission encourages DCOs and SDRs to develop an
industry-wide standard for original swap termination messages. The
Commission anticipates that original swap termination messages could be
standardized given the limited number of data elements that must be
transmitted, such as clearing swap USIs, DCO LEIs, and clearing swap
SDR LEIs. Standardization also would alleviate LCH's concern that the
original swap's SDR would become a factor in determining whether a swap
was eligible for clearing.
The Commission has also considered conflicting comments on whether
original swap terminations should be reported at the end of the day or
as soon as technologically practicable. The Commission has determined
to adopt the amendment as proposed and require reporting original swap
terminations at the end of the day, as this would be consistent with
reporting other types of continuation data under Sec. 45.4.
v. Revisions to Sec. 45.4(d)
The Commission received no comments on the proposed revisions to
Sec. 45.4(d), and is adopting those revision as proposed.
D. Unique Swap Identifiers--Amendments to Section 45.5
1. Existing Sec. 45.5
Existing Sec. 45.5 requires that each swap subject to the
Commission's jurisdiction be identified in all recordkeeping and all
swap data reporting by the use of a USI. The rule establishes different
requirements for the creation and transmission of USIs depending on
whether the swap is executed on a SEF or DCM (Sec. 45.5(a)), executed
off-facility with an SD or MSP reporting counterparty (Sec. 45.5(b)),
or executed off-facility with a non-SD/MSP reporting counterparty
(Sec. 45.5(c)). Existing Sec. 45.5 provides that for swaps executed
on a SEF or DCM, the SEF or DCM creates the USI, and for swaps not
executed on a SEF or DCM, the USI is created by an SD or MSP reporting
counterparty, or by the SDR if the reporting counterparty is not an SD
or MSP.\167\
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\167\ See 17 CFR 45.5(a)-(c).
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With the exception of swaps with a non-SD/MSP reporting
counterparty, the existing rule generally requires USI creation and
transmission to be carried out by the entity or counterparty required
to report all required swap creation data for the swap. Existing Sec.
45.5 thus does not distinguish between original and clearing swaps,
does not provide USI creation and transmission requirements
specifically for DCOs, and consequently does not provide for the
issuance to DCOs of a USI ``namespace,'' which is one of two component
parts of a USI.\168\
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\168\ See, e.g., 17 CFR 45.5(a)(1)(i), (b)(1)(i) and (c)(1)(i)
(the data component of a USI commonly referred to as a namespace is
the unique alphanumeric code assigned to the registered entity
responsible for generating the USI for the purpose of identifying
such registered entity with respect to USI creation).
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The Commission understands that, in practice, SEFs/DCMs and
reporting counterparties, or SDRs in the case of non-SD/MSP reporting
counterparties, generate and assign USIs for swaps that would become
original swaps under the proposed rules, and that DCOs generate and
assign USIs to swaps that would qualify as clearing swaps in connection
with reporting required swap creation data for clearing swaps to SDRs.
2. Proposed Amendments to Sec. 45.5
The Commission proposed to renumber existing Sec. 45.5(d) as Sec.
45.5(e), and to create a new Sec. 45.5(d) that would set forth
requirements regarding the creation and transmission of USIs for
clearing swaps.\169\
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\169\ The Commission also proposes conforming amendments to
renumber existing Sec. 45.5(e) as Sec. 45.5(f).
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As proposed, Sec. 45.5(d)(1) would require a DCO to generate and
assign a USI for each clearing swap upon, or as soon as technologically
practicable after, acceptance of an original swap by the DCO for
clearing (or execution of a clearing swap that does not replace an
original swap), and prior to reporting the required swap creation data
for each clearing swap.\170\ Proposed Sec. 45.5(d)(1) would also
require that the USI for each clearing swap consist of two data
components: A unique alphanumeric code assigned to the DCO by the
Commission for the purpose of identifying the DCO with respect to USI
creation, and an alphanumeric code generated and assigned to that
clearing swap by the automated systems of the DCO. These proposed USI
creation requirements and data components for DCOs and clearing swaps
are consistent with those currently required by part 45 for other
registered entities such as SEFs, DCMs, and SDRs.\171\
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\170\ See 80 FR 52544, 52554.
\171\ See, e.g., 17 CFR 45.5(a), 45.5(c).
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As proposed, Sec. 45.5(d)(2) would require a DCO to transmit the
USI for a clearing swap electronically to the SDR to which the DCO
reports required swap creation data for the clearing swap, as part of
that report, and to the DCO's counterparty with respect to that
clearing swap, as soon as technologically practicable after either
acceptance of the original swap by the DCO for clearing or execution of
a clearing swap that does not replace an original swap.\172\
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\172\ See 80 FR 52544, 52554.
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Finally, the Commission proposed to amend Sec. Sec. 45.5(a),
45.8(f), and 45.10(a) to incorporate the language ``or pursuant to the
rules of'' to the phrase ``swaps executed on a swap execution facility
or designated contract market'' to make clear that those provisions
currently apply to all swaps executed on or pursuant to the rules of a
SEF or DCM.\173\
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\173\ See 80 FR 52544, 52554.
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3. Comments Received
The Commission received several comments regarding its proposed
amendments to Sec. 45.5.\174\ All comments
[[Page 41751]]
received were supportive of the amendment to Sec. 45.5(d)(1), which
requires DCOs to generate USIs for clearing swaps.\175\
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\174\ ITV requested that the Commission remove the obligation
for SDRs, when a swap is executed between two non-SD/MSPs and the
SDR is obligated to create the USI, to transmit the USI to the
counterparties. ITV commented that this could create obligations for
SDRs to transmit information to parties not enrolled with the SDR.
The Commission has noted this comment, but it is beyond the scope of
the NPRM.
\175\ See ITV Oct. 30, 2015 Letter, at 3 (but noting that
generation of the USI for a clearing swap by the SDR would slow
acceptance of swaps in the clearing process); ISDA Oct. 30, 2015
Letter, at 7 (also suggesting that the Commission require the
namespace component of USIs for each DCO be made publicly
available); AIMA Oct. 30, 2015 Letter, at 7.
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FSR requested that the Commission adopt ISDA best practices for
identifying international swaps, including allowing for the use of a
USI as a unique transaction identifier (``UTI'') for reporting swaps in
other jurisdictions.\176\ FSR commented that adopting the ISDA best
practice concerning USIs would avoid potential double-counting when an
international swap is reported to two separate SDRs in two
jurisdictions.\177\
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\176\ See FSR Oct. 30, 2015 Letter, at 4.
\177\ See id.
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ISDA commented that, in principal model clearing, the DCO should
ensure that both the DCO's clearing member and the ultimate
counterparty (if not the clearing member) receive the clearing swap
USIs.\178\ ISDA further noted that the current Orders of Exemption
issued to foreign DCOs do not include an obligation for those exempt
DCOs to generate the USIs for reportable clearing swaps.\179\
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\178\ See ISDA Oct. 30, 2015 Letter, at 6.
\179\ See ISDA Oct. 30, 2015 Letter, at 6.
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4. Final Rule Text of Sec. 45.5
Having considered the comments relating to the purpose and scope of
the proposed amendments to Sec. 45.5, the Commission is adopting
amended Sec. 45.5 as proposed. The proposed Sec. 45.5(d) provisions
that would govern creation and assignment of USIs by the DCO with
respect to clearing swaps would be consistent with the Commission's
``first-touch'' approach to USI creation for SEFs, DCMs, SDs, MSPs, and
SDRs.\180\
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\180\ See Final Part 45 Rulemaking, 77 FR 2136, 2158 (Jan. 13,
2012). The Commission's approach with respect to SEFs, DCMs, SDs,
MSPs, and SDRs was designed to foster efficiency by taking advantage
of the technological sophistication and capabilities of such
entities, while ensuring that a swap is identified by a USI from its
inception.
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The Commission notes ISDA's request for guidance on whether DCOs
must ensure, in the principal clearing mode, that the ultimate
counterparty (when not the clearing member) receive the USI of the
clearing swaps. As noted above, the Commission is aware of various
issues relating to reporting of principal model clearing but will not
offer further guidance at this time. The Commission notes ISDA's
comment that the current Orders of Exemption for foreign DCOs do not
include a requirement that the DCO generate USIs for reportable
clearing swaps. Finally, the Commission notes FSR's request for the
Commission to align the use of USIs and UTIs for reporting
international swaps. While the Commission declines to address the issue
in this release as it is beyond the scope of the NPRM, the Commission
is cognizant of the need to harmonize reporting across jurisdictions
and will continue to work with other regulators to address this and
other issues.
E. Determination of Which Counterparty Must Report--Amendments to Sec.
45.8
1. Existing Sec. 45.8
Existing Sec. 45.8 sets forth a hierarchy under which the
reporting counterparty for a particular swap depends on the nature of
the counterparties involved in the transaction. Regulation 45.8 assigns
a reporting counterparty for off-facility swaps, for which the
reporting counterparty must report all required swap creation data, as
well as for swaps executed on or pursuant to the rules of a SEF or DCM,
for which the SEF or DCM must report all required swap creation data.
2. Proposed Amendments to Sec. 45.8
The Commission proposed to add paragraph (i) to Sec. 45.8 in order
to explicitly provide that the DCO will be the reporting counterparty
for clearing swaps.\181\ The Commission also proposed to amend the
introductory language of Sec. 45.8 to make clear that the reporting
counterparty for all swaps except clearing swaps will be made as
provided in paragraphs (a) through (h) of Sec. 45.8, while the
reporting counterparty for clearing swaps will be made as provided in
paragraph (i) of Sec. 45.8. The Commission further proposed to remove
the language ``if available'' from Sec. 45.8(h)(1)(i) to ensure
consistency with proposed changes to appendix 1 to part 45. As
discussed below in addressing changes to the PET data fields in
appendix 1, the ``if available'' language was only relevant prior to
availability of the LEI system.\182\
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\181\ See 80 FR 52544, 52554-55.
\182\ See, infra, Section II.H.1.i.
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The Commission proposed to further amend Sec. 45.8 to remove part
of paragraphs (d)(1) and (f)(1) and to remove part of paragraph (h)(2)
and all of paragraphs (h)(2)(i) and (ii), which require SEFs to notify
counterparties to a swap if it cannot determine who would be the
reporting counterparty. Finally, the Commission proposed conforming
changes to explanatory notes in the PET data tables in appendix 1 to
part 45 that reference the situation described in Sec. 45.8(h)(2).
3. Comments Received
The Commission received six comments in connection with its
proposed amendments to Sec. 45.8. One commenter supported proposed
Sec. 45.8(i) as it would promote efficiency in reporting by explicitly
designating the DCO as the reporting party for clearing swaps.\183\
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\183\ See AIMA Oct. 30, 2015 Letter, at 6.
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ISDA noted a potential inconsistency between reporting obligations
under parts 43 and 45 for clearing swaps, as DCOs are not included in
the hierarchy under Sec. 43.3 for determining reporting party of real-
time reporting.\184\ ISDA suggested that this could result in
duplicative reporting obligations for DCOs and clearing members in
situations where a clearing swap does not replace an original swap.
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\184\ See ISDA Oct. 30, 2015 Letter, at 7.
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EEI/EPSA requested that the Commission not remove, as proposed, the
provisions in Sec. Sec. 45.8(d)(1) and (f)(1), which currently require
the counterparties to select the reporting party, where the swap is
executed on a SEF or DCM and both counterparties have the same SD, MSP
or financial entity status.\185\ The commenter requested that the
provisions be left in place because the proposed rule did not set out
how the reporting party would be determined. ITV argued that the
reporting hierarchy in existing Sec. Sec. 45.8(c) and (e), when
applied to uncleared swaps between end-users, particularly in the
commodity asset class, can preclude end-users from negotiating between
themselves who the reporting party would be.\186\ This may result in
the selection of a reporting party who has less technical
infrastructure than the non-reporting counterparty.\187\ ISDA
recommended that the Commission encourage SEFs to adopt the ISDA asset
class tie-breaker logic (the ``ISDA RCP'') for determining reporting
party for on-SEF swaps.\188\
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\185\ See EEI/EPSA Oct. 30, 2015 Letter, at 4.
\186\ See ITV Oct. 30, 2015 Letter, at 4 and 6.
\187\ ITV also commented that it believes counterparties should
be permit to select the reporting party for a swap when both
counterparties are non-SD/MSPs, regardless of financial entity
status or U.S. person status. See ITV Oct. 30, 2015 Letter, at 4.
\188\ See ISDA Oct. 30, 2015 Letter, at 7.
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Two commenters noted that, with the addition of proposed Sec.
45.8(i)
[[Page 41752]]
addressing the reporting of clearing swaps, the phrase ``or is cleared
by a derivatives clearing organization'' in Sec. 45.8(f) would become
inapplicable.\189\ The commenters recommended that the Commission
remove this clause from existing Sec. 45.8(f).
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\189\ See EEI/EPSA Oct. 30, 2015 Letter, at 4; CMC Oct. 30, 2015
Letter, at 3.
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4. Final Rule Text of Sec. 45.8
For the reasons expressed more fully below, the Commission has
decided to adopt the amendments to Sec. 45.8 as proposed.
The Commission has considered ISDA's comment that the inclusion of
DCOs in the part 45 reporting hierarchy could create inconsistencies
between part 43 and part 45 reporting obligations for clearing swaps
that do not replace original swaps. Existing Sec. 43.3(a)(3) sets out
the reporting hierarchy for real-time reporting of off-facility swaps.
DCOs are not included in this hierarchy, but the hierarchy is
applicable unless otherwise agreed to by the parties prior to the
execution of the publicly reportable swap transaction.\190\ To the
extent that clearing swaps are reportable events under part 43, the
Commission notes that DCOs and their clearing members could agree that
the DCO should be the reporting party for part 43 purposes pursuant to
the ``unless otherwise agreed'' clause of Sec. 43.3(a)(3). It is only
if the DCO and its clearing member did not so agree would the clearing
member have part 43 reporting obligations for some clearing swaps
pursuant to the reporting hierarchy under Sec. 43.3. The Commission
therefore declines in this rule release to include DCOs in the part 43
real-time reporting hierarchy.
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\190\ 17 CFR 43.3(a)(3).
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The Commission has also considered comments from EEI/EPSA and ITV
regarding the removal of provisions in Sec. Sec. 45.8(d)(1) and (f)(1)
governing the selection of reporting parties for swaps executed on SEFs
and DCMs. As was explained in the preamble to the NPRM, the Commission
proposed to remove these provisions to help preserve parties' anonymity
on SEFs and DCMs, in particular for swaps cleared through a straight-
through-processing mechanism.\191\ SEFs have adopted various formulas
to determine who will be the reporting party when both counterparties
have the same SD, MSP, financial entity, and U.S. Person status. These
formulas will ensure that reporting parties are selected consistently.
Therefore, the Commission is adopting amendments to Sec. Sec.
45.9(d)(1) and (f)(1) as proposed. In addressing ISDA's comment
regarding the ISDA RCP, the Commission declines to adopt or impose any
particular formula at this time for selecting the reporting party,
instead leaving such determinations to the SEFs.
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\191\ See 80 FR 52544, 52555.
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The Commission has also considered EEI/EPSA's and CMC's comments
regarding the continued inclusion of the phrase ``or is cleared by a
derivatives clearing organization'' in Sec. 45.8(f). The Commission
notes that existing Sec. 45.8(f) addresses reporting hierarchy for
certain categories of reportable swaps executed between two non-U.S.
Persons; one category of such reportable swaps is a swap cleared
through a DCO. The Commission notes that the swap ``cleared by a
derivatives clearing organization'' in this provision relates to the
original swap between the original counterparties, and not the clearing
swaps with the DCO. The Commission is adopting Sec. 45.8(f) as
proposed, with the continued inclusion of the phrase ``cleared by a
derivatives clearing organization.''
F. Reporting to a Single Swap Data Repository--Amendments to Sec.
45.10
1. Existing Sec. 45.10
Existing Sec. 45.10 requires ``all swap data for a given swap'' to
be reported to a single SDR, which must be the same SDR to which
creation data for that swap is first reported. The time and manner in
which such data must be reported to a single SDR depends on whether the
swap is executed on a SEF or DCM,\192\ executed off-facility with an
SD/MSP reporting counterparty,\193\ or executed off-facility with a
non-SD/MSP reporting counterparty.\194\ Currently, Sec. 45.10(b) and
(c) also provide circumstances in which a reporting counterparty is
excused from reporting PET data to an SDR because the swap is accepted
for clearing by a DCO before the applicable reporting deadline.
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\192\ See 17 CFR 45.10(a).
\193\ See 17 CFR 45.10(b)
\194\ See 17 CFR 45.10(c).
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2. Proposed Amendments to Sec. 45.10
In order to further clarify that ``all swap data for a given swap''
encompasses all swap data required to be reported pursuant to parts 43
and 45 of the Commission's regulations, the Commission proposed to add
language to this effect to paragraphs (a) through (c) and to the
introductory language of Sec. 45.10.\195\ This proposed additional
language would clarify the existing requirement that registered
entities and reporting counterparties must provide all swap data
required under parts 43 and 45 to a single SDR for a given swap.\196\
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\195\ See 80 FR 52544, 52555-56.
\196\ The Commission also proposed to repeat the language ``Off-
facility swaps with a swap dealer or major swap participant
reporting counterparty'' from the title of Sec. 45.10(b) in the
body of that regulation to make clear that the requirement pertains
to off-facility swaps with an SD or MSP.
---------------------------------------------------------------------------
The Commission also proposed to remove Sec. 45.10(b)(2) and
(c)(2),\197\ which are no longer applicable because they reference
provisions in Sec. 45.3(b)(1), (c)(1)(i), and (c)(2)(i) that, as
discussed above, the Commission proposed to remove.\198\
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\197\ The Commission also proposed conforming amendments to
Sec. 45.10 to renumber paragraph (b)(3) as (b)(2), paragraph (c)(3)
as (c)(2), and paragraph (c)(4) as (c)(3). The Commission also
proposed to remove a reference to Sec. 45.10(c)(2) from existing
Sec. 45.10(c)(4) because the Commission proposed to remove Sec.
45.10(c)(2).
\198\ See Section II.B.2.ii, supra.
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Additionally, the Commission proposed to add new Sec. 45.10(d),
which would govern clearing swaps and would establish explicit
requirements that DCOs report all required swap creation data and all
required swap continuation data for each clearing swap to a single
SDR.\199\ Specifically, proposed Sec. 45.10(d)(1) would require a DCO
to report all required swap creation data for a particular clearing
swap to a single SDR. As proposed, Sec. 45.10(d)(1) would also require
the DCO to transmit the LEI of the SDR to which it reported the
required swap creation data for each clearing swap to the counterparty
of each clearing swap, as soon as technologically practicable after
either acceptance of the original swap by the DCO for clearing or
execution of a clearing swap that does not replace an original
swap.\200\
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\199\ See 80 FR 52544, 52555-56.
\200\ See 80 FR 52544, 52555-56.
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As proposed, Sec. 45.10(d)(2) would require a DCO to report all
required swap creation data and all required swap continuation data for
a particular clearing swap to the same SDR that received the initial
swap creation data for the clearing swap required by Sec. 45.10(d)(1).
In the event there are two or more clearing swaps that replace a
particular original swap, and in the event there are equal and opposite
clearing swaps that are created upon execution of the same transaction
and that do not replace an original swap, proposed Sec. 45.10(d)(3)
would require the DCO to report all required swap creation and
continuation data for each such clearing swap to a single SDR.\201\
[[Page 41753]]
Accordingly, all required creation and continuation data for all
clearing swaps that can be traced back to the same original swap (and
for all equal and opposite clearing swaps that are created upon
execution of the same transaction but that do not replace an original
swap) will be reported to a single SDR.
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\201\ The Commission notes that proposed Sec. 45.10(d)(3) would
require any equal and opposite clearing swaps, including those
resulting from the operation of Sec. 39.12(b)(6) of the
Commission's regulations, to be reported to a single SDR, regardless
of whether such clearing swaps replaced an original swap.
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The Commission noted in its proposal that by operation of proposed
new Sec. 45.8(i) and (j) and proposed Sec. 45.3(e), there may be
scenarios in which the SEF/DCM or reporting counterparty reports
required swap creation data for the swap that became the original swap
to one SDR, and the DCO reports required swap creation data for the
clearing swaps that replace the original swap to a different SDR.\202\
The Commission proposed to require that all swap data for the clearing
swaps that can be traced back to the same original swap be reported to
the same SDR, but did not require that the clearing swaps be reported
to the same SDR as the original swap.\203\
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\202\ See 80 FR 52556.
\203\ See id.
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The Commission included in the NPRM the following example to
illustrate the application of proposed Sec. 45.10: \204\
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\204\ See 80 FR 52544, 52556.
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Swap 1 is intended to be submitted to a DCO for clearing and
executed on or pursuant to the rules of a SEF. The SEF reports all
required creation data for such swap to registered SDR A pursuant to
Sec. 45.3(a), which was selected by the SEF pursuant to proposed Sec.
45.3(j)(1), and submits the swap to the DCO for clearing. Upon
acceptance of Swap 1 for clearing, the DCO extinguishes Swap 1 and
replaces it with Swap 2 and Swap 3, both of which are clearing swaps.
Swap 1 is now an original swap.
Proposed Sec. 45.4(c) would require the DCO to report the
termination of Swap 1 to SDR A,\205\ reflecting that Swap 1, now an
original swap, has been terminated through clearing novation.\206\ The
DCO would also report all required swap creation data for clearing Swap
2 to a single SDR of its choice (say, for example, SDR B) pursuant to
proposed Sec. Sec. 45.3(e) and (j)(2), and 45.10(d).\207\ Similarly,
the DCO would be required to report all required swap creation data for
clearing Swap 3 to a single SDR, in this case SDR B. Pursuant to
proposed Sec. 45.10(d)(3), the DCO would be required to report all
required swap creation data for clearing Swap 2 and clearing Swap 3 to
the same SDR (SDR B) because Swap 2 and Swap 3 replaced Swap 1.
Thereafter, proposed Sec. 45.10(d)(2) would require the DCO to report
all required swap creation data and continuation data to the SDR where
the first report of required swap creation data for both clearing Swap
2 and clearing Swap 3 was made (SDR B).
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\205\ Pursuant to proposed Sec. 45.10(a)(2), (b)(2), and
(c)(3), continuation data for original swaps must be reported to the
SDR where the first report of required swap creation data was made
for the swap.
\206\ Pursuant to existing Sec. 45.13(b), the DCO shall use the
facilities, methods, or data standards provided or required by SDR
A. 17 CFR 45.13(b).
\207\ The Commission notes that pursuant to proposed Sec. Sec.
45.10(a)-(d), the DCO in this example could select an SDR other than
SDR A.
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3. Comments Received
The Commission received three comments addressing its proposed
amendments to Sec. 45.10.\208\ AIMA supported the Commission's
proposal clarifying that the DCO is obligated to report creation and
continuation data for clearing swaps to a single SDR.\209\
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\208\ An additional comment letter addressed the issue of
``portability'' of swaps reporting between SDRs. See ITV Oct. 30,
2015 Letter, at 3-4. The portability issue is beyond the scope of
the NPRM.
\209\ See AIMA Oct. 30, 2015 Letter, at 7.
---------------------------------------------------------------------------
ISDA opposed the requirement in proposed Sec. 45.10(d)(1) that a
DCO transmit to the counterparties of clearing swaps the LEI of the SDR
to which the clearing swaps were reported.\210\ ISDA doubted the value
of such information for the clearing swap counterparties, and opined
that counterparties are unlikely to build mechanisms to retain such
information on a transactional basis.\211\ ISDA also noted that a DCO
would be separately required to send a termination of the original swap
to the original swap's SDR, and this report would include the LEI of
the SDR to which the clearing swaps are reported, making a report of
such data to the counterparties redundant.\212\
---------------------------------------------------------------------------
\210\ See ISDA Oct. 30, 2015 Letter, at 8.
\211\ Id.
\212\ Id.
---------------------------------------------------------------------------
DTCC opposed the provision in proposed Sec. 45.10(d)(1) that would
allow a DCO to select the SDR for reporting clearing swaps, instead
arguing that clearing swaps should be reported to the same SDR as the
original swap.\213\ DTCC argued that such reporting would create data
fragmentation between the original swap and related clearing swaps.
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\213\ See DTCC Oct. 30, 2015 Letter, at 6.
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4. Final Rule Text of Sec. 45.10
Having considered all of the comments relating to the purpose and
scope of the proposed amendments to Sec. 45.10, including amendments
to Sec. Sec. 45.10(a) through (c) and new Sec. 45.10(d), the
Commission is adopting amended Sec. 45.10 as proposed. The
requirements for DCOs demonstrated in the above example and contained
in proposed Sec. 45.10(d)(1) and (2) are consistent with the existing
requirements for SEFs, DCMs, and other reporting counterparties under
current Sec. 45.10. By requiring that all swap data for each clearing
swap be reported to a single SDR, proposed Sec. Sec. 45.10(d)(1) and
(2) further the Commission's stated purpose in creating Sec. 45.10,
and part 45 generally, of reducing fragmentation of data for a given
swap across multiple SDRs.\214\
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\214\ See, e.g., Final Part 45 Rulemaking, 77 FR 2136, 2139
(``To avoid fragmentation of data for a given swap across multiple
SDRs, the [Notice of Proposed Rulemaking] [for part 45] would
require that all data for a particular swap must be reported to the
same SDR.''); at 2143 (``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 the same SDR.''); and at 2168 (``The Commission believes
the 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.'').
---------------------------------------------------------------------------
The proposed requirement in Sec. Sec. 45.10(d)(3) that the DCO
report to a single SDR all swap data for each clearing swap that can be
traced back to the same original swap also supports the goal of
avoiding fragmentation of swap data. Though clearing swaps are new
individual swaps, all clearing swaps that issue from the same original
swap are component parts of a cleared swap transaction. Fragmentation
among clearing swaps would needlessly impair the ability of the
Commission and other regulators to view or aggregate all the data
concerning the related clearing swaps.
While proposed Sec. 45.10 ensures that each swap comprising a
cleared swap transaction is reported to a single SDR, the Commission
notes DTCC's comments on data fragmentation where original swaps are
reported to different SDRs than their resulting clearing swaps.
However, as long as DCOs properly identify the original swap's USI and
SDR in reports on clearing swaps, and report clearing swaps' USIs and
SDR in terminations of the original swaps, the Commission believes it
will be able to reconcile those transactions when performing risk and
other analysis. As discussed in Section II.C.4.iii above, the
Commission has considered various alternatives to the adopted rules.
The Commission believes that the adopted amendments will provide the
Commission with the information it needs to perform its regulatory
obligations while minimizing
[[Page 41754]]
costs to market participants, SDRs, and DCOs.
In response to ISDA's comment that counterparties were unlikely to
build mechanisms to retain information on the SDR to which clearing
swaps were reported, the Commission believes that all swaps
counterparties should be aware of the SDR to which their swaps are
reported. The Commission notes that under existing Sec. 45.14(b) non-
reporting parties to swaps have obligations to correct any errors or
omissions in swaps data of which they become aware.
G. Examples of Cleared Swap Reporting Workflows Under the Adopted
Revisions
The following examples demonstrate the manner in which the adopted
revisions and additions to part 45 rules would operate in hypothetical
scenarios involving: (1) An off-facility swap not subject to the
clearing requirement with an SD/MSP reporting counterparty; and (2) a
swap executed on or pursuant to the rules of a SEF or DCM. All
references to part 45 appearing in the following examples refer to the
rules as adopted in this release. These examples are provided only for
illustrative purposes to demonstrate the applicability of certain rules
adopted in this release in hypothetical scenarios. The examples are not
intended to dictate any aspect of compliance, reporting or other
related processes and are not intended to cover all possible reporting
circumstances.
1. Off-Facility Swap Not Subject to the Clearing Requirement With SD/
MSP Reporting Counterparty
An off-facility swap that is not subject to the clearing
requirement is executed with an SD reporting counterparty. The SD
generates and assigns a USI for the swap pursuant to Sec. 45.5(b) and
reports all required swap creation data for the swap to SDR A pursuant
to Sec. 45.3(c). The SD submits the swap to a DCO for clearing and,
pursuant to Sec. 45.10(b), transmits to the DCO, at the time the swap
is submitted for clearing, the identity of SDR A and the USI for the
swap.
The DCO accepts the swap for clearing, extinguishing it and
replacing it with clearing swaps; the swap that was submitted for
clearing is now an original swap. The DCO generates and assigns a USI
to each clearing swap pursuant to Sec. 45.5(d) and, pursuant to Sec.
45.3(e), reports all required swap creation data for the clearing
swaps, including the original swap USI and all additional data fields
applicable to clearing swaps,\215\ to SDR B, which the DCO in this
example selected pursuant to Sec. 45.3(j)(2).
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\215\ Modifications to appendix 1 would require that PET data
include the original swap USI and all data categories and fields
applicable to clearing swaps. See infra, Section II.H.3.
---------------------------------------------------------------------------
Pursuant to Sec. 45.4(c), the DCO would report continuation data
for the original swap, including the original swap termination notice,
to SDR A using either the life cycle or state data methods, and using
the facilities, methods, or data standards provided or required by SDR
A.\216\ In addition to all other necessary continuation data, original
swap continuation data reported by the DCO, including the original swap
termination notice, would also include: The LEI of SDR B (the SDR to
which creation data for each clearing swap that replaced the particular
original swap was reported); \217\ the USI of the original swap as
transmitted to the DCO by the SD at the time the swap was submitted for
clearing; and the USI for each clearing swap.
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\216\ See 17 CFR 45.13(b).
\217\ The Commission notes that the amended Sec. 45.4(c)(2)(i)
requirement that the DCO include the LEI of the SDR to which all
required swap creation data for each clearing swap was reported by
the DCO applies whether or not swap data for the original and
clearing swaps is reported to the same SDR or to different SDRs. The
Commission expects that this information will be useful for
regulators with respect to their review of data pertaining to
cleared swap transactions, and to SDRs with respect to their
processing of swap data received, even when the original and
clearing swaps reside in the same SDR.
---------------------------------------------------------------------------
The DCO would also transmit to each counterparty to the clearing
swaps, as soon as technologically practicable after acceptance for
clearing, the USI of each clearing swap pursuant to Sec. 45.5(d)(2)
and the LEI of the SDR to which the clearing swap was reported pursuant
to Sec. 45.10(d)(1).
The DCO would have no further continuation data reporting
obligations with respect to the original swap thereafter. However, the
Commission notes that pursuant to Sec. 45.14, registered entities and
counterparties required to report swap data to an SDR must report any
known errors and omissions in the data reported.\218\ Additionally,
non-reporting counterparties are required to notify the reporting
counterparty of such errors or omissions.\219\ Finally, pursuant to
Sec. 49.10(a), SDR A would be required to accept and record any
original swap continuation data, including the original swap
termination.
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\218\ While the DCO would have no additional continuation data
reporting requirement with respect to the original swap after
reporting the termination upon acceptance for clearing, the DCO
remains obligated under Sec. 45.14 to correct errors and omissions
in the data reported by the DCO, including the termination notice.
For example, if a swap is submitted to, and accepted by, a DCO for
clearing, the DCO would report the termination notice of the
original swap to the SDR to which the creation data for the original
swap was reported. After submission of the termination notice to the
SDR, if the DCO should become aware of an error or omission in the
termination notice, the DCO is required, pursuant to Sec. 45.14, to
correct any errors and omissions in the data so reported as soon as
is technologically practicable after discovery of such errors or
omissions. Likewise, all reporting entities and swap counterparties
also remain obligated under Sec. 45.14 to correct errors and
omissions in all data reported by or on behalf of each entity and
swap counterparty to an SDR.
\219\ Pursuant to Sec. 45.14(b), if a counterparty to a swap
that is not the reporting counterparty as determined by Sec. 45.8
discovers any error or omission with respect to the continuation
data, including termination notice of the original swap, such non-
reporting counterparty is required to notify the DCO of each such
error or omission.
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2. Swaps Executed on or Pursuant to the Rules of a SEF or DCM
A swap is executed on or pursuant to the rules of a SEF or DCM. The
SEF/DCM generates and assigns a USI for the swap pursuant to Sec.
45.5(a) and reports all required swap creation data to SDR A pursuant
to Sec. 45.3(a). The SEF/DCM submits the swap to a DCO for clearing
and, pursuant to Sec. 45.10(a), transmits to the DCO, at the time the
swap is submitted for clearing, the identity of SDR A and the USI for
the swap.
The DCO accepts the swap for clearing, extinguishing it and
replacing it with clearing swaps; the swap that was submitted for
clearing is now an original swap. Under Sec. Sec. 45.5(d) and 45.3(e),
the DCO would generate and assign a USI to each clearing swap and
report all required swap creation data, including the original swap USI
and all additional data fields applicable to clearing swaps, for the
clearing swaps to registered SDR A, which, in this example, the DCO
selected pursuant to Sec. 45.3(j)(2).\220\
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\220\ Pursuant to Sec. 45.3(j)(2), the DCO could have selected
SDR B.
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Pursuant to Sec. 45.4(c), the DCO would report continuation data
for the original swap, including the original swap termination notice,
to SDR A using either the life cycle or state data methods, and using
the facilities, methods, or data standards provided or required by SDR
A. Such continuation data would include the LEI of SDR A (the SDR to
which creation data for each clearing swap that replaced the particular
original swap was reported), the USI of the original swap as
transmitted to the DCO by the SEF/DCM at the time the swap was
submitted for clearing, and the USI for each clearing swap.
The DCO would also transmit to each counterparty to the clearing
swaps, as soon as technologically practicable after
[[Page 41755]]
acceptance for clearing, the USI of each clearing swap pursuant to
Sec. 45.5(d)(2) and the LEI of the SDR to which the clearing swap was
reported pursuant to Sec. 45.10(d)(1).
The DCO would have no further continuation data reporting
obligations with respect to the original swap thereafter. However, the
Commission notes that pursuant to Sec. 45.14, registered entities and
counterparties required to report swap data to an SDR must report any
known errors and omissions in the data reported. Additionally, non-
reporting counterparties are also required to notify the reporting
counterparty of such errors or omissions.\221\ Finally, pursuant to
Sec. 49.10(a), SDR A would be required to accept and record the
original swap termination.
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\221\ See notes 220-221, supra.
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H. Primary Economic Terms Data--Amendments to Appendix 1 to Part 45--
Tables of Minimum Primary Economic Terms
The Commission's existing lists of minimum primary economic terms
for swaps in each swap asset class are found in tables in Exhibits A-D
of appendix 1 to part 45. Those tables include data elements that
reflect generic economic terms and conditions common to most
standardized products. They reflect the fact that PET data captures a
swap's basic nature and essential economic terms, and are provided in
order to ensure to the extent possible that all such essential terms,
where applicable, are included when required primary economic terms are
reported for each swap.
1. Proposed Amendments and Additions to Primary Economic Data Fields
The Commission proposed the following revisions to Exhibits A-D of
appendix 1, each of which is discussed in greater detail below: (1)
Modifications to existing PET data fields; (2) the addition of three
new PET data fields applicable to all reporting entities for all swaps;
and (3) the addition of a number of new data fields that must be
reported by DCOs for clearing swaps.\222\
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\222\ The Commission also proposes to revise each of the data
categories and fields that reference the clearing requirement
exception in CEA section 2(h)(7) to reflect that exceptions to, and
exemptions from, the clearing requirement, including the clearing
requirement exception in CEA section 2(h)(7), are set forth under
part 50 of the Commission's regulations. Additionally, the
Commission is making non-substantive edits to the following fields
in Exhibits A-D: Asset class; For a multi-asset class swap, an
indication of the primary asset class; For a multi-asset class swap,
an indication of the secondary asset class(es); and to the Clearing
member client account field in Exhibits C and D.
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i. Proposed Modifications to Existing PET Data Fields
The Commission proposed clarifying and conforming changes and minor
corrective modifications to the following existing PET data fields:
\223\
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\223\ See 80 FR 52544, 52558.
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The Unique Swap Identifier for the swap--The Commission
proposed to remove the explanatory note in the Comment section to this
data field in Exhibits A-D. The explanatory note is no longer necessary
because under proposed Sec. 45.5(d), the DCO would create the USI for
each clearing swap.
PET data fields that utilize a LEI \224\--The Commission
proposed conforming changes to the Comment sections to data fields in
Exhibits A-D that utilize the LEI to reflect that the CFTC has
designated an LEI system \225\ and to reflect that a substitute
identifier may be reported for natural person swap counterparties.
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\224\ These include the following fields in Exhibits A-D: The
Legal Entity Identifier of the reporting counterparty; If the swap
will be allocated, or is a post-allocation swap, the Legal Entity
Identifier of the agent; The Legal Entity Identifier of the non-
reporting party; Clearing venue; The identity of the counterparty
electing an exception or exemption to the clearing requirement under
Part 50 of this chapter (formerly The identity of the counterparty
electing the clearing requirement exception in CEA section 2(h)(7));
Exhibit A: An indication of the counterparty purchasing protection;
An indication of the counterparty selling protection; Information
identifying the reference entity; Exhibit D: Buyer, Seller.
\225\ The explanatory notes discussing a situation where no CFTC
designated LEI is yet available are no longer applicable. See
generally Order Extending the Designation of the Provider of Legal
Entity Identifiers To Be Used in Recordkeeping and Swap Data
Reporting Pursuant to the Commission's Regulations, 80 FR 44078
(Jul. 24, 2015).
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If no CFTC-approved LEI for the non-reporting counterparty
is yet available, the internal identifier for the non-reporting
counterparty used by the swap data repository--The Commission proposed
to remove this data field in each of the Exhibits. As noted above, the
CFTC has designated an LEI, and these PET data fields are no longer
applicable.
For a mixed swap reported to two non-dually-registered
swap data repositories, the identity of the other swap data repository
(if any) to which the swap is or will be reported--The Commission
proposed to add an explanatory note to the Comment section for this
data field in Exhibits A-D providing that the field value is the LEI of
the other SDR to which the swap is or will be reported.
Block trade indicator--The Commission proposed to modify
the Comment section to this data field in Exhibits A-D to reflect that
the CFTC has issued a final rulemaking regarding Procedures To
Establish Appropriate Minimum Block Sizes for Large Notional Off-
Facility Swaps and Block Trades.\226\
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\226\ See, generally, Procedures To Establish Appropriate
Minimum Block Sizes for Large Notional Off-Facility Swaps and Block
Trades, Final Rule, 78 FR 32866 (May 31, 2013).
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Execution venue--The Commission proposed to modify the
explanatory note in the Comment section to this data field in Exhibits
A-D to reflect that the CFTC has designated an LEI system and to
require the reporting of only the LEI of the SEF or DCM for swaps
executed on or pursuant to the rules of a SEF or DCM.
Clearing indicator--The Commission proposed modifications
to the explanatory note in the Comment section to this data field in
Exhibits A-D to provide for the reporting of a Yes/No indication of
whether the swap will be submitted for clearing to a DCO.
Clearing venue--The Commission proposed modifications to
the Comment section of this data field in Exhibits A-D to provide for
the reporting of only the LEI of the derivatives clearing organization.
ii. Proposed Addition of New PET Data Fields Applicable to All
Reporting Entities for All Swaps
The Commission proposed to add to Exhibits A-D the following new
PET fields which would be applicable to all reporting entities for all
swaps: \227\
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\227\ See 80 FR 52544, 52558-59.
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Asset class--This data field would provide the specific
asset class for the swap. Field values: Credit, equity, FX, interest
rates and other commodities.
An indication of whether the reporting counterparty is a
derivatives clearing organization with respect to the swap.
Clearing exception or exemption type--This field would
provide the type of clearing exception or exemption being claimed.
Field values: End user, Inter-affiliate or Cooperative.
iii. Proposed Addition of New PET Data Fields Applicable to DCOs for
Clearing Swaps
The Commission also proposed to modify Exhibits A-D in order to add
new PET fields specifically to be reported by DCOs for clearing
swaps.\228\ The proposed data fields that must be reported by DCOs for
clearing swaps include the following:
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\228\ See 80 FR 52544, 52559.
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Clearing swap USIs--This data field would provide the USI
for each clearing swap that replaces the original swap,
[[Page 41756]]
other than the USI for which the PET data is currently being reported.
Original swap USI--This data field would provide the USI
for the original swap that was replaced by clearing swaps.\229\
---------------------------------------------------------------------------
\229\ See also Sec. Sec. 45.10(a)(1), (b)(1)(iii), (b)(2)(ii),
(c)(1)(iii), (c)(2)(ii), and (c)(3) (requiring entities with
reporting obligations to transmit to the DCO for swaps submitted for
clearing ``the identity of the swap data repository to which
required swap creation data is reported'' and the USI for the swap).
---------------------------------------------------------------------------
Original swap SDR--This data field would provide the LEI
of the SDR to which the original swap was reported.\230\
---------------------------------------------------------------------------
\230\ Id.
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Clearing member LEI--This data field would provide the LEI
of the clearing member.
Clearing member client account--This data field would
provide the account number for the client, if applicable, of the
clearing member.
Origin (house or customer)--This data field would provide
information regarding whether the clearing member acted as principal
for a house trade or agent for a customer trade.
Clearing receipt timestamp--This data field would provide
the date and time at which the DCO received the original swap that was
submitted for clearing.
Clearing acceptance timestamp--This data field would
provide the date and time at which the DCO accepted the original swap
that was submitted for clearing.
3. Comments Received
i. General Comments
Eurex commented that there are no additional fields for clearing
swaps beyond those proposed which are necessary to understand a
clearing swap or the mechanics of the clearing process.\231\ JBA
cautioned that the definitions used in the markets are not always
consistent with those proposed by the NPRM, which places a significant
burden on small-sized market participants.\232\ JBA also noted
potential difficulties in reporting hybrid instruments because swaps
with multiple underlying assets may have their own market conventions
that do not fall under the categories in the proposed rules.\233\
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\231\ See Eurex Oct. 30, 2015 Letter, at 8.
\232\ See JBA Oct. 30, 2015 Letter, at 2-3.
\233\ See JBA Oct. 30, 2015 Letter, at 3.
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Several commenters addressed how PET data fields can operate in the
context of agency and principal clearing models. LCH recommended that
the Commission require a PET data field indicating if a swap is cleared
following an agency or principal model.\234\ ISDA recommended combining
the ``Clearing indicator'' and ``Origin (house or customer)'' fields
into a single ``Cleared'' field with four possible values--not cleared,
intended to be cleared, cleared (principal), and cleared (agency).\235\
ISDA commented that the current reporting system results in DCOs
reporting principal cleared trades in a manner designed for agency
clearing model. ISDA commented that this is at odds with European Union
requirements and may result in data reported to multiple jurisdictions
that is not reconcilable.\236\ Eurex commented that, in the principal
model, the DCO may not know the identity of the clearing member's
client; if the DCO is required to report that client's identity, it
would be necessary for anyone trading part 45 reportable swaps to
possess an LEI.\237\
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\234\ See LCH Oct. 30, 2015 Letter, at 4.
\235\ See ISDA Oct. 30, 2015 Letter, at 9-10.
\236\ See ISDA Oct. 30, 2015 Letter, at 11.
\237\ See Eurex Oct. 30, 2015 Letter, at 8.
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LCH commented that the ``Original swap USI,'' ``Original swap
SDR,'' and ``Clearing member client account'' PET fields for clearing
swaps should only be required ``if applicable.'' \238\
---------------------------------------------------------------------------
\238\ See LCH Oct. 30, 2015 Letter, at 4.
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ii. Comments on Specific Proposed PET Fields \239\
---------------------------------------------------------------------------
\239\ DTCC also commented on the proposed PET field for
``Clearing swap USIs,'' ``Original swap USIs,'' and ``Original swap
SDRs.'' See DTCC Oct. 30, 2015 Letter, at 8-9. These comments are
addressed in the discussions on proposed revisions to Sec. Sec.
45.5 and 45.8, supra Sections II.D and II.E.
---------------------------------------------------------------------------
ISDA supported the proposed modification of the clearing venue and
execution venue PET fields to require the submission of an LEI for such
venues.\240\ ISDA also supported the addition of the ``Asset class''
PET data field for all swaps.\241\ ISDA also commented on the removal
of internal counterparty identifiers as a valid submission for various
counterparty identification fields, noting that not all global
regulators require swap counterparties to obtain LEIs.\242\ ISDA
requested that the Commission continue to work with global regulators
to ensure uniform adoption of the LEI standard across jurisdictions.
---------------------------------------------------------------------------
\240\ See ISDA Oct. 30, 2015 Letter, at 8.
\241\ See id. at 9.
\242\ See id., at 8.
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ISDA commented that the PET field for ``Block trade indicator''
should be removed rather than amended because block trade status only
affects part 43 reporting.\243\ ISDA questioned the value that block
trade status would provide the Commission when evaluating swap
data.\244\ Further, block trade status may change over the life of a
swap and there is no guidance in part 43 or part 45 on how to deal with
such changes.\245\
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\243\ See id. at 8.
\244\ See id. at 8.
\245\ See id. at 8.
---------------------------------------------------------------------------
Finally, ISDA commented on the proposed ``Clearing exception or
exemption type'' PET field, which would require the reporting party to
identify the clearing exception or exemption exercised for a particular
swap.\246\ ISDA commented that it could be challenging and costly for
firms to implement this change, while providing duplicative information
because exemption elections must already be provided to SDRs.\247\ ISDA
recommended that the ``Clearing exception or exemption type'' PET field
acceptable values be limited to ``inter-affiliate'' and ``other,''
because inter-affiliate trades can be identified under existing
reporting standards.
---------------------------------------------------------------------------
\246\ See id. at 9.
\247\ See id. at 9.
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4. Final Rule Text
Having considered the comments provided in response to the NPRM,
the Commission is adopting the revisions to Appendix 1 of part 45 as
proposed.\248\ In response to the IDWG Request for Comment, some
commenters argued that the Commission should not require additional
data fields for reporting and should reduce the number of fields
currently required.\249\ The Commission explained in the NPRM that the
proposed modifications to existing PET data fields will add clarity to
the current reporting requirements. In regards to the additional
fields, the NPRM explained that the new fields will require the
reporting of information that is essential to the efficient operation
of reporting of
[[Page 41757]]
the swaps involved in a cleared swap transaction.\250\
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\248\ The Commission has also noted ITV's comment requesting the
addition of an indicator that a swap was part of a package
transaction. See ITV Oct. 30, 2015 Letter, at 3. While this comment
is beyond the scope of the NPRM, the Commission would note that the
Technical Specifications Request for Comment solicits input on this
topic.
\249\ See CMC May 27, 2014 Letter, at 3 (recommending that the
Commission reduce the number and complexity of data fields required
to improve data reporting); CME letter at 17-19 (providing
recommendations on modification for specific data fields and arguing
against requiring certain additional reporting); DTCC May 27, 2014
Letter, at 3, appendix at 15 (suggesting that the Commission
consider whether requiring fewer data elements would better enable
the Commission and other regulators to fulfill their regulatory
obligations); International Energy Credit Association May 27, 2014
Letter, at 5-6 (arguing that existing swap data reporting
requirements do not need to be expanded and that data reporting
would be improved by reducing the current reporting burden); Swiss
Re May 27, 2014 Letter, at 5 (describing reporting difficulties for
specific data fields).
\250\ See 80 FR 52544, 52559.
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Regarding the proposed PET fields for clearing swaps, as noted in
the NPRM, the Commission believes such data elements would more
accurately capture the additional, unique features of clearing swaps
that are not relevant to uncleared swaps.\251\ The Commission has noted
the number of comments addressing the issue of reporting swaps cleared
under the principal, as opposed to agency, model of clearing. In
particular, the Commission has reviewed ISDA's comment on combining the
``Clearing indicator'' and ``Origin (house or customer)'' fields. While
the Commission is adopting those fields as proposed, the Commission
would note that in the Technical Specifications Request for Comment,
the Commission solicited input on a potential data element indicating
agency versus principal clearing model, and on reporting package
transactions.\252\
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\251\ See 80 FR 52544, 52559.
\252\ See Draft Technical Specifications for Certain Swap Data
Elements, Request for Comment (Dec. 22, 2015), available at http://www.cftc.gov/idc/groups/public/@newsroom/documents/file/specificationsswapdata122215.pdf. (``Technical Specifications
Request for Comment'').
---------------------------------------------------------------------------
The Commission notes LCH's comment that certain PET data elements
should only be reported ``if applicable.'' The Commission notes that
appendix 1 to part 45 states that reporting parties should ``[e]nter N/
A for fields that are not applicable,'' which is repeated in the header
to every column in appendix 1. To ensure that reported swap data is
complete, the Commission would reiterate that any PET data field that
is not applicable to a particular swap should be marked ``N/A'' and not
left blank. Otherwise, the Commission cannot determine if a field is
inapplicable or if an applicable data element is missing.
The Commission declines to remove the ``Block trade indicator'' as
requested by ISDA because this indicator is necessary for a proper
review of market activity for surveillance and enforcement purposes.
The Commission would note that block trade status is most relevant for
part 43 real-time reporting purposes. Therefore, in response to ISDA's
request for guidance, the Commission would note that a swap's block
trade status should be determined as of the time of execution;
subsequent changes to notional amounts should not impact whether the
swap met the block trade threshold originally.
As for the ``Clearing exception or exemption type'' PET field, the
Commission has noted ISDA's comment that this field may be difficult to
implement. However, the Commission believes that additional PET fields
indicating clearing exception and exemption type are necessary for the
Commission to track compliance with Commission regulation Sec. 50.50.
While reporting counterparties are required under existing Sec.
50.50(b) to provide clearing exemption election forms with SDRs, the
existing swaps data reporting rules do not require that the reporting
counterparty indicate that such clearing exemption was elected for a
particular swap. Without such information provided as part of
transaction-specific swaps data, the Commission is unable to determine
which counterparties are relying on an exemption and how often such
elections are being made.\253\ This additional PET field will aid the
Commission in tracking compliance with the clearing mandate by
providing transaction specific information on why certain swaps were
uncleared.
---------------------------------------------------------------------------
\253\ As noted above, in addition to the end-user exception to
the swap clearing requirement set forth in section 2(h)(7) of the
CEA and codified in part 50 of the Commission's regulations, the
Commission has published two exemptions to the swap clearing
requirement: The inter-affiliate exemption (Sec. 50.52) and the
financial cooperative exemption (Sec. 50.51).
---------------------------------------------------------------------------
The asset class data field will assist the Commission in
identifying the asset class for swaps reported to registered SDRs
pursuant to part 45. The indication of whether the reporting
counterparty is a DCO with respect to the swap data field is consistent
with proposed Sec. 45.8(i), which designates the DCO as the reporting
counterparty for clearing swaps, and the existing PET data fields that
require certain information related to the registration status of the
counterparties to be included in PET data reporting.
III. Related Matters
A. Regulatory Flexibility Act
The Regulatory Flexibility Act (``RFA'') requires federal agencies,
in promulgating rules, to consider the impact of those rules on small
entities.\254\ The rules proposed herein 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. The Commission has previously established certain
definitions of ``small entities'' to be used by the Commission in
evaluating the impact of its rules on small entities in accordance with
the RFA.\255\ The Commission has previously determined that DCMs \256\
and DCOs \257\ are not small entities for the purpose of the RFA. The
Commission has also previously proposed that SDRs, SEFs, SDs, and MSPs
should not be considered to be small entities.\258\
---------------------------------------------------------------------------
\254\ See 5 U.S.C. 601 et seq.
\255\ 47 FR 18618, 18618-21, Apr. 30, 1982.
\256\ Id.
\257\ 66 FR 45604, 45609, Aug. 29, 2001.
\258\ Swap Data Recordkeeping and Reporting, Notice of Proposed
Rulemaking, (``Part 45 NPRM'') 75 FR 76574, 76595 (Dec. 8, 2010)
(discussing why SDRs, SEFs, SDs, and MSPs should not be considered
small entities).
---------------------------------------------------------------------------
The Final Part 45 Rulemaking and preceding proposal discussed how
certain non-SD/MSP counterparties could be considered small entities in
certain limited situations, but concluded that part 45 does not have a
significant impact on a substantial number of small entities.\259\ The
modifications to part 45 adopted herein do not affect that conclusion,
or the reasoning behind it, and therefore the Commission does not
believe that these adopted rules will have a significant economic
impact on a substantial number of small entities. To the extent that
this rulemaking has any significant impact on small entities, it
removes some reporting obligations by explicitly putting the obligation
to terminate original swaps on DCOs accepting those swaps.
---------------------------------------------------------------------------
\259\ Final Part 45 Rulemaking, 77 FR 2136, 2170-71 (discussion
for non-SD/MSP counterparties); Part 45 NPRM, 75 FR 76574, 76595
(discussion for non-SD/MSP counterparties).
---------------------------------------------------------------------------
Therefore, the Chairman, on behalf of the Commission, pursuant to 5
U.S.C. 605(b), hereby certifies that the adopted rules will not have a
significant economic impact on a substantial number of small entities.
B. Paperwork Reduction Act
The purposes of the Paperwork Reduction Act of 1995, 44 U.S.C. 3501
et seq. (``PRA'') are, among other things, to minimize the paperwork
burden to the private sector, to ensure that any collection of
information by a government agency is put to the greatest possible
uses, and to minimize duplicative information collections across the
government.\260\ The PRA applies to all information, regardless of form
or format, whenever the government is obtaining, causing to be
obtained, or soliciting information, and includes required disclosure
to third parties or the public, of facts or opinions, when the
information collection calls for answers to identical questions posed
to, or identical reporting or recordkeeping requirements imposed on,
ten or more persons.\261\ The
[[Page 41758]]
PRA requirements have been determined to include not only mandatory but
also voluntary information collections, and include both written and
oral communications.\262\ Under the PRA, 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 from
the Office of Management and Budget (``OMB''). The OMB control number
for the information collection associated with part 45 swaps reporting
is 3038-0096.\263\ Because reporting entities under part 45 would also
be required to report swaps pursuant to part 43, where applicable, some
of the burden associated with swaps reporting under part 45 is covered
in the information collection covering real-time swaps reporting
pursuant to part 43.\264\
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\260\ See 44 U.S.C. 3501.
\261\ See 44 U.S.C. 3502.
\262\ See 5 CFR 1320.3(c)(1).
\263\ The NPRM improperly cited information collection 3038-
0089, rather than 3038-0096, as the collection relating to swaps
reporting under part 45. However, the NPRM's discussion of what
information is collected and the burden estimates for swaps
reporting under part 45 correctly described collection 3038-0096,
which is the basis of this PRA discussion.
\264\ See Information Collection 3038-0070; see also 77 FR 2136,
2174. (``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 needed 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.'').
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The Commission intends to amend existing collection 3038-0096 to
account for adjustments to reporting entities' swaps data reporting
systems necessitated by this release. Information collection 3038-0096
\265\ includes an estimate of burden hours and costs associated with
various requirements of part 45 swaps reporting and recordkeeping,\266\
including the reporting of creation data under Sec. 45.3 and
continuation data under Sec. 45.4,\267\ the maintenance of an internal
order management system (``OMS''), and personnel needed to maintain a
compliance program in support of an OMS system. The intended amendment
to the collection will add an estimate for the burden associated (a)
with changing reporting systems to comply with changes to the required
data to be reported under Sec. 45.3 and Sec. 45.4, and (b) with
requirements that DCOs potentially connect to all registered SDRs. The
Commission will be filing to update this information collection with
OMB prior to the effective date of this release. This update will be
publicly noticed and made available for comment in the Federal
Register.
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\265\ The Commission issued a notice of intent to renew
information collection 3038-0096 on August 7, 2015. See Notice of
Intent to Renew Collection 3038-0096, 80 FR 47477 (Aug. 7, 2015).
The Commission received no comments on this notice of intent to
renew. The comment file is available at http://comments.cftc.gov/PublicComments/CommentList.aspx?id=1608. The Office of Management
and Budget approved without change the renewal of this information
collection on December 21, 2015.
\266\ Supporting documentation for the renewal of information
collection 3038-0096 is available at http://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=201508-3038-002.
\267\ ``Creation data'' under Sec. 45.3 includes all PET data
fields listed in appendix 1 to part 45, as well as all
``confirmation data,'' which includes all terms of the swap matched
and agreed upon by the parties. ``Continuation data'' reporting
under Sec. 45.4 requires a reporting entity to ensure that all data
on a swap is kept current and accurate, including any changes to
primary economic terms.
---------------------------------------------------------------------------
The Commission received several comments on the costs associated
with part 45 swaps reporting that could implicate PRA burdens.\268\
Regarding the addition of PET fields applicable to all swaps, ISDA
commented that the PET field for ``clearing exception or exemption
type'' would be ``very challenging and costly'' to implement.\269\
However, neither ISDA nor any other commenter provided information
quantifying the cost to update reporting systems to account for the
modified and additional PET fields. As discussed more extensively in
Section III.C.9, the information required to be reported in the
modified ``clearing exception or exemption type'' is also already in
the possession of the reporting entity; changes to reporting systems
required to report this field would involve adding a known piece of
information to the message reported to an SDR. Regarding new PET fields
for clearing swaps, Eurex commented that DCOs would need to collect
data from the original swap counterparties or trading venue to be able
to report these fields.\270\ The information required to report these
PET fields is either generated by the DCO itself (such as clearing swap
USI, clearing member LEI, clearing member internal identifier, house/
customer account flag, and receipt and clearing timestamps) or should
be included in the clearing member's submission of a swap to the DCO
for clearing (such as the original swap USI and original swap SDR).
While the Commission believes that reporting entities already possess
information required to report the added and amended PET fields, the
Commission intends to amend collection 3038-0096 to account for changes
that reporting entities must make to their reporting systems to comply
with these new and amended fields.
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\268\ In addition, FSR requested that the Commission promulgate
rules to standardize data elements. See FSR Oct. 30, 2015 Letter, at
4. While this comment would relate to the burden of reporting for
part 45 purposes, it is beyond the scope of the NPRM. The Commission
would note Commission staff's efforts in connection with the
Technical Specifications Request for Comment, discussed in n. 42.
The Commission also received some comments suggesting that the
Commission not require the reporting of intended-to-be-cleared
original swaps, or require DCOs to report such swaps. See, e.g.,
CEWG Oct. 30, 2015 Letter, at 2-3; CMC Oct. 30, 2015 Letter, at 2.
While not requiring such reporting would reduce the burden on
original swap reporting entities, the NPRM and adopted amendments to
part 45 do not change the existing requirement to report such swaps.
Therefore, this comment is beyond the scope of the NPRM. See, supra,
Section II.B.4.iii.
\269\ ISDA Oct. 30, 2015 Letter, at 9.
\270\ See Eurex Oct. 30, 2015 Letter, at 5.
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Some commenters raised concerns that requiring DCOs to report
continuation data for original swaps to the SDR to which the original
swap was reported could increase costs for DCOs as they may need to
connect to SDRs to which they do not currently have a connection.\271\
The Commission understands that DCOs already may report terminations to
the original SDR, and to the extent these reporting systems are already
implemented the new rules will not introduce additional costs for these
DCOs. Moreover, the costs of additional SDR connections that may not
yet be in place are addressed by the Commission more fully below at
III.C.5. However, the Commission recognizes that requiring DCOs to
potentially connect to more than one SDR in order to report
continuation data for original swaps may require an update to the
existing information collection 3038-0096. The Commission will be
filing to update this information collection with OMB prior to the
effective date of this release. This update will be publicly noticed
and made available for comment in the Federal Register.
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\271\ See e.g., Eurex Oct. 30, 2015 Letter, at 5, 9; LedgerX
Oct. 30, 2015 Letter, at 2; LCH Oct. 30, 2015 Letter, at 3. The
Commission notes that another commenter stated that ``DCOs have
already made connections with the major CFTC-registered SDRs.''
(DTCC Oct. 30, 2015, Letter at 5).
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C. Cost-Benefit Considerations
1. Introduction
Section 15(a) of the CEA requires the Commission to consider the
costs and benefits of its actions before promulgating a regulation
under the CEA or issuing certain orders.\272\ Section 15(a) further
specifies that the costs and benefits shall be evaluated in light of
five broad areas of market and public concern: (1) Protection of market
[[Page 41759]]
participants and the public; (2) efficiency, competitiveness, and
financial integrity of futures markets; (3) price discovery; (4) sound
risk management practices; and (5) other public interest
considerations. The Commission considers the costs and benefits
resulting from its discretionary determinations with respect to the
section 15(a) factors.
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\272\ 7 U.S.C. 19(a).
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The Commission is amending and making additions to Sec. Sec. 45.1,
45.3, 45.4, 45.5, 45.8, 45.10, and appendix 1 to part 45 in order to
provide clarity to counterparties to a swap and registered entities
regarding their part 45 reporting obligations with respect to cleared
swap transactions and to improve the efficiency of data collection and
maintenance associated with the reporting of the swaps involved in a
cleared swap transaction. The final rule adopts revisions to part 45 as
proposed in the NPRM.
2. Background
The swap data reporting framework adopted in the Final Part 45
Rulemaking \273\ was largely based on the mechanisms for the trading
and execution of uncleared swaps. The plain language of the existing
part 45 rules presumes the existence of a single, continuous swap both
prior to and after acceptance of a swap for clearing by a DCO. Under
that framework, registered entities and counterparties would each
report data with respect to a single swap when such swap is initially
executed, referred to as ``creation data,'' and over the course of the
swap's existence, referred to as ``continuation data.'' \274\
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\273\ See 77 FR 2136.
\274\ Section 45.1 defines ``required swap creation data'' as
primary economic terms data and confirmation data. Section 45.1
defines ``primary economic terms data'' as 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 and defines
``confirmation data'' as all of the terms of a swap matched and
agreed upon by the counterparties in confirming the swap. 17 CFR
45.1. 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. Id.
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The Commission has since had additional opportunities to consult
with industry and with other regulators, including the SEC,\275\ and to
observe how the part 45 regulations function in practice with respect
to swaps that are cleared, including how the implementation of part 45
interacts with the implementation of part 39 of the Commission's
regulations, which contains provisions applicable to DCOs.
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\275\ The SEC proposed certain new rules and rule amendments to
Regulation SBSR governing reporting in the context of security-based
swaps. See Regulation SBSR--Reporting and Dissemination of Security-
Based Swap Information, 80 FR 14740 (Mar. 19, 2015).
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In particular, Sec. 39.12(b)(6) provides that upon acceptance of a
swap by a DCO for clearing, the original swap is extinguished and
replaced by equal and opposite swaps, with the DCO as the counterparty
to each such swap.\276\ The original swap that is extinguished upon
acceptance for clearing is commonly referred to as the ``alpha'' swap
and the equal and opposite swaps that replace the original swap are
commonly referred to as ``beta'' and ``gamma'' swaps. The Commission is
of the view that the existing part 45 regulations should be amended to
better accommodate the multi-swap framework of Sec. 39.12(b)(6) by
explicitly addressing beta and gamma swaps as distinct swaps for
purposes of part 45 reporting.\277\
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\276\ See 17 CFR 39.12(b)(6) (requiring a DCO that clears swaps
to have rules providing that, upon acceptance of a swap by the [DCO]
for clearing: (i) The original swap is extinguished; (ii) the
original swap is replaced by an equal and opposite swap between the
[DCO] and each clearing member acting as principal for a house
trading or acting as agent for a customer trade). Subsequent to
adoption of the Final Part 45 Rulemaking, the Commission affirmed
that the multi-swap framework (comprising separate and unique
original and resulting swaps) should apply for part 45 reporting
purposes. See Statement of the Commission on the Approval of Chicago
Mercantile Exchange Rule 1001 (Mar. 6, 2013), at 6, available at:
http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/statementofthecommission.pdf.
\277\ The Commission also notes that a single swap reporting
framework for cleared swaps, as opposed to a multi-swap framework
like the one contemplated by Sec. 39.12(b)(6), would likely not be
consistent with the approach proposed by the SEC in its release
proposing certain new rules and rule amendments to Regulation SBSR.
See Regulation SBSR--Reporting and Dissemination of Security-Based
Swap Information, 80 FR 14740 (Mar. 19, 2015). The Commission
discusses the benefits associated with harmonizing its approach with
that of other regulators later in this release.
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The existing part 45 regulations do not explicitly address the
reporting of ``alpha,'' ``beta,'' and ``gamma'' swaps; however,
industry practice has evolved to address such reporting. The Commission
understands that market participants generally report part 45 data for
cleared swap transactions in conformance with the framework described
in Sec. 39.12(b)(6), where separate swaps (alphas, betas, and gammas)
are represented individually in reported swap data. The Commission
understands that under existing market practice: SEFs, DCMs and
reporting counterparties generally report required swap creation data
for alpha swaps to the SDR of their choice; DCOs that accept alpha
swaps for clearing generally report required swap creation data for the
beta and gamma swaps that result from clearing novation of the alpha
swap to the SDR of their choice (which may be different than the SDR to
which the alpha swap was reported); such DCOs do not in all cases
include the USI of the alpha swap in creation data reported for the
beta and gamma swaps; and that DCOs may inconsistently report, and SDRs
may inconsistently accept and process, alpha swap terminations.\278\
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\278\ While the above reflects the Commission's general
understanding of industry practice with respect to the reporting of
component parts of a cleared swap transaction, the Commission does
not possess complete information regarding certain details and
nuances of the reporting practices of different registered entities
and reporting counterparties. For instance, in some cases, the
Commission generally does not possess sufficient information to
ascertain the period of time between the DCO's acceptance of an
alpha swap for clearing and the DCO's report of creation data for
beta and gamma swaps. The Commission posed questions eliciting
specific details or nuances of industry practice that are likely to
have cost/benefit implications in the relevant sections of the NPRM.
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The gaps between the existing part 45 regulations, Sec.
39.12(b)(6), and certain industry practices, including those outlined
above, have likely contributed to a lack of certainty regarding the
applicability of the part 45 regulations to beta and gamma swaps,
including which registered entity or counterparty is required to report
creation data and/or continuation data for such swaps, and the manner
in which such swaps must be reported. The Commission understands that
this uncertainty presents compliance challenges for registered entities
and reporting counterparties.
Additionally, the lack of clarity regarding existing part 45
obligations with respect to beta and gamma swaps has impacted the
accuracy, quality, and usefulness of data that is reported for cleared
swaps. For instance, inconsistent DCO reporting of alpha swap USIs in
creation data for beta and gamma swaps hinders the Commission's ability
to trace the history of a cleared swap transaction from execution
between the original counterparties to clearing novation. Even in cases
where the Commission can ascertain the USI of a specific alpha swap
that was replaced by beta and gamma swaps, SDR data available to the
Commission at times misleadingly shows some alpha swaps as remaining
open between the original counterparties, when in actuality such swaps
have been extinguished through clearing novation. The inability to
determine whether an alpha swap has been terminated impedes the
Commission's ability to analyze cleared swap activity and to review
swap activity for compliance with the clearing
[[Page 41760]]
requirement.\279\ If alpha swaps have been terminated, yet appear to
remain open, then a risk of double counting swap notional exposures can
result, which would impede the Commission's ability to analyze and
study swaps market activity using accurate information. The inability
to link the different swaps in a cleared swap transaction also impedes
the Commission's ability to assess exposures of market participants in
the uncleared and cleared swaps markets. Additionally, certain creation
data fields that are currently populated for beta and gamma swaps prove
difficult to interpret by the Commission, and thus can result in
inconsistencies in their application and reporting among alpha, beta,
and gamma swaps, hindering the Commission's ability to interpret and
analyze data regarding beta and gamma swaps.
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\279\ Commission staff recently noted difficulty in evaluating
the proper de minimis level of activity for swap dealer registration
under Commission regulation 1.3(ggg), in part due to difficulties
linking alpha swaps with resulting beta and gamma swaps. See Swap
Dealer De Minimis Exception Preliminary Report (Nov. 18, 2015), at
13-14, available at http://www.cftc.gov/idc/groups/public/@swaps/documents/file/dfreport_sddeminis_1115.pdf. In the report, Staff
noted that the finalization and implementation of this final rule
release for reporting of cleared swaps should help to mitigate this
issue going forward.
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The revisions and additions that are being adopted in this final
rulemaking would amend part 45 to differentiate reporting requirements
for cleared and uncleared swap transactions, and which explicitly
address swap counterparty and registered entity reporting requirements
for each component (e.g., alpha, beta, and gamma) of a cleared swap
transaction. This rulemaking will remove uncertainty as to which
counterparty to a swap is responsible for reporting creation data for
each of the various components of a cleared swap transaction. The final
rule makes clear whose obligation it is to report the termination of
the original swap upon acceptance of a swap by a DCO for clearing.
These additional details include where, when, and how to report the
swap data pertaining to the establishment of the beta and gamma swaps
and the reporting of the termination message to the SDR that originally
received the swap data for the alpha swap. This final rule is also
intended to improve the efficiency of data collection and maintenance
associated with the reporting of the swaps involved in a cleared swap
transaction and to improve the accuracy, quality, and usefulness of
data that is reported for cleared swaps and alpha swaps that have been
extinguished due to clearing novation.
The Commission believes that the baseline for this consideration of
costs and benefits is generally the existing part 45 regulations, which
were adopted in 2011.\280\ However, as described above, in certain
circumstances, industry practice has been informed by certain
provisions of part 39 and by subsequent industry developments, and thus
does not necessarily reflect the plain language of the existing part 45
regulations. In those circumstances, the baseline for this
consideration of costs and benefits will be industry practice.
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\280\ See Swap Data Recordkeeping and Reporting Requirements,
Final Rule, 77 FR 2136 (Jan. 13, 2012).
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The following consideration of costs and benefits is organized
according to the rules and rule amendments put forth in this final
rulemaking. For each rule, the Commission summarizes the amendments
\281\ and identifies and discusses the costs and benefits attributable
to them, including a discussion of the commenters' suggestions with
regards to the costs and benefits of the amendments present in the IDWG
Request for Comment and the NPRM.\282\ The Commission then considers
the costs and benefits of certain alternatives to the rules put forth
in this final rulemaking, as well as the costs and benefits of all of
the rules jointly in light of the five public interest considerations
set out in section 15(a) of the CEA.
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\281\ As described in detail throughout Section II of this final
release, the Commission is also adopting a number of non-
substantive, conforming rule amendments in this release, such as
renumbering certain provisions and modifying the wording of existing
provisions to ensure consistency with the wording in newly proposed
definitions. Non-substantive amendments of this nature will not be
discussed in the cost-benefit portion of this final release.
\282\ See IDWG Request for Comment, 79 FR 16689 (Mar. 26, 2014);
NPRM, 80 FR 52544, 52570 (Aug. 31, 2015).
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The Commission notes that this consideration of costs and benefits
is based on the understanding that the swaps market functions
internationally, with many transactions involving U.S. firms taking
place across international boundaries, with some Commission registrants
being organized outside of the United States, with leading industry
members typically conducting operations both within and outside the
United States, and with industry members commonly following
substantially similar business practices wherever located. Where the
Commission does not specifically refer to matters of location, the
below discussion of costs and benefits refers to the effects of the
proposed rules on all swaps activity subject to the amended
regulations, whether by virtue of the activity's physical location in
the United States or by virtue of the activity's connection with or
effect on U.S. commerce under CEA section 2(i).\283\ The Commission
also notes that the existing part 45 regulations generally contemplate
situations where a swap may be required to be reported pursuant to U.S.
law and the law of another jurisdiction.\284\
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\283\ 7 U.S.C. 2(i). Section 2(i)(1) makes the swaps provisions
of the Dodd-Frank Act, and Commission regulations promulgated under
those provisions, applicable to activities outside the United States
that ``have a direct and significant connection activities in, or
effect on, commerce of the United States;'' while section 2(i)(2)
makes them applicable to activities outside the United States that
contravene Commission rules promulgated to prevent evasion of Dodd-
Frank. Application of section 2(i)(1) to the existing part 45
regulations with respect to SDs/MSPs and non-SD/non-MSP
counterparties is discussed in the Commission's non-binding
Interpretive Guidance and Policy Statement Regarding Compliance With
Certain Swap Regulations, 78 FR 45292 (July 26, 2013).
\284\ See 17 CFR 45.1 (defining ``International swap'' to mean 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.); see also 17 CFR
45.3(h) (prescribing requirements with respect to international
swaps).
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3. Definitions--Amendments to Sec. 45.1
The adopted amendments to Sec. 45.1 revise the definition of
``derivatives clearing organization'' for purposes of part 45 to update
a reference to an existing definition of ``derivatives clearing
organization'' and make clear that part 45 applies to DCOs registered
with the Commission. The adopted amendments to Sec. 45.1 will also add
new definitions for ``original swaps'' (swaps that have been accepted
for clearing by a DCO, commonly referred to as ``alpha'' swaps) and
``clearing swaps'' (swaps created pursuant to the rules of a DCO that
have a DCO as a counterparty, including, but not limited to, any swap
that replaces an original swap that was extinguished upon acceptance
for clearing, commonly referred to as ``beta'' and ``gamma'' swaps).
The terms original swap and clearing swaps will be used throughout
amended part 45 to help clarify reporting obligations for each swap
involved in a cleared swap transaction. Likewise, the Commission will
use the defined terms ``original swaps'' and ``clearing swaps''
throughout this consideration of costs and benefits. Given that these
terms are a product of this release and are not yet part of industry
nomenclature, the Commission will also use the terms ``alpha, beta, and
gamma'' throughout this consideration of costs and benefits when
discussing existing industry
[[Page 41761]]
practice and when helpful for purposes of clarification.\285\
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\285\ The Commission determined to utilize the proposed to be
defined terms ``original swap'' and ``clearing swaps'' in this
release rather than the industry terms ``alpha, beta, and gamma''
because while a cleared-swap transaction generally comprises an
original swap that is terminated upon novation and the equal and
opposite swaps that replace it, the Commission is aware of certain
circumstances in which a clearing swap may not involve the
replacement of an original swap (e.g., an open offer swap, as
discussed earlier in this release). See supra, Section II.A.
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The Commission notes that commenters did not submit any comments
relevant to the costs and benefits of the proposed amendments to Sec.
45.1.
i. Costs
The Commission does not anticipate that these definitions, in and
of themselves, impose additional costs on DCOs or market participants.
However, these definitions will be referenced in other proposed
substantive provisions and the costs and benefits of those substantive
requirements will be discussed in the relevant sections below.
ii. Benefits
As discussed earlier in this release, the plain language of the
existing part 45 regulations presumes the existence of one continuous
swap and does not explicitly acknowledge distinct reporting
requirements for the individual components (i.e., alphas, betas, and
gammas) of a cleared swap transaction. However, industry practice is
generally to report part 45 data for cleared swap transactions in
conformance with the multi-swap framework described in Sec.
39.12(b)(6) (i.e., to report alphas, betas, and gammas separately). The
definitions of original and clearing swaps, along with the other
revisions to part 45 covered in this release, will help align the part
45 regulations with part 39 and with certain industry practices and
will explicitly delineate the swap data reporting obligations
associated with each of the swaps involved in a cleared swap
transaction.\286\
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\286\ The Commission acknowledges that the alternative
approaches to the reporting of cleared swap transactions separately
discussed in Section III.C.10, Consideration of Alternatives, later
in this release could also provide these benefits for registered
entities and swap counterparties. However, for the reasons explained
in that section, the Commission is of the view that the proposed
approach is more consistent with industry practice than the
alternatives.
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4. Creation Data Reporting by DCOs--Amendments to Sec. 45.3
Existing Sec. 45.3 requires reporting to an SDR of two types of
``creation data'' generated in connection with a swap's creation:
``primary economic terms data'' and ``confirmation data.'' \287\
Regulation 45.3 governs what creation data must be reported, who must
report it, and deadlines for its reporting.
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\287\ Section 45.1 defines ``required swap creation data'' as
primary economic terms data and confirmation data. Section 45.1
defines ``primary economic terms data'' as 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 and defines
``confirmation data'' as all of the terms of a swap matched and
agreed upon by the counterparties in confirming the swap. 17 CFR
45.1. 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.'' Id.
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Amended Sec. 45.3(e) will govern creation data reporting
requirements for swaps that fall under the proposed definition of
clearing swaps. Amended Sec. 45.3(e) will also require a DCO, as
reporting counterparty under adopted Sec. 45.8(i),\288\ to report all
required swap creation data for each clearing swap as soon as
technologically practicable after acceptance of an original swap by a
DCO for clearing (in the event that the clearing swap replaces an
original swap) or as soon as technologically practicable after
execution of the clearing swap (in the event that the clearing swap
does not replace an original swap).\289\
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\288\ As discussed in greater detail below, adopted Sec.
45.8(i) will designate the DCO as the reporting counterparty for
clearing swaps.
\289\ As noted earlier in this release, the amended definition
of ``clearing swap'' is intended to encompass: (1) Swaps that
replace an original swap and to which the DCO is a counterparty
(i.e., swaps commonly known as betas and gammas) and (2) all other
swaps to which the DCO is a counterparty (even if such swap does not
replace an original swap). The Commission understands that there may
be instances in which a clearing swap does not replace an original
swap. For example, in the preamble to the part 39 adopting release,
the Commission noted that ``open offer'' systems are acceptable
under Sec. 39.12(b)(6), stating that ``Effectively, under an open
offer system there is no `original' swap between executing parties
that needs to be novated; the swap that is created upon execution is
between the DCO and the clearing member, acting either as principal
or agent.''). See Derivatives Clearing Organization General
Provisions and Core Principles, Final Rule 76 FR 69334, 69361 (Nov.
8, 2011).
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Swaps other than clearing swaps, including swaps that later become
original swaps by virtue of their acceptance for clearing by a DCO,
will continue to be reported as currently required under existing Sec.
45.3(a)-(d). The Commission is thus following an approach to creation
data reporting that will require reporting counterparties or SEFs/DCMs
to report creation data for swaps commonly known as alpha swaps, and
that will require DCOs to report creation data for swaps commonly known
as beta and gamma swaps, and for any other swaps to which the DCO is a
counterparty.\290\
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\290\ Because the reporting counterparty or SEF/DCM are
currently required under Part 45 to report a swap that would become
an original swap under this final release, there is no need to
conduct a cost-benefit consideration of this requirement.
Alternatives to the current reporting approach for original swaps
are discussed in the Consideration of Alternatives section, Section
III.C.10, below.
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With respect to confirmation data reporting, for swaps that are
intended to be cleared at the time of execution, the Commission is
amending Sec. 45.3(a), (b), (c)(1)(iii), (c)(2)(iii), and (d)(2) to
remove certain existing confirmation data reporting requirements. Under
the modified rules, SEFs/DCMs and reporting counterparties will
continue to be required to report PET data as part of their creation
data reporting, but will not be required to report confirmation data
for swaps that are intended to be submitted to a DCO for clearing at
the time of execution. Instead, the DCO will be required to report
confirmation data for clearing swaps pursuant to proposed Sec.
45.3(e).
The Commission is also amending Sec. 45.3(j), which will provide
that: for swaps executed on or pursuant to the rules of a SEF or DCM
(including swaps that become original swaps), the SEF or DCM will have
the obligation to choose the SDR for such swaps; for all other swaps
(including for off-facility swaps and/or clearing swaps) the reporting
counterparty (as determined under Sec. 45.8) will have the obligation
to choose the SDR.
The Commission has considered the letters sent by commenters to the
cost-benefit considerations of proposed amendments to Sec. 45.3.
Several comments were received on the elimination of the requirement
for reporting confirmation data for swaps that are intended to be
cleared. On the cost-benefit considerations front, Markit commented
that eliminating the requirement for reporting confirmation data for
swaps that are intended to be cleared, while still maintaining the
requirement to report primary economic terms data, will not benefit
reporting workflows and that there is little incremental cost to report
confirmation data as reporting systems are set-up to capture that
information already.\291\
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\291\ See Markit Oct. 30, 2015 Letter, at 2-3.
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With regards to eliminating the requirement for reporting
confirmation data, the Commission acknowledges that there might be
incremental cost savings due to the elimination of this requirement, as
suggested by commenters. Nevertheless, the Commission believes that
there is no cost associated with the elimination of
[[Page 41762]]
this requirement and that confirmation data requirements for clearing
swaps provide the Commission with a sufficient representation of the
confirmation data for a cleared swap transaction. As a result, the
Commission believes that there are benefits in the form of cost savings
that need to be considered in the elimination of this requirement.
Other commenters responded to the question of which entity should
be responsible for reporting creation data for swaps that will become
original swaps. Commenters were split on this question. Some commenters
suggested that the DCO, rather than the reporting counterparty, should
be responsible for reporting the creation data for that swap.\292\ CME
commented that assigning all the reporting obligations for original and
clearing swaps to the DCO is a better and simpler way to address alpha
swap reporting, and will eliminate the need to reconcile original and
clearing swaps across SDRs.\293\ CMC similarly commented that DCOs are
in the best position to report on swaps that are accepted or rejected
for clearing and should assume all reporting obligations for cleared
swaps, including all reporting of swaps that are intended to be
cleared.\294\ AIMA likewise suggested that if the Commission continues
the reporting requirements associated with original swaps, assigning
the reporting obligations to the DCOs will remove reporting burdens and
the risk of data fragmentation across SDRs.\295\
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\292\ See e.g., CME Oct. 30, 2015 Letter, at 2-3; CMC Oct. 30,
2015 Letter, at 2-3; AIMA Oct. 30, 2015 Letter, at 6; CEWG Oct. 30,
2015 Letter, at 3.
\293\ See CME Oct. 30, 2015 Letter, at 3.
\294\ See CMC Oct. 30, 2015 Letter, at 2.
\295\ See AIMA Oct. 30, 2015 Letter, at 6.
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Other commenters recommended that the Commission continue to
require the reporting counterparty to report creation data for those
swaps that will become original swaps.\296\ LCH commented that the
reporting counterparty of a trade should always be a party to the
transaction and therefore, in the case of a swap that will become an
original swap, the DCO would not be better suited than the SEF, DCM, or
reporting counterparty to report the creation data.\297\ Eurex
suggested that assigning the reporting obligation of original swap
creation data to the DCO may present a timeliness issue depending on
when the DCO receives the necessary information from the
counterparties.\298\ ISDA likewise agreed that the obligation to report
swaps that become original swaps should remain with the reporting
counterparty for that swap.\299\
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\296\ See ISDA Oct. 30, 2015 Letter, at 4; LCH Oct. 30, 2015
Letter, at 2; Eurex Oct. 30, 2015 Letter, at 4.
\297\ See LCH Oct. 30, 2015 Letter, at 2.
\298\ See Eurex Oct. 30, 2015 Letter, at 4.
\299\ ISDA also commented in support of the Commission's
proposal to remove the provisions in Sec. 45.3 that excused a
reporting counterparty from reporting creation data for a swap
accepted for clearing before the primary economic terms reporting
deadline. See ISDA Oct. 30, 2015 Letter, at 4.
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Furthermore, certain commenters suggested that the reporting of any
creation data for swaps that will become original swaps is
unnecessary.\300\ AIMA commented that eliminating reporting for swaps
that are intended to be cleared at the time of execution will
significantly reduce complexity in the reporting regime and streamline
the reported data.\301\ AIMA also commented that the proposed reporting
approach for original swaps will not reduce data fragmentation.\302\
Similarly, EEI/EPSA suggested that there is little to no benefit to
original swap reporting for swaps that are intended to be cleared at
the time of execution and that counterparties should not be required to
report any creation data for such swaps.\303\
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\300\ See AIMA Oct. 30, 2015 Letter, at 2-6; EEI/EPSA Oct. 30,
2015 Letter, at 3; CEWG Oct. 30, 2015 Letter, at 2.
\301\ See AIMA Oct. 30, 2015 Letter, at 3.
\302\ See AIMA Oct. 30, 2015 Letter, at 4 (noting that reporting
original swap creation data to one SDR and reporting clearing swap
data to a different SDR may undermine data quality for the
Commission's supervisory purposes).
\303\ See EEI/EPSA Oct. 30, 2015 Letter, at 3.
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While the NPRM did not propose changing the existing obligation to
report swaps that become original swaps, and is therefore beyond the
scope of the NPRM, the Commission continues to believe that original
swaps contain essential information regarding the origins of cleared
swap transactions for market surveillance and audit-trail purposes. The
Commission's ability to trace the history of a cleared swap transaction
from execution between the original counterparties to clearing novation
relies on this information and this is a significant benefit to the
Commission in terms of understanding the market structure as well as
for surveillance purposes.
With respect to the issue of who reports creation data for those
swaps that will become original swaps, the Commission believes that the
requirement that the reporting counterparty report creation data for
those swaps that will become original swaps should remain. The
Commission believes there are significant benefits associated with
maintaining established industry workflows. Reporting counterparties
and registered entities have invested substantial time and resources to
report swaps (both cleared and not cleared) to SDRs, and DCOs have
invested substantial resources to report clearing swaps. The Commission
believes it would be efficient to make use of this existing
infrastructure and asking market participants to make changes to this
established workflow might be costly. The Commission acknowledges the
data fragmentation concerns raised by those that recommend DCOs report
original swap creation data. However, the Commission also recognizes
that requiring the DCOs, rather than the original reporting
counterparty, to report original swap creation data may present
challenges of its own.\304\ The Commission also believes that there are
significant benefits associated with maintaining accurate and timely
reporting of the required data fields and that this will outweigh data
fragmentation concerns for those situations where the original swap and
clearing swaps are reported to different SDRs.
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\304\ See e.g., Eurex Oct. 30, 2015 Letter, at 4 (suggesting
there could be timeliness issue depending on when the DCO receives
necessary information from counterparties to report creation data).
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The Commission has considered arguments made by the commenters with
respect to choice of SDR and believes that placing the obligation to
choose the SDR on the registered entity or counterparty that is
required to report the swap, rather than on another entity, will result
in more efficient data reporting. Allowing the first entity to report
data on a swap to choose the SDR will allow reporting entities to
select an SDR to which they have established connections; giving
another entity the ability to choose the SDR could require the first
reporting entities to connect to multiple SDRs. The Commission also
believes allowing the first reporting registered entity or counterparty
to choose the SDR will also promote competition among SDRs to provide
SDR services to a broad array of reporting entities.
This method of SDR selection also avoids the insertion of any
entity other than a party to the swap or facility where the transaction
is executed, into the decision as to how a registered entity or
counterparty fulfills its regulatory obligation to report initial
required swap creation data. As with the ``first-touch'' approach taken
with respect to the creation of USIs in part 45,\305\ the Commission
believes that the entity with the first reporting obligation should
select the SDR for that report. The Commission believes that such a
[[Page 41763]]
method of SDR selection will avoid delays in real-time reporting for
part 43 purposes. If DCOs were to select the SDR for an original swap,
the DCO would not be in a position to make such selection until after a
swap was accepted for clearing. Any delays in clearing would translate
into delays in reporting for both part 43 real-time reporting and part
45 reporting. Additionally, the registered entity or counterparty that
is required to report a swap pursuant to Sec. 45.8 may select an SDR
to which its technological systems are most suited or to which it
already has an established relationship, providing for the efficient
and accurate reporting of swap data. As a result, the Commission
believes that amendments to Sec. 45.3(j) simply codify existing
practice and will not impose any additional connection costs for DCOs
or SDRs. In addition, the Commission believes that allowing DCOs to
choose the SDRs to which they report creation and continuation data is
cost-minimizing for DCOs because it allows them to select the SDR which
is most cost effective.
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\305\ See Final Part 45 Rulemaking, 77 FR 2136, 2158 (Jan. 13,
2012).
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i. Costs
The Commission understands that under current industry practice,
DCOs commonly report to SDRs creation data for swaps that would fall
under the definition of clearing swaps. Accordingly, to the extent that
DCOs already have been reporting in conformance with adopted Sec.
45.3(e), the Commission does not expect the final rule to result in any
additional costs.
With respect to registered DCOs organized outside of the United
States, its territories, and possessions, that are subject to
supervision and regulation in a foreign jurisdiction, a home country
trade reporting regulatory regime may require the DCO to report swap
data to a trade repository in the home country jurisdiction. For
clearing swaps that a DCO would be required to report both to a
registered SDR pursuant to the amendments to part 45, and to a foreign
trade repository pursuant to a home country trade reporting regulatory
regime, the Commission acknowledged in the NPRM that a DCO could be
expected to incur some additional costs in satisfying both its CFTC and
home country reporting obligations, relative to a DCO that would only
be subject to part 45 reporting requirements. As also indicated in the
NPRM, DCOs are not currently required to provide such cost information
to the Commission, the Commission lacks access to the information
needed to assess the magnitude of the costs relating to compliance with
reporting obligations in multiple jurisdictions. In addition, the
Commission did not receive any comments on, nor estimates of, the costs
relating to compliance with reporting obligations in multiple
jurisdictions. In terms of any potential costs, the Commission expects
that industry technological innovations may effectively allow for
satisfaction of swap data reporting requirements across more than one
jurisdiction by means of a single data submission, and that a
streamlined reporting process or other technology and operational
enhancements could mitigate the cost of satisfying reporting
requirements for swaps that may be required to be reported to a foreign
trade repository under a home country regulatory regime as well as to a
registered SDR pursuant to amendments to part 45.\306\ Additionally,
the Commission anticipates that adopting an approach to the reporting
of cleared swaps in the United States that is, to the extent possible,
consistent with the approaches adopted in other jurisdictions may also
minimize compliance costs for entities operating in multiple
jurisdictions.\307\ The Commission also notes that any costs arising
from reporting swap data with respect to more than one jurisdiction
could already have been realized, to the extent that DCOs located
outside the United States are already reporting swap data to a
registered SDR in addition to reporting swap data to a trade repository
pursuant to a home country regulatory regime.
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\306\ As noted in the NPRM, the part 45 regulations contemplate
situations where a swap may be required to be reported pursuant to
U.S. law and the law of another jurisdiction. See 80 FR 52544, 52564
n. 138.
\307\ The Commission understands that the approach followed in
this final release for the reporting of cleared swaps (e.g.,
requiring separate reporting of alphas, betas, and gammas) is
largely consistent with the multi-swap approach adopted by a number
of jurisdictions, including, for example, the European Union,
Singapore, and Australia.
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Finally, with respect to choice of SDR, the Commission believes
that amendments to Sec. 45.3(j) will not impose any additional costs
because the amendments simply codify existing practice--the Commission
understands that the workflows that apply the proposed choice of SDR
obligations are already in place.
The Commission believes that allowing DCOs to choose the SDRs to
which they report creation and continuation data is cost-minimizing for
DCOs because it allows them to select the SDR which is most cost
effective. As discussed in greater detail below, the Commission
anticipates that DCOs that have affiliated SDRs will continue their
current practice of reporting clearing swaps to their affiliated
SDRs.\308\
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\308\ The Commission acknowledges several commenters at both the
IDWG Request for Comment and NPRM stages who commented on the costs
to reporting counterparties when reporting original swaps. See,
e.g., CME Oct. 30, 2015 Letter, at 6-7; CMC Oct. 30, 2015 Letter, at
2. However, the Commission has noted that the revisions to part 45
adopted in this release do not change the existing obligation of
those entities to report original swaps. Therefore, the costs
currently incurred by such reporting counterparties are not a factor
when considering the costs and benefits of the revisions adopted in
this release. The Commission does discuss those costs in the
Consideration of Alternatives, below at Section III.C.10.
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ii. Benefits
Amended Sec. 45.3(e) will explicitly articulate DCO part 45
reporting obligations with respect to clearing swaps (e.g., betas and
gammas).\309\ As explained above, existing Sec. 45.3 does not
explicitly acknowledge distinct reporting requirements for swaps
commonly known as alphas, betas, and gammas. The amendments explicitly
delineate creation data reporting obligations for each component of a
cleared swap transaction, which will improve the Commission's ability
to analyze data associated with such transactions.
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\309\ The Commission acknowledges that the alternatives
separately discussed in the Consideration of Alternatives section
later in this release could also provide these benefits for
registered entities and swap counterparties. However, for the
reasons explained in that section, the Commission is of the view
that the proposed approach is more consistent with industry practice
than the alternatives.
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Requiring DCOs to report required swap creation data for clearing
swaps to SDRs in the manner outlined in this release is expected to
result in uniform protocols and consistent reporting of the individual
components of a cleared swap transaction. The Commission believes that
the adopted reporting framework for cleared swaps will result in more
consistent reporting of all components of a cleared swap transaction,
including linkages between the related swaps, thereby increasing the
efficiency of the SDR data collection function and enhancing the
Commission's ability to utilize the data for regulatory purposes,
including for systemic risk mitigation, market monitoring, and market
abuse prevention.
With respect to confirmation data reporting, the Commission
anticipates that the removal of certain confirmation data reporting
requirements will result in decreased costs for swap counterparties
and/or registered entities that are currently gathering and conveying
electronically the information necessary to report
[[Page 41764]]
confirmation data for swaps that are intended to be submitted to a DCO
for clearing at the time of execution.\310\
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\310\ See CEWG May 27, 2014 Letter, at 4-5 (stating that
reporting confirmation data in addition to PET data is highly
redundant because confirmation data simply includes all of the PET
data matched and agreed to by the counterparties); ISDA May 27, 2014
Letter, at 6-8 (noting that ``Confirmation data should not be
required for an alpha trade that is intended for clearing at point
of execution, whether due to the clearing mandate or bilateral
agreement. Confirmation data for alpha swaps is not meaningful since
they will be terminated and replaced with cleared swaps
simultaneously or shortly after execution for which confirmation
data will be reported by the DCO.'').
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With respect to the adopted rule allowing the removal of certain
confirmation data reporting requirements for swaps that are intended to
be submitted to a DCO for clearing at the time of execution, the
Commission is of the view that the adopted confirmation data reporting
requirements for clearing swaps should provide the necessary
confirmation data with respect to cleared swap transactions. Given that
the adopted rules will require the DCO to report confirmation data for
clearing swaps, requiring an additional set of confirmation data
reporting for the now-terminated original swap, in addition to PET
data, would be duplicative and therefore unnecessary.
Finally, with respect to choice of SDR, under adopted Sec.
45.3(j), the party with the obligation to report the first data for a
swap has the discretion to select the SDR of its choice. This can be an
SDR with which the party already has a working relationship, an SDR
which is, in the registered entity or reporting counterparty's
estimation, most cost-effective, or an SDR that provides the best
overall service and product. The Commission believes that this
flexibility to select SDRs will minimize reporting errors and improve
reporting efficiencies by allowing the reporting entity to select an
SDR with which it has a connection and reporting systems in place. The
Commission also believes this approach will foster competition between
SDRs, as reporting entities such as SEFs/DCMs, SDs/MSPs, DCOs, and non-
SD/MSPs can select the SDR to which they will report. Further, allowing
the reporting entity to select the SDR will reduce costs, as reporting
counterparties and registered entities (other than DCOs) should not
have to establish a connection to more than one SDR unless they prefer
to do so. The Commission understands that Sec. 45.3(j) is consistent
with industry practice,\311\ and thus that the benefits described above
are already being realized.
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\311\ The Commission notes that industry practice with respect
to choice of SDR has likely been influenced in part by a variety of
factors, including, among others, the Commission's statement
regarding CME Rule 1001. See Statement of the Commission on the
Approval of CME Rule 1001 (Mar. 6, 2013), at 6. The Commission notes
that other DCOs have adopted similar rules. See, e.g., ICE Clear
Credit Rule 211.
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5. Continuation Data Reporting by DCOs--Adopted Amendments to Sec.
45.4
The Commission's amendments to Sec. 45.4, which governs the
reporting of swap continuation data to an SDR during a swap's existence
through its final termination or expiration, incorporate the
distinction between original swaps and clearing swaps. The Commission
is removing Sec. 45.4(b)(2)(ii), which requires a reporting
counterparty that is an SD or MSP to report valuation data for cleared
swaps daily; instead, the DCO will be the only swap counterparty
required to report swap continuation data, including valuation data,
for clearing swaps.
Notably, amended Sec. 45.4(c) will require a DCO to report all
required continuation data for original swaps, including original swap
terminations, to the SDR to which such original swap was reported.
Finally, adopted Sec. 45.4(c)(2) will require that continuation data
reported by DCOs include the following data fields as life cycle event
data or state data for original swaps pursuant to adopted Sec.
45.4(c)(1): (i) The LEI of the SDR to which each clearing swap that
replaced a particular original swap was reported by the DCO pursuant to
new Sec. 45.3(e); (ii) the USI of the original swap that was replaced
by the clearing swaps; and (iii) the USIs for each of the clearing
swaps that replace the original swap.
The Commission has considered the costs and benefits raised by
commenters on the proposed addition of Sec. 45.4(c) and its
requirement that DCOs report continuation data for original swaps,
including terminations. The Commission believes that the adopted
revisions to Sec. 45.4(c) are broadly in line with existing industry
practice, and set out specific obligations that will ensure
continuation data is properly reported and reflected in the data that
the Commission uses to fulfill its regulatory obligations. The
Commission notes that it may be more burdensome for the counterparties
to the original swaps, rather than the DCO, to report terminations, as
the counterparty would have to receive a message from the DCO
confirming that the original swap was accepted for clearing and then
translate that message from the DCO into a termination message to the
SDR. Particularly, this may be most burdensome to commercial end-users
executing swaps on SEFs or DCMs who might otherwise have no reporting
obligations and who may not have the infrastructure in place to report
as quickly or as efficiently as DCOs.\312\ The Commission's proposed
rules largely avoid these costs for commercial end-users.
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\312\ See, supra, n. 26, discussing reporting obligations for
end-users trading on-facility cleared swaps.
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i. Costs
Existing Sec. 45.4(b)(2) requires that both SDs/MSPs and DCOs
report daily valuation data for cleared swaps. The removal of Sec.
45.4(b)(2)(ii) will eliminate the existing valuation data reporting
requirement for SDs/MSPs, leaving DCOs as the sole entity responsible
for daily valuation data reporting. As DCOs are currently required to
report valuation data for cleared swaps, they will not bear any
additional costs as a result of this proposed amendment.
While DCOs are currently required to report continuation data on
``cleared swaps,'' including terminations, to SDRs under existing Sec.
45.4,\313\ the adopted rule clarifies reporting obligations as they
relate to swaps that become original swaps. The Commission understands
that DCOs frequently assume responsibility to report the termination of
swaps that become alpha swaps, but that DCOs do not consistently report
such alpha swap terminations or do not report them in the form required
by the alpha swap SDR. Some DCOs that do not currently have
connectivity to the SDR where the SEF/DCM or original counterparties
first reported the swap will incur costs associated with establishing
such connectivity. DCOs will also realize costs associated with the
termination notice and submissions correcting previously erroneously
reported or omitted data. However, DCO reporting of alpha swap
terminations has not been uniform and may vary by DCO and SDR. The
Commission is aware that, in some instances, DCOs currently report
alpha swap terminations to the original SDR that received the original
submission of the intended to be cleared swap. To the extent that DCOs
have implemented systems to report alpha swap terminations to the
original swap SDR, the amended rules thus will not introduce any new
costs for those DCOs.
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\313\ Section 45.4(b) as effective prior to this rule release,
required DCOs to report continuation data on all swaps cleared by
the derivatives clearing organization, including life cycle event
data or state data.
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The Commission received three comments concerning the costs and
benefits of the proposed amendments to
[[Page 41765]]
Sec. 45.4 in two different contexts. In commenting on the NPRM, LCH
and Eurex expressed concerns with the infrastructure required to have
the DCO connected to every SDR chosen by the SD/MSP for which the DCO
clears and report terminations according to the technical requirements
of each SDR.\314\ Eurex specifically indicated that the cost of
implementing the required infrastructure would have significant time
and financial costs. In commenting on the IDWG Request for Comment, one
foreign central counterparty now acting pursuant to a DCO Exemptive
Order cited a specific cost for connecting to a new SDR as involving at
least 150 man-days.\315\ Based on the most recent industry compensation
reports, the median cost to a firm for 150 working days by a computer
programmer in the finance industry would be $61,000 per DCO to SDR
connection.\316\ Considering that each DCO must have a connection to at
least one registered SDR currently to report beta and gamma swaps under
current industry practice, and considering that there are only four
registered SDRs, each DCO could be expected to incur at most $183,000
to connect to all registered SDRs. This cost would be reduced to the
extent that the DCO has existing connections to more than one SDR or if
it clears swaps for clearing members whose original swaps are reported
to a limited number of SDRs.
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\314\ See Eurex Oct. 30, 2015 Letter, at 4-5; LCH Oct. 30, 2015
Letter, at 3.
\315\ See OTC Hong Kong May 27, 2014 Letter, at 2-3 (contending
that setup, application development, and testing to interface with
each SDR is likely to require at least 150 man-days, and that a more
cost-effective framework would be to require the original
counterparty to report termination of the alpha once it receives
confirmation that the alpha has been accepted for clearing, and that
the original counterparty would already have in place technical and
operational interfaces with the SDR of its choice. The commenter
also contended that the burden on DCOs of additional reporting
outweighs the benefits to the CFTC).
\316\ See SIFMA Report, Management & Professional Earnings in
the Securities Industry 2013 (October 2013), available at http://www.sifma.org/research/item.aspx?id=8589940603. This estimate is
based on the median total compensation for a Programmer (Code 1604)
($91,050), on an hourly basis assuming 1,800 hours worked per year
($50.83) and an eight hour work day.
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With respect to additional data fields, as discussed above, adopted
Sec. 45.4(c)(2) will add three data fields (the LEI of the SDR to
which creation data for the clearing swaps was reported, the USI of the
original swap, and USIs of the clearing swaps) to the life cycle event
data or to state data reported by DCOs as continuation data for
original swaps.\317\ All three of these data fields are either already
in use or can be created by the SDR and reported by the DCO. While
requiring the reporting of additional fields imposes costs, DCOs should
already possess the information needed for these fields, and the
Commission believes that the extra costs to DCOs associated with
adopted Sec. 45.4(c)(2) would be minimal. The Commission requested
relevant information and quantitative estimates regarding the costs
associated with creating and using these fields but did not receive
any. As discussed in Section II.C.4.iv above, the Commission would
encourage SDRs and DCOs to standardize messages for terminating
original swap, which should alleviate some of the burden on DCOs.
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\317\ ``Required swap continuation data'' is defined in Sec.
45.1 and includes ``life cycle event data'' or ``state data''
(depending on which reporting method is used) and ``valuation
data.'' Each of these data types is defined in Sec. 45.1. ``Life
cycle event data'' means all of the data elements necessary to fully
report any life cycle event. ``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. 17 CFR 45.1.
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ii. Benefits
Adopted Sec. 45.4(c) will ensure that data concerning original
swaps remains current and accurate, allowing the Commission to
ascertain whether an original swap was terminated through clearing
novation. Original swap data that does not reflect the current state of
the swap frustrates the use of swap data for regulatory purposes,
including, but not limited to, assessing market exposures between
counterparties and evaluating compliance with the clearing
mandate.\318\ The Commission is of the view that, to the extent that
DCOs' current practices are not currently in conformance with the
adopted rule, requiring the DCO to report continuation data for
original swaps is the most efficient and effective method to ensure
that data concerning original swaps remains current and accurate as the
DCO, through its rules, determines when an original swap is terminated
and thus has the quickest and easiest access to authoritative
information concerning termination of the original swap.
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\318\ See Swap Dealer De Minimis Exception Preliminary Report,
(Nov. 18, 2015), at 13-14, available at http://www.cftc.gov/idc/groups/public/@swaps/documents/file/dfreport_sddeminis_1115.pdf.
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Adopted Sec. 45.4(c) will ensure that part 45 explicitly addresses
DCO part 45 continuation data reporting obligations with respect to
original swaps (i.e., alphas).\319\ Existing Sec. 45.4(b), which
addresses ``continuation data reporting for cleared swaps,'' requires
DCOs to report continuation data for ``all swaps cleared by a [DCO],''
but does not explicitly address the multi-swap framework provided in
Sec. 39.12(b)(6).\320\ Therefore, uncertainty persists as to whether,
under existing Sec. 45.4(b) the DCO must report continuation data for
the alpha, beta and gamma swaps. The inconsistent interpretation of
this reporting requirement leads to substantial differences in
reporting of cleared swaps and presents challenges for regulatory
oversight. The continuation data reporting requirements adopted in this
rule will make explicit that the DCO has the obligation to report
continuation data for original swaps that have been terminated and the
clearing swaps that replace a terminated original swap.
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\319\ The Commission acknowledges that the alternatives
separately discussed in the Consideration of Alternatives, Section
III.C.10, could also provide these benefits for registered entities
and swap counterparties. However, for the reasons explained in that
section, the Commission is of the view that the proposed approach is
superior to the alternatives.
\320\ As discussed earlier in this release, Sec. 39.12(b)(6)
provides that upon acceptance of a swap by a DCO for clearing, the
original swap is extinguished and replaced by equal and opposite
swaps, with the DCO as the counterparty to each such swap. See 17
CFR 39.12(b)(6).
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The Commission believes that the removal of the requirement that
SDs and MSPs report daily valuation data for cleared swaps from Sec.
45.4(b)(2) can result in cost savings to the extent that any SDs and
MSPs are not currently relying on no-action relief.\321\ In addition,
because there are fewer DCOs than non-DCO reporting counterparties,
placing the responsibility to report valuation data solely on the DCO
will result in a more consistent and standardized valuation reporting
scheme, as there would be a dramatic decrease in the number of
potential valuation data submitters to SDRs. This will benefit SDRs,
regulators, and the public because it would facilitate data aggregation
and improve the Commission's ability to analyze SDR data and to satisfy
its risk and market oversight responsibilities, including measurement
of the notional amount of outstanding swaps in the market.
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\321\ See CFTC No-Action Letter No. 12-55 (Dec. 17, 2012); CFTC
No-Action Letter No. 13-34 (Jun. 26, 2013); CFTC No-Action Letter
No. 14-90 (Jun. 30, 2014); and CFTC No-Action Letter No.15-38 (Jun.
15, 2015). Staff no-action relief from the requirements of Sec.
45.4(b)(2)(ii) has been in effect since the initial compliance date
for part 45 reporting.
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Adopted Sec. 45.4(c)(2) will require DCOs to report three
important continuation data fields for original swaps which will assist
regulators in tracing the history of, and associating
[[Page 41766]]
the individual swaps involved in, a cleared swap transaction, from
execution of the original swap through the life of each clearing swap
that replaces an original swap, regardless of the SDR(s) to which the
original and clearing swaps are reported. The newly required
continuation data elements to be reported by the DCOs for original
swaps will ensure that original swap continuation data includes
sufficient information to identify, by USI, any clearing swaps created
from the same original swap, as well as the SDR where those clearing
swaps reside. As such, the Commission expects that review of any
particular swap in a registered SDR will include a listing of all other
relevant USIs with respect to that swap (e.g., original swap and
clearing swaps). The Commission believes that this requirement will
help ensure the availability of information necessary to link original
swaps and clearing swaps, even if those swaps are reported to different
SDRs. The ability to link original and clearing swaps across multiple
SDRs will decrease data fragmentation and will increase the ability of
the Commission to accurately aggregate cleared swap data across various
SDRs. As a result, adopted Sec. 45.4(c)(2) will improve the ease of
use for cleared swaps data, which will enhance the Commission's ability
to perform its regulatory duties, including to protect market
participants and the public.
6. USI Creation by DCOs--Sec. 45.5(d)
Existing Sec. 45.5 requires that each swap subject to the
Commission's jurisdiction be identified in all swap recordkeeping and
data reporting by a USI. The rule establishes different requirements
for the creation and transmission of USIs depending on whether the swap
is executed on a SEF or DCM or executed off-facility with or without an
SD or MSP reporting counterparty. Existing Sec. 45.5 also provides
that for swaps executed on or pursuant to the rules of a SEF or DCM,
the SEF or DCM creates the USI, and for swaps not executed on or
pursuant to the rules of a SEF or DCM, the USI is created by an SD or
MSP reporting counterparty, or by the SDR if the reporting counterparty
is not an SD or MSP.
Amended rule Sec. 45.5(d) will require a DCO to generate and
assign a USI for a clearing swap upon, or as soon as technologically
practicable after, acceptance of an original swap by the DCO for
clearing (in the event the clearing swap replaces an original swap) or
execution of a clearing swap (in the event that the clearing swap does
not replace an original swap), and prior to reporting the required swap
creation data for the swap. Amended Sec. 45.5(d) contains provisions
governing creation and assignment of USIs by the DCO that are
consistent with analogous provisions governing creation and assignment
of USIs by SEFs, DCMs, SDs, MSPs, and SDRs.
All comments received with respect to amended Sec. 45.5(d) were
supportive of the change and there were no comments with regards to the
costs and benefits of this amendment.
i. Costs
The Commission believes that adopted Sec. 45.5(d) is largely
consistent with industry practice and will not result in any additional
costs for DCOs. Any DCOs that will not be in complete conformance with
the adopted rule may need to enhance their existing technological
protocols in order to create USIs in house, but these marginal costs
would likely be lower than the costs associated with obtaining a USI
with a separate USI-creating entity. The Commission believes that
creating USIs in-house, rather than with a different USI creating
entity, is less costly for DCOs and the Commission did not receive any
data on that comparison or on any other quantifiable cost structures
associated with Sec. 45.5(d).
ii. Benefits
As noted above, the existing part 45 regulations do not explicitly
address the assignment of USIs to swaps that fall within the adopted
definition of clearing swaps. Explicitly requiring DCOs to generate,
assign, and transmit USIs for clearing swaps will provide regulatory
certainty with respect to the generation and assignment of USIs for
clearing swaps. The adopted rule will also help ensure consistent and
uniform USI creation and assignment for such swaps and will allow
regulators to better identify and trace the swaps generally involved in
cleared swap transactions, from execution of the original swap through
the life of each clearing swap.
7. Determination of the Reporting Counterparty for Clearing Swaps--
Sec. 45.8
Current Sec. 45.8 establishes a hierarchy under which the
reporting counterparty for a particular swap depends on the nature of
the counterparties involved in the transaction. DCOs are not included
in the existing Sec. 45.8 hierarchy. The Commission is adopting Sec.
45.8(i) in order to identify DCOs in the hierarchy as the reporting
counterparty for clearing swaps.
One commenter supported proposed Sec. 45.8(i) as it promoted
efficiency in reporting by explicitly designating the DCO as the
reporting party for clearing swaps.\322\ There were no other comments
with respect to the costs and benefits of this amendment.
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\322\ See AIMA Oct. 30, 2015 Letter, at 6.
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i. Costs
The Commission believes that the adopted amendments to Sec. 45.8,
in and of themselves, will not impose any additional costs on
registered entities or reporting counterparties. The Commission
believes that the rule simply reflects established reporting
arrangements, which, to the Commission's understanding, is for the DCO
to submit data to the SDR for swaps that would fall within the
definition of clearing swaps.
ii. Benefits
As noted above, clearing swaps are not explicitly acknowledged in
existing Sec. 45.3, and DCOs are not identified as reporting
counterparties in the reporting counterparty hierarchy of Sec. 45.8.
The Commission acknowledges the comment by AIMA that one benefit of
proposed Sec. 45.8(i) is that it improves efficiency in reporting by
explicitly designating the DCO as the reporting party for clearing
swaps. In addition, the Commission expects that modifications to the
Sec. 45.8 reporting counterparty hierarchy will eliminate ambiguity
regarding which registered entity or swap counterparty is required to
report required creation data for clearing swaps, explicitly
delineating the nature and extent of DCO reporting obligations, and
affording market participants and SDRs a more precise and accurate
understanding of reporting obligations under part 45.
8. Reporting to a Single Swap Data Repository--Sec. 45.10
Existing Sec. 45.10 requires that all swap data for a given swap
must be reported to a single SDR, which must be the same SDR to which
creation data for that swap is first reported. The time and manner in
which such data must be reported to a single SDR depends on whether the
swap is executed on a SEF or DCM or executed off-facility with or
without an SD/MSP reporting counterparty. The Commission is amending
Sec. 45.10 to require DCOs to report all data for a particular
clearing swap to a single SDR. Moreover, consistent with current
industry practice, amended Sec. 45.10(d)(3) will require the DCO to
report all required swap creation data for each clearing swap that
replaces a particular original swap (i.e., the beta and gamma that
[[Page 41767]]
replace a particular alpha) to a single SDR, such that all required
creation data and all required continuation data for all clearing swaps
that can be traced back to the same original swap will be reported to
the same SDR (although not necessarily the same SDR as the original
swap).
i. Costs
The Commission does not expect DCOs to incur any new costs
associated with ensuring that clearing swap data is reported to a
single SDR because the requirements of the adopted rule are, to the
Commission's understanding, consistent with current DCO reporting
practice.
ii. Benefits
The Commission believes that the benefit of reporting data
associated with each clearing swap to a single SDR is that all required
creation data, all required continuation data for related clearing
swaps and, by extension, USIs linking clearing swaps to the original
swap, will be stored with the same SDR. This will minimize confusion on
the part of SDRs and regulators regarding which swaps are still active
and which ones have been terminated. The Commission notes that the
benefits of reporting all data for clearing swaps to the same SDR are
currently being realized, as it is current industry practice for DCOs
to report swaps that will fall under the amended definition of clearing
swaps in conformance with adopted Sec. 45.10(d)(3).
9. PET Data--Adopted Amendments to the Primary Economic Terms Data
Tables
The Commission's current lists of minimum (required) primary
economic terms for swaps in each swap asset class are found in tables
in Exhibits A-D of appendix 1 to part 45. With this final release, the
Commission has modified the descriptions of some PET fields applicable
to all swaps, added some PET fields applicable to all swaps, and added
some PET fields applicable only to clearing swaps. For PET fields
applicable to clearing swaps, the Commission is adding several new data
elements under the heading ``Additional Data Categories and Fields for
Clearing Swaps'' to Exhibits A-D in order to more accurately capture
the additional, unique features of clearing swaps that are not relevant
to original swaps or uncleared swaps. The newly proposed data fields
include: The USI for the clearing swap; the USI for the original swap;
the SDR to which the original swap was reported; clearing member LEI,
clearing member client account origin, house or customer account;
clearing receipt timestamp; and clearing acceptance timestamp.
As for PET field modifications and additions relevant for all
swaps, the Commission is also adding several new required data
elements, which will be applicable to all swaps, and making conforming
changes to some existing data elements. The newly added fields include:
Asset class, an indication of whether the reporting counterparty is a
DCO with respect to the swap, and clearing exception or exemption
types.
The Commission has received various comments with respect to the
proposed changes to the primary economic terms data but few that
address the cost and benefits of the changes are summarized below.\323\
ISDA commented on the proposed ``Clearing exception or exemption type''
PET field, which would require the reporting party to identify the
clearing exemption exercised for a particular swap.\324\ ISDA commented
that it could be challenging and costly for firms to implement this
change, while providing no new information because exception and
exemption elections must already be provided to SDRs. Because existing
reporting standards can identify inter-affiliate trades, ISDA
recommended that the ``Clearing exception or exemption type'' PET field
acceptable values be limited to ``inter-affiliate'' and ``other.''
---------------------------------------------------------------------------
\323\ One commenter cautioned that the definitions used in the
markets are not always consistent with those proposed by the NPRM,
which places a significant burden on small-sized market
participants. See JBA Oct. 30, 2015 Letter, at 2-3. Because the only
new fields either relate solely to clearing swap reporting (and
therefore affect only DCOs), reference terms defined in the
Regulations (such as ``Asset class''), or reference the application
of certain provisions of the Regulations (such as ``Clearing
Exception or Exemption Type''), the Commission believes the terms in
the new PET data fields are sufficiently clear to avoid any costs or
burden cited by this commenter.
\324\ See ISDA Oct. 30, 2015 Letter, at 9.
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With respect to ISDA's comment, SDs are already required already to
submit to SDRs information on any clearing exception or exemption
elections made by their counterparties pursuant to part 50. The
Commission believes that reporting information on clearing exception or
exemption elections on a transactional basis, in the manner described
in the proposed changes to the primary economic terms, should not
substantially increase costs on reporting counterparties.
i. Costs
The Commission emphasizes that, as a result of the amendments to
the PET data tables for clearing swaps, the newly added data fields for
clearing swaps will be reported exclusively by DCOs. While there might
be costs associated with reporting newly added data fields, the
Commission believes that DCOs are better situated than swap
counterparties to report the additional fields for clearing swaps
without the substantial costs and operational burdens because DCOs
already possess certain information, or other registered entities and
swap counterparties are required to transmit the information to DCOs,
regarding those fields. For example, the data necessary to report the
adopted ``original swap SDR'' field is currently required to be
transmitted to the DCO under existing Sec. 45.5, and the Commission
understands that data required by the amended ``clearing receipt
timestamp'' and ``clearing acceptance timestamp'' fields may already be
generated and present in DCO systems--such DCOs would just have to
transfer those timestamps to the reporting system for each clearing
swap. Similarly, the Commission understands that house or customer
account designations are already collected and maintained in relation
to certain part 39 reporting obligations. Hence, there will be no
additional cost in collecting the information necessary to report the
``origin (house or customer)'' field, and marginal costs might stem
from conveying the information in part 45 swap data reports. The
Commission solicited comments on the extent to which DCOs may already
possess the information required by the amended additional fields and
the costs associated with obtaining and/or reporting such information
but did not receive any comments or estimates on this topic.
While the Commission requested the data needed to quantify the cost
of the addition of three data fields applicable to all reporting
entities (asset class, DCO indicator, and clearing exception or
exemption type), the Commission did not receive any quantifiable
estimates of costs associated with creating and using these fields from
commenters. The Commission believes that the costs associated with
these additional fields will not be substantial since the information
necessary to report these data elements is likely to be readily
available in connection with the execution of swaps, with some marginal
costs stemming from the requirement to include the information in PET
data reported to an SDR (to the extent that such information is not
already reported). The Commission understands that in at least some
cases, market practice is to report some of the information required by
the proposed
[[Page 41768]]
three new data fields applicable to all reporting entities for all
swaps.
ii. Benefits
The Commission believes that the additions to the list of minimum
primary economic terms will result in a variety of benefits. Clearing
swap PET fields, such as USI for the original swap or the SDR to which
the original swap was reported, can facilitate the monitoring of each
original swap by SDRs and regulators. Clearing swap PET fields can also
prevent potential double-counting of swap transactions or notional
amounts, thus improving the accuracy of SDR data for use by the
Commission in such activities as evaluating swap dealer de minimis
thresholds. Other proposed fields such as clearing member LEI or
clearing member client account information will facilitate the
Commission's assessment of risk management of market participants,
promoting the protection of the financial integrity of the markets and
the protection of market participants and the public.
The new PET fields for all swaps also will benefit the Commission
in performing its regulatory obligations. The asset class data field
will assist the Commission in determining the asset class for swaps
reported to SDRs, enhancing the Commission's ability to identify swaps
activity in each asset class as well as the capability to use the data
for regulatory purposes. The indication of whether the reporting
counterparty is a DCO with respect to the swap data field will help the
Commission monitor DCOs' compliance with reporting of clearing swap
data elements, and improve the Commission's ability to analyze swap
data relating to cleared swap transactions. The clearing exception or
exemption types data field will enable the Commission to ascertain the
specific exception or exemption from the clearing requirement that was
elected and will assist in the evaluation of compliance with the
clearing requirement, as well as assessing market activity in uncleared
swaps.
10. Consideration of Alternatives
The Commission considered the costs and benefits of certain
alternatives raised by commenters in response to the IDWG Request for
Comment and the NPRM, including whether part 45 should require intended
to be cleared swaps (original swaps) to be reported to registered SDRs.
Some commenters noted that reporting of alpha swaps is beneficial and
should continue to be required,\325\ while other commenters contended
that alpha swaps should not be required to be reported to an SDR and
questioned the benefits of requiring the reporting of alpha swaps.\326\
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\325\ See TR SEF May 27, 2014 Letter, at 10; AFR May 27, 2014
Letter, at 5; Markit May 27, 2014 Letter, at 25; and DTCC May 27,
2014 Letter, at 17-18.
\326\ See AIMA Oct. 30, 2015 Letter, at 2-6; EEI/EPSA Oct. 30,
2015 Letter, at 3; CEWG Oct. 30, 2015 Letter. At 2; SIFMA May 27,
2014 Letter, at 4; CEWG May 27, 2014 Letter, at 15; CME May 27, 2014
Letter, at 2-3
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Some commenters stated that the Commission should require clearing
swaps to be reported to the same SDR as original swaps, so that the
entire history of a swap would reside at the same SDR.\327\ A number of
commenters suggested that part 45 should place swap data reporting
obligations solely on DCOs, including with respect to swaps that are
intended to be cleared at the time of execution and accepted for
clearing by a DCO (swaps commonly known as ``alpha'' swaps) and swaps
resulting from clearing (swaps commonly known as ``beta'' and ``gamma''
swaps).\328\ However, other commenters noted that it would not be
appropriate to require a DCO to report information related to the
execution of an alpha swap.\329\
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\327\ See DTCC Oct. 30, 2015 Letter, at 3; DTCC May 27, 2014
Letter, at 2-3, appendix at 4, 21 (arguing that the Commission
should adopt a ``single SDR'' rule to ensure that all of the data
for a swap is available in one SDR); ISDA May 27, 2014 Letter, at
44.
\328\ See CMC Oct. 30, 2015 Letter, at 2-3; CME Oct. 30, 2015
Letter, at 2-3; AIMA Oct. 30, 2015 Letter, at 6; CEWG Oct. 30, 2015
Letter, at 3; CMC May 27, 2014 Letter, at 1, 3, 6; NFPEA May 27,
2014 Letter, at 12; EEI/EPSA May 27, 2014 Letter, at 3, 14; ITV May
27, 2014 Letter, at 3, 17; CEWG May 27, 2014 Letter, at 16; CME May
27, 2014 Letter, at 20; and NFP Electric Associations May 27, 2014
Letter, at 4.
\329\ See ISDA Oct. 30, 2015 Letter, at 4; LCH Oct. 30, 2015
Letter, at 2; Eurex Oct. 30, 2015 Letter, at 4; LCH May 29, 2014
Letter, at 10.
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In light of these comments, the Commission considered the costs and
benefits of six alternatives in comparison to the costs and benefits of
the proposed rule: (1) Requiring original and clearing swaps to be
reported to the same SDR chosen by the reporting counterparty or SEF/
DCM; (2) requiring original and clearing swaps to be reported to the
same SDR chosen by the DCO accepting the swap for clearing; (3)
requiring only one report for each swap intended for clearing, that is,
not requiring original (alpha) swaps to be reported separately from
clearing swaps, with the SDR chosen by the reporting counterparty or
SEF/DCM; (4) requiring only one report for each swap intended for
clearing as in (3), but with the SDR chosen by the DCO accepting the
swap for clearing; (5) requiring the DCO to report both the original
swap and all resulting clearing swaps, to the SDR of its choosing; and
(6) requiring the original swap reporting counterparty to report the
creation and the termination of the original swap.\330\
---------------------------------------------------------------------------
\330\ The Commission highlighted the first four alternatives in
its NPRM, and added the last two in light of comments provided in
response to the NPRM.
---------------------------------------------------------------------------
The first two alternatives each require swaps that become original
swaps and the resulting clearing swaps to be reported to the same SDR.
If such swaps were reported to the same SDR, there would be no need for
certain requirements in proposed Sec. 45.4(c) that extra fields, such
as clearing swap SDR, be included in the report to the SDR for the
clearing swap to link the clearing swap to an original swap on a
different SDR. Similarly, the need for certain clearing swap PET data
fields, such as the identity of the original SDR, intended to be used
for linking purposes, might not be necessary. This would reduce costs
to the extent that certain PET data fields would not be required to
link the original and clearing swaps. The first approach would require
DCOs to connect to multiple SDRs to the same extent as the adopted
rules. However, the second approach could require reporting
counterparties or SEFs/DCMs to connect to multiple SDRs, which could
increase costs for a larger number of market participants.
Because the adopted rule more closely reflects current industry
practice relative to the alternative, there would be some potentially
significant one-time costs, including the costs of changes to existing
systems, associated with changing practices to conform to the
alternatives. Additionally, a substantial portion of aggregation costs
for regulators, and, likely, market participants, arises from the
current landscape, which includes multiple SDRs. The adopted
requirements to link original and clearing swaps at multiple SDRs is a
relatively minor burden compared with the existing burden on the
Commission, and potentially other regulators, in reconciling swap data
for a cleared swap transaction across multiple SDRs without data
elements linking the original and clearing swaps. Additionally, costs
associated with monitoring and aggregation would likely be mitigated by
the continuation data fields of adopted Sec. 45.4(c)(2), which would
enable regulators to more effectively connect original swaps at one SDR
with clearing swaps at another SDR. Also, as noted in Section
II.B.4.iv, above, these options could also introduce delays in
reporting under
[[Page 41769]]
both part 43 and part 45, which could undermine the price discovery
function of real-time reporting.
Regarding who would choose the single SDR, the SDR could be chosen
by the reporting counterparty (or DCM or SEF) or by the DCO. Under
either of the first two alternatives, one registered entity or
counterparty's choice of SDR would bind a second registered entity or
counterparty to also report to that SDR, which could be an SDR that the
second registered entity or counterparty would not otherwise select.
Allowing the reporting counterparty or SEF/DCM to choose the SDR would
enable the reporting party to choose the SDR with the best combination
of prices and service, and thus may promote competition among SDRs.
Allowing the DCO to choose the SDR for both original and clearing swaps
would likely result in the DCO always choosing the same SDR, which may
be the SDR that is affiliated with the DCO (that is, shares the same
parent company). This would reduce costs for DCOs since they would need
to maintain connectivity with only one SDR, but would limit the ability
of SDRs to compete since DCOs could choose to report only to SDRs with
which they are affiliated.\331\
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\331\ The Commission requested comment on the extent to which
SDRs compete on the basis of price or service and the extent to
which SDRs are chosen on the basis of relationships with registered
entities and reporting counterparties. Markit commented on DCOs
using affiliated SDRs for reporting, which is addressed in the
Antitrust Considerations, Section III.D, below.
---------------------------------------------------------------------------
Under the third and fourth alternatives, there would be no
requirement to report intended to be cleared swaps (original swaps)
separately from the resulting clearing swaps. Rather, there would only
be one report for each cleared swap transaction. This would be a change
from current swap market practice. As with the first two alternatives,
the choice of SDR could be made by the reporting counterparty as
determined under current Sec. 45.8, or by the DCO as under adopted
Sec. 45.8(i). If there is only one report for each cleared swap
transaction, there would be ongoing cost savings associated with the
need to make fewer reports to SDRs. As with the first two alternatives,
there would be no need for the requirement in adopted Sec. 45.4(c)
that extra fields, such as clearing swap SDR, be included in the report
to the SDR to link the clearing swap to an original swap on a different
SDR, and market participants and the Commission could access all
information about a single cleared swap transaction at a single SDR.
This would also reduce costs relative to the adopted rule. However, the
benefits of separate reports for original and clearing swaps would be
foregone and there may be a less complete record of the history of each
cleared swap. Moreover, it would be more difficult for the Commission
to determine the original counterparties, original execution time, and
other vital information on the original swap for market surveillance or
enforcement purposes. It may be possible to reclaim these benefits
through requiring additional fields in each cleared swap report,
although this would also increase costs and would require DCOs to
receive and report information beyond what is otherwise required for
clearing purposes. Additionally, because the adopted rule more closely
reflects current industry practice relative to these alternatives,
there would be some potentially significant one-time costs, including
the costs of changes to existing systems, associated with changing
practices to conform to the alternatives. The effects of who chooses
the SDR are similar to the effects described for the first two
alternatives.
Under the fifth alternative, the DCO would report both the swap
that becomes the original swap (including creation data and
termination) and all clearing swaps resulting from clearing of the
original swap. While one DCO and some end-users supported this
alternative as simplifying work flows and reducing costs to original
swaps counterparties,\332\ other DCOs opposed requiring DCOs to report
original and clearing swaps because DCOs would not have all information
required to report original swaps.\333\ While recognizing that this
alternative could reduce costs for reporting counterparties, the
Commission declined to adopt this alternative as DCOs would not have
all information necessary to submit such reports. Further, the
Commission declined to adopt this alternative because of negative
impacts on the timeliness of reporting real-time pricing information
under part 43.
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\332\ See CME Oct. 30, 2015 Letter, at 6-7; CMC Oct. 30, 2015
Letter, at 2-3.
\333\ See LCH Oct. 30, 2015 Letter, at 2; Eurex Oct. 30, 2015
Letter, at 4.
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Finally, under the sixth alternative, the reporting counterparty to
the original swap would be required to report the termination of that
swap upon acceptance for clearing. As addressed above in the discussion
of final Sec. 45.4, the Commission believes that DCOs would be in a
better position to report the termination of the original swap, and
would have all information necessary to report such terminations.
The Commission has determined not to adopt the alternatives listed
above because the final rule is more consistent with current industry
practice than such alternatives. The Commission understands that
reporting counterparties and registered entities are already set up to
report alpha swaps to registered SDRs (whether or not such swaps are
intended to be cleared at the time of execution) and that DCOs are
already set up to report beta and gamma swaps that result from
acceptance of a swap for clearing, and have been making such reports.
Accordingly, the industry has already incurred the costs of setting up
a system for reporting cleared swap transactions to SDRs (including
separate reports for swaps that would fall within the proposed
definitions of original and clearing swaps). Changing this system to
conform to an alternative rule would have certain costs to reporting
entities.
The Commission also believes that clarifying distinct reporting
requirements in part 45 for alphas (swaps that become original swaps)
and betas and gammas (clearing swaps that replace original swaps)
presents a full history of each cleared swap transaction and permits
the Commission and other regulators to identify and analyze each
component part of such transactions. The Commission also continues to
believe that placing the part 45 reporting obligation on the
counterparty or registered entity closest to the source of, and with
the easiest and fastest access to, complete and accurate data regarding
a swap fosters accuracy and completeness in swap data reporting. In
light of these benefits, the Commission will maintain the current
industry practice of separately reporting both alpha swaps (i.e., swaps
that would become original swaps under the proposed rules) and beta and
gamma swaps (i.e., clearing swaps as defined under the proposed rules).
Additionally, the multi-swap reporting approach adopted in this
rule is largely consistent with the approach proposed by the SEC in its
release proposing certain new rules and rule amendments to Regulation
SBSR,\334\ and is also largely consistent with the approach adopted by
several foreign regulators.\335\ Given that the swaps market is global
in nature, the Commission anticipates that adopting
[[Page 41770]]
an approach to the reporting of cleared swaps in the United States that
is consistent with the approaches adopted in other jurisdictions may
minimize compliance costs for entities operating in multiple
jurisdictions.
---------------------------------------------------------------------------
\334\ See Regulation SBSR--Reporting and Dissemination of
Security-Based Swap Information, 80 FR 14740 (Mar. 19, 2015).
\335\ The Commission's understanding is that a number of
jurisdictions, including the European Union, Singapore, and
Australia, for example, also account for a multi-swap approach to
the reporting of cleared swaps.
---------------------------------------------------------------------------
11. Section 15(a) Factors
Section 15(a) of the CEA requires the Commission to consider the
effects of its actions in light of the following five factors:
(1) Protection of market participants and the public. In the Final
Part 45 Rulemaking, the Commission stated that the data reporting
requirements of part 45 provided for protection of market participants
and the public by providing regulatory agencies with a wealth of
previously unavailable data in a unified format, greatly enhancing the
ability of market and systemic risk regulators to perform their
oversight and enforcement functions.\336\ The Commission believes that
the adopted amendments outlined in this final release will enhance
these protections by explicitly providing how and by whom each of the
swaps involved in a cleared swap transaction should be reported. In
particular, by requiring DCOs to electronically report the creation
data and continuation data for clearing swaps, the Commission believes
that data on all clearing swaps associated with a specific original
swap will be aggregated at the same SDR, provided by a single entity
and readily available for accurate and complete analysis. This will
also allow the Commission and other regulators to access all data
pertaining to related clearing swaps from a single SDR. These
enhancements should allow for efficiencies in oversight and enforcement
functions, resulting in improved protection of market participants and
the public.
---------------------------------------------------------------------------
\336\ 77 FR 2136, 2188.
---------------------------------------------------------------------------
(2) The efficiency, competitiveness and financial integrity of the
markets. In the Final Part 45 Rulemaking, the Commission stated that
the swap data reporting requirements of part 45 would enhance the
financial integrity of swap markets.\337\ The Commission also stated
that part 45's streamlined reporting regime, including the counterparty
hierarchy used to select the reporting counterparty, could 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.\338\ The
Commission believes that the amendments in this final release will
further enhance this efficiency by requiring DCOs to report where they
are the party best equipped to do so.\339\ In addition, by explicitly
delineating reporting responsibilities associated with each component
of a cleared swap transaction, the adopted rules should result in
improved reliability and consistency of the swaps data reported,
further enhancing the financial integrity of the swap markets.
---------------------------------------------------------------------------
\337\ Id. at 2189.
\338\ Id.
\339\ As noted earlier in this release, the Commission's
understanding is that the DCO is the entity that should have the
easiest and quickest access to full information with respect to PET
data and confirmation data for clearing swaps, as well with respect
to terminations of original swaps.
---------------------------------------------------------------------------
The rule confirming that the reporting counterparty or SEF/DCM has
the right to choose the SDR for the original swap can promote
competition among SDRs. However, the Commission also acknowledges that
by allowing DCOs to choose the SDR to which they report, competition
for SDR services can be impacted as a result of DCOs reporting to their
affiliated SDR, that is, an SDR that shares the same parent company as
the DCO. Any such impact on competition will be a consequence of
business decisions designed to realize costs savings associated with
the affiliations between DCOs and SDRs. The Commission notes that
section 21 of the CEA permits a DCO to register as an SDR.
(3) Price Discovery. In the Final Part 45 Rulemaking, the
Commission stated that the swap data reporting requirements of part 45
did not have a material effect on the price discovery process.\340\ The
Commission believes that the adopted amendments also will not have a
material effect on price discovery.
---------------------------------------------------------------------------
\340\ 77 FR 2136, 2189 (Jan. 13, 2012).
---------------------------------------------------------------------------
(4) Risk Management. In the Final Part 45 Rulemaking, the
Commission stated that the data reporting requirements of part 45 did
not have a material effect on sound risk management practices.\341\ The
Commission believes that the adopted amendments also will not have a
material effect on sound risk management practices.
---------------------------------------------------------------------------
\341\ Id. at 2189.
---------------------------------------------------------------------------
(5) Other Public Interest Considerations. In the Final Part 45
Rulemaking, the Commission stated that the data reporting requirements
will allow regulators to readily acquire and analyze market data, thus
streamlining the surveillance process.\342\ The Commission
preliminarily believes that the amendments outlined in this release
will enhance this consideration by providing certainty about how and by
whom each of the swaps involved in a cleared swap transaction should be
reported.
---------------------------------------------------------------------------
\342\ Id.
---------------------------------------------------------------------------
As noted earlier in this release, the multi-swap reporting approach
proposed in this final release is largely consistent with the
approaches proposed by the SEC and adopted by several foreign
regulators. Given that the swaps market is global in nature, the
Commission anticipates that adopting an approach that is consistent
with the approaches adopted by other regulators may further other
public interest considerations by reducing compliance costs for
entities operating in multiple jurisdictions.
D. Antitrust Considerations
Section 15(b) of the CEA requires the Commission to take into
consideration the public interest to be protected by the antitrust
laws, and endeavor to take the least anticompetitive means of achieving
the objectives of the CEA, in issuing any order or adopting any
Commission rule or Regulation. The Commission evaluated the amendments
to Part 45 in the context of 7 U.S.C. 2(a)(13)(G) and 7 U.S.C. 24a,
which were adopted by Congress as part of the Dodd-Frank Act. These
provisions require each swap, whether cleared or uncleared, to be
reported to a registered SDR. The Dodd-Frank Act was enacted to reduce
systemic risk, increase transparency, and promote market integrity by,
among other things, creating rigorous data reporting regimes with
respect to swaps, including real time reporting.\343\ As noted in this
release, the Commission has adopted these amendments to help ensure
that cleared swaps transactions are reported to SDRs in a consistent
and accurate way to allow the Commission to evaluate market risk and
monitor for abusive trading practices.
---------------------------------------------------------------------------
\343\ 77 FR 2136, 2137.
---------------------------------------------------------------------------
In the Final Part 45 Rulemaking, the Commission identified choice
of SDR as one area of the rules that could potentially have an impact
on competition.\344\ In that release, the Commission stated that the
adopted rule governing who makes the initial creation data report and
selects the SDR ``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.'' \345\
---------------------------------------------------------------------------
\344\ 77 FR 2136, 2149.
\345\ 77 FR 2136, 2149.
---------------------------------------------------------------------------
In the NPRM proposing amendments on cleared swap reporting, the
Commission asked for comments on any anticompetitive impacts of the
proposed
[[Page 41771]]
cleared swaps reporting rules.\346\ In response to the NPRM, the
Commission received two comments directly addressing competitive
concerns. DTCC and Markit both commented that allowing a DCO to select
the SDR for clearing swaps will impact competition as some DCOs have
affiliated SDRs, which may allow DCOs to bundle clearing services with
SDR services.\347\
---------------------------------------------------------------------------
\346\ 80 FR 52571.
\347\ See Markit Oct. 30, 2015 Letter, at 3-5; DTCC Oct. 30,
2015 Letter, at 7.
---------------------------------------------------------------------------
DTCC commented that allowing the DCO to report to an affiliated
SDR, particularly after the original swap has already been reported to
a different SDR, will further entrench DCOs' vertical integration in
trade execution, clearing, and data reporting.\348\ DTCC argued that
this would, in turn, increase barriers to entry for exchanges,
clearinghouses, and independent SDRs that are unaffiliated with
DCOs.\349\ As an alternative, DTCC proposed to grant the registered
entity or reporting counterparty that is obligated to report the
original swap the ability to select the SDR to which the clearing swaps
must be reported by the DCO.\350\
---------------------------------------------------------------------------
\348\ See DTCC Oct. 30, 2015 Letter, at 7.
\349\ See DTCC Oct. 30, 2015 Letter, at 7.
\350\ See DTCC Oct. 30, 2015 Letter, at 7.
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Markit argued that allowing the DCO to select the SDR to which
clearing swaps are reported would provide regulatory approval for
anticompetitive tying of clearing and reporting services.\351\ Markit
contrasted the current marketplace for clearing services with what
existed in March 2013 when the Commission approved CME Rule 1001, and
alleged that concentration has increased since 2013.\352\ In support,
Markit argued that one DCO--which is affiliated with an SDR--clears 87
percent of global credit index swaps.\353\ As an alternative to the
Commission's proposal, Markit proposed that the reporting counterparty
for an original swap be permitted, at its discretion, to both report
the resulting clearing swaps and select the SDR to which the clearing
swaps are reported. Under Markit's proposal, the reporting counterparty
to the original swap would also be permitted to delegate this reporting
and SDR selection responsibility to the DCO.\354\
---------------------------------------------------------------------------
\351\ See Markit Oct. 30, 2015 Letter, at 4.
\352\ See Markit Oct. 30, 2015 Letter, at 4.
\353\ See Markit Oct. 30, 2015 Letter, at 4-5.
\354\ See Markit Oct. 30, 2015 Letter, at 5.
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The Commission has taken into consideration the public interest to
be protected by the antitrust laws, and endeavored to take the least
anticompetitive means of achieving the objectives of the CEA in
adopting this final rule. Having considered the comments raised by DTCC
and Markit, the Commission believes that the amendments to part 45
concerning choice of SDR announced in this release meet this least-
anticompetitive-means standard.
The mix of entities reporting swaps to the various SDRs illustrates
how the choice of SDR currently operates in the marketplace. Presently
there are four registered SDRs to which swaps may be reported. Two of
the SDRs (CME and ICE Trade Vault) are affiliated with DCOs and contain
swaps data reported by those DCOs, as well as data reported by SEFs,
SDs, and non-SD/MSP market participants. These SDRs receive swap data
on uncleared swaps, as well as both the original swaps and clearing
swaps from cleared swap transactions. One SDR (DTCC) is a subsidiary of
a large financial services utility and has ownership and governance
ties to a number of swap dealers. DTCC receives swap data from a number
of those swap dealers, as well as SEFs, non-SD/MSP market participants,
and at least one DCO. DTCC receives swaps reporting for a large number
of uncleared swaps, as well as original swaps whose associated clearing
swaps are reported at either DTCC or a DCO-affiliated SDR. The fourth
SDR (Bloomberg) is corporately affiliated with a SEF and available to
accept data from, among others, SEFs/DCMs, DCOs, and reporting
counterparties. Also relevant to this discussion, some SD/MSPs and SEFs
report swaps to multiple SDRs. Some SDs and SEFs, even those with
corporate affiliations or ownership links to SDRs, report some swaps to
SDRs to which they have no such connections. The mix of swaps reported
to each SDR (uncleared, original and clearing swaps) and the mix of
reporting entities using each SDR are the result of market
participants' decisions on how to fulfill reporting obligations.
Consumers of SDR services under these amendments are the entities
with the first reporting obligation on a swap: SEFs/DCMs for uncleared
or original swaps executed on-facility; reporting counterparties
(primarily swap dealers, but also non-SD/MSP market participants) for
uncleared or original swaps executed off-facility; and DCOs for
clearing swaps. The amendments place the choice of SDR for each
individual swap with the entity first required to report data on that
swap. The amendments do not place the choice of SDR with a single
entity or counterparty with respect to more than one swap. In other
words, the choice of SDR will be made as to a particular swap when a
registered entity or reporting counterparty that is required to report
the swap makes the first report of all creation data on a particular
swap.\355\ Because each reporting entity responsible for the first
report of a swap would have its choice of SDR, the Commission does not
believe that the amendments to Part 45 in this release will
significantly impact the mix of swaps reported to each SDR and the mix
of reporting entities using each SDR, as described above.
---------------------------------------------------------------------------
\355\ As discussed in section III.C.4. above, Sec. 45.3(j)
provides that the registered entity or counterparty required to
report swap creation data has the choice of SDR when fulfilling its
obligations under Sec. Sec. 45.3(a)-(e).
---------------------------------------------------------------------------
In determining which entity may select the SDR for the original and
separately for clearing swap components of a cleared swap transaction,
the Commission considered three alternatives that potentially could
achieve the objectives of the CEA: (a) Allowing the entity initially
reporting an original swap to select the SDR for both the original and
clearing swaps, by requiring clearing swaps to be reported to the same
SDR as the original swaps they replace; (b) allowing the DCO to select
the SDR for both the original and clearing swaps; or (c) allowing the
entity first reporting a swap to select the SDR, specifically by
allowing the original swap reporting entity to select the SDR for the
original swap and the DCO to select the SDR for the clearing swaps. Of
the three, the Commission considers its ultimate decision--option (c)--
to be the least anticompetitive to satisfy its regulatory objectives.
Both option (a) and (b) hold significant potential for a particular
constituency group--namely swap dealers or DCOs, respectively-- to
assume an outsized role in shaping the evolving SDR landscape to favor
the competitive interests of particular SDRs to which they have
financial ties.\356\ In contrast, option (c) minimizes this potential
by diffusing the SDR selection role across different categories of
reporting entities. No reporting entity (such as an individual DCO) or
group of similarly situated reporting entities
[[Page 41772]]
(such as SDs that have an ownership interest in an SDR) would be able
to dictate where another reporting entity reports a swap. As a result,
swaps reporting should not become concentrated in a single SDR
associated with either DCOs or SDs. On the contrary, even assuming that
all SDs choose to report all original and uncleared swaps to DTCC while
ICE and CME report all clearing swaps to their affiliated SDRs, swaps
reporting will be diffused across at least three SDRs. At the same
time, the adopted amendments allow reporting entities to take advantage
of costs savings and efficiencies by selecting an SDR with which the
reporting entity has an existing relationship.
---------------------------------------------------------------------------
\356\ As noted, DTCC has ownership and governance ties to a
number of swap dealers. Additionally, some swap dealers in the DTCC
ownership consortium have ownership and/or governance ties to
certain SEFs. Accordingly, the Commission sees a strong incentive
for swap dealers and swap dealer-affiliated SEFs to select DTCC as
the SDR to the extent this part 45 amendment grants them authority
to do so.
Conversely, the Commission foresees a strong likelihood that
DCO's that have affiliate SDRs, will select their respective SDR
affiliates to the extent this part 45 amendment grants them
authority to do so and doing so is consistent with their core
principle obligations. As discussed below, the CME Group DCO
currently has a rule providing that all swaps that it clears be
reported to the CME-affiliated SDR.
---------------------------------------------------------------------------
In the context of this rulemaking, the Commission believes that the
concerns of DTCC and Market are misdirected. The criticism of both
commenters pivots on the fundamental view that ``the proposed rule
unnecessarily permits DCOs to bundle services'' and that
anticompetitive consequences flow from such bundling.\357\ The instant
amendment, however, merely specifies who, in a particular circumstance,
will select the SDR to which a particular swap will be reported; the
amendment neither permits nor prohibits DCO/SDR bundling--it does not
speak to the issue at all. To the extent that a particular DCO reports
all of its swaps to a particular SDR (pursuant to a DCO rule or
otherwise), it must do so consistent with its core principle
obligations, including Core Principle N.\358\ This amendment does not
alter or otherwise impact that obligation. DCO registration is
contingent upon ongoing compliance with Core Principle N.\359\ Thus the
question of whether a particular DCO may be restraining trade or
imposing an anticompetitive burden through the manner in which it
exercises its Sec. 45.3(j) SDR-choice (including under a theory of
anticompetitive tying) is properly addressed as a matter of DCO
compliance with Core Principle N.\360\
---------------------------------------------------------------------------
\357\ DTCC Oct. 30, 2015 Letter, at, p. 7; see also, Markit Oct.
30, 2015 Letter, at 4 (``proposed policy would provide regulatory
approval for anticompetitive tying of clearing and regulatory
reporting services'').
\358\ CEA section 5b(c)(2)(N), 7 U.S.C.7a-1(c)(2)(N). DCO Core
Principle N provides that unless necessary or appropriate to achieve
the purposes of this Act, a derivatives clearing organization shall
not--(i) adopt any rule or take any action that results in any
unreasonable restraint of trade; or (ii) impose any material
anticompetitive burden.
\359\ See CEA section 5b(c)(2)(A)(i), 7 U.S.C. 7a-1(c)(2)(A)(i);
17 CFR 39.10(a).
\360\ Currently, CME Rule 1001 provides that the CME Group DCO
will report all swaps resulting from its clearing to the CME Group
SDR. After consideration pursuant to section 5c(c)(5) of the CEA and
Commission regulation 40.5, the Commission granted CME's request for
approval of Rule 1001 on March 6, 2013. See Statement of the
Commission (``Statement''), available at http://www.cftc.gov/idc/groups/public/@newsroom/documents/file/statementofthecommission.pdf.
In granting the request for approval, the Commission determined,
among other things, that under the then-current facts and
circumstances Rule 1001 was not inconsistent with DCO Core Principle
N. As the Statement expressly stated, however, the Commission's
determination was based on the ``present facts and circumstances,''
and that ``CME has a continuing obligation to implement its Rule
1001 in a manner consistent with the Commission's regulations and
the DCO Core Principles, including Core Principle N, based on the
relevant facts and circumstances as they may change over time.''
Statement at 12. The Commission expects that DCOs will continue to
monitor industry circumstances and amend their rules and conduct as
necessary to remain in statutory and regulatory compliance as
industry conditions evolve. More specifically in the context of
compliance with Core Principle N, the Commission expects such
ongoing monitoring to include attention to the competitive impact of
DCO rules and conduct in appropriately defined relevant antitrust
product and geographic markets, and assessment of whether particular
DCO rules or conduct transgress antitrust laws, including Sherman
Act sections 1 and 2, 15 U.S.C. 1 and 2.
---------------------------------------------------------------------------
IV. Compliance Dates
Because some revisions and additions to part 45 create new
reporting obligations or clarify existing reporting obligations, while
some remove obligations presently covered by no-action or other relief,
the Commission is adopting this release on a bifurcated basis. The
deletion of former Sec. 45.4(b)(2)(ii), requiring that SD/MSP
counterparties to clearing swaps report valuation data on those swaps,
shall be effective upon publication in the Federal Register.
Compliance with all other revisions and additions to part 45
adopted in this release shall be required one hundred and eighty (180)
days after this release is published in the Federal Register. The
Commission has noted comments on the need for market participants,
SDRs, DCOs, and other affected parties to update systems to comply with
the proposed changes to part 45.\361\ Therefore, the Commission is
adopting the revisions and additions to part 45 with compliance dates
for new obligations that will provide sufficient time to update and
test reporting systems.
---------------------------------------------------------------------------
\361\ See JBA Oct. 30, 2015 Letter, at 2 (requesting delayed
implementation); DTCC Oct. 30, 2015 Letter, at 9 (requesting that
all changes to PET fields be required prospectively only, and not
for existing swaps; requesting implementation time of 6 months);
ISDA Oct. 30, 2015 Letter, at 12 (requesting delayed implementation,
but deferring to SDRs and DCOs on timeline for such implementation);
LCH Oct.30, 2015 Letter, at 2 (recommending at least 12 months for
DCOs and SDRs to coordinate on solution for reporting).
---------------------------------------------------------------------------
List of Subjects in 17 CFR Part 45
Data recordkeeping requirements and data reporting requirements,
Swaps.
For the reasons stated in the preamble, the Commodity Futures
Trading Commission amends 17 CFR part 45 as set forth below:
PART 45--SWAP DATA RECORDKEEPING AND REPORTING REQUIREMENTS
0
1. The authority citation for part 45 is revised to read as follows:
Authority: 7 U.S.C. 6r, 7, 7a-1, 7b-3, 12a, and 24a, 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.
0
2. Amend Sec. 45.1 as follows:
0
a. Add a definition for ``clearing swap'' in alphabetical order;
0
b. Revise the definition of ``derivatives clearing organization''; and
0
c. Add a definition for ``original swap'' in alphabetical order.
The additions and revisions read as follows:
Sec. 45.1 Definitions.
* * * * *
Clearing swap means a swap created pursuant to the rules of a
derivatives clearing organization that has a derivatives clearing
organization as a counterparty, including any swap that replaces an
original swap that was extinguished upon acceptance of such original
swap by the derivatives clearing organization for clearing.
* * * * *
Derivatives clearing organization means a derivatives clearing
organization, as defined by Sec. 1.3(d) of this chapter, that is
registered with the Commission.
* * * * *
Original swap means a swap that has been accepted for clearing by a
derivatives clearing organization.
* * * * *
0
3. Revise Sec. 45.3 to read as follows:
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 and in the manner provided in Sec. 45.13(b). The
rules governing acceptance and recording of such data by a swap data
repository are set forth in Sec. 49.10 of this chapter. 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
[[Page 41773]]
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 in 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 an exception to, or an exemption from, the clearing requirement
has been elected under part 50 of this chapter are subject to the
reporting obligations set forth in part 50 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. Paragraphs
(a) through (d) of this section apply to all swaps except clearing
swaps, while paragraph (e) applies only to clearing swaps.
(a) Swaps executed on or pursuant to the rules of a swap execution
facility or designated contract market. 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 primary economic terms data for the swap, as
defined in Sec. 45.1, as soon as technologically practicable after
execution of the swap. If the swap is not intended to be submitted to a
derivatives clearing organization for clearing at the time of
execution, the swap execution facility or designated contract market
must report all confirmation data for the swap, as defined in Sec.
45.1, as soon as technologically practicable after execution of the
swap.
(b) Off-facility swaps subject to the clearing requirement. For all
off-facility swaps subject to the clearing requirement under part 50 of
this chapter, except for those off-facility swaps for which an
exception to, or exemption from, the clearing requirement has been
elected under part 50 of this chapter, 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.
(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 swap as soon as technologically practicable
after execution, but no later than 15 minutes after execution.
(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 one business hour after execution.
(2) [Reserved]
(c) Off-facility swaps not subject to the clearing requirement,
with a swap dealer or major swap participant reporting counterparty.
For all off-facility swaps not subject to the clearing requirement
under part 50 of this chapter, all off-facility swaps for which an
exception to, or an exemption from, the clearing requirement has been
elected under part 50 of this chapter, 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.
(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 30
minutes after execution.
(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 30 minutes after execution.
(ii) If the swap is not intended to be submitted to a derivatives
clearing organization for clearing at the time of execution, 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.
(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.
(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 two
hours after execution.
(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 two hours after execution.
(ii) If the swap is not intended to be submitted to a derivatives
clearing organization for clearing at the time of execution, 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
[[Page 41774]]
business hours after confirmation if confirmation does not occur
electronically.
(d) Off-facility swaps not subject to the clearing requirement,
with a non-SD/MSP reporting counterparty. For all off-facility swaps
not subject to the clearing requirement under part 50 of this chapter,
all off-facility swaps for which an exception to, or an exemption from,
the clearing requirement has been elected under part 50 of this
chapter, 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 paragraph (d) of this section.
(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 24
business hours after execution.
(2) If the swap is not intended to be submitted to a derivatives
clearing organization for clearing at the time of execution, 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 24 business hours after confirmation.
(e) Clearing swaps. As soon as technologically practicable after
acceptance of an original swap by a derivatives clearing organization
for clearing, or as soon as technologically practicable after execution
of a clearing swap that does not replace an original swap, the
derivatives clearing organization, as reporting counterparty, must
report all required swap creation data for the clearing swap. Required
swap creation data for clearing swaps must include all confirmation
data and all primary economic terms data, as those terms are defined in
Sec. 45.1 and as included in appendix 1 to this part.
(f) Allocations. For swaps involving allocation, required swap
creation data shall be reported to a single swap data repository as
follows.
(1) 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). A
unique swap identifier for the initial swap transaction must be created
as provided in Sec. 45.5.
(2) Post-allocation swaps--(i) 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.
(ii) 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.
(iii) 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 initial
swap transaction and of each of the post-allocation swaps.
(g) 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.
(h) 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.
(i) 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.
(j) Choice of SDR. The entity with the obligation to choose the
swap data repository to which all required swap creation data for the
swap is reported shall be the entity that is required to make the first
report of all data pursuant to this section, as follows:
(1) For swaps executed on or pursuant to the rules of a swap
execution facility or designated contract market, the swap execution
facility or designated contract market shall choose the swap data
repository;
(2) For all other swaps, the reporting counterparty, as determined
in Sec. 45.8, shall choose the swap data repository.
Sec. 45.4 [Amended]
0
4. Effective June 27, 2016, remove Sec. 45.4 (b)(2)(ii).
0
5. Effective July 27, 2016, revise Sec. 45.4 to read as follows:
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 and in the manner provided in Sec. 45.13(b). The
rules governing acceptance and recording of such data by a swap data
repository are set forth in Sec. 49.10 of this chapter. 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
in 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
[[Page 41775]]
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 generally. 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 clearing swaps. For all
clearing swaps, required continuation data must be reported as provided
in this section.
(1) Life cycle event data or state data reporting. The derivatives
clearing organization, as reporting counterparty, 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 by the derivatives clearing organization, as reporting
counterparty, daily.
(c) Continuation data reporting for original swaps. For all
original swaps, required continuation data, including terminations,
must be reported to the swap data repository to which the swap that was
accepted for clearing was reported pursuant to Sec. 45.3(a) through
(d) in the manner provided in Sec. 45.13(b) and in this section, and
must be accepted and recorded by such swap data repository as provided
in Sec. 49.10 of this chapter.
(1) Life cycle event data or state data reporting. The derivatives
clearing organization that accepted the swap for clearing 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) In addition to all other necessary continuation data fields,
life cycle event data and state data must include all of the following:
(i) The legal entity identifier of the swap data repository to
which all required swap creation data for each clearing swap was
reported by the derivatives clearing organization pursuant to Sec.
45.3(e);
(ii) The unique swap identifier of the original swap that was
replaced by the clearing swaps; and
(iii) The unique swap identifier of each clearing swap that
replaces a particular original swap.
(d) Continuation data reporting for uncleared swaps. For all swaps
that are not cleared by a derivatives clearing organization, including
swaps executed on or pursuant to the rules of a swap execution facility
or designated contract market, 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 (d)(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 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 first business day following the date of any life cycle event; 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 second business day following such event.
(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.
0
6. Revise Sec. 45.5 to read as follows:
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 (f) of this section.
(a) Swaps executed on or pursuant to the rules of a swap execution
facility or designated contract market. 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 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
[[Page 41776]]
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.
(d) Clearing swaps. For each clearing swap, the derivatives
clearing organization that is a counterparty to such swap shall create
and transmit a unique swap identifier as provided in paragraphs (d)(1)
and (2) of this section.
(1) Creation. The derivatives clearing organization shall generate
and assign a unique swap identifier upon, or as soon as technologically
practicable after, acceptance of an original swap by the derivatives
clearing organization for clearing or execution of a clearing swap that
does not replace an original swap, and prior to the reporting of
required swap creation data for the clearing swap. The unique swap
identifier shall consist of a single data field that contains two
components:
(i) The unique alphanumeric code assigned to the derivatives
clearing organization by the Commission for the purpose of identifying
the derivatives clearing organization with respect to unique swap
identifier creation; and
(ii) An alphanumeric code generated and assigned to that clearing
swap by the automated systems of the derivatives clearing organization,
which shall be unique with respect to all such codes generated and
assigned by that derivatives clearing organization.
(2) Transmission. The derivatives clearing organization shall
transmit the unique swap identifier electronically as follows:
(i) To the swap data repository to which the derivatives clearing
organization reports required swap creation data for the clearing swap,
as part of that report; and
(ii) To its counterparty to the clearing swap, as soon as
technologically practicable after acceptance of a swap by the
derivatives clearing organization for clearing or execution of a
clearing swap that does not replace an original swap.
(e) 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
paragraphs (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
[[Page 41777]]
is submitted for clearing, as part of the required swap creation data
transmitted to the derivatives clearing organization for clearing
purposes.
(f) 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.
0
7. Revise Sec. 45.8 to read as follows:
Sec. 45.8 Determination of which counterparty must report.
The determination of which counterparty is the reporting
counterparty for all swaps, except clearing swaps, shall be made as
provided in paragraphs (a) through (h) of this section. The
determination of which counterparty is the reporting counterparty for
all clearing swaps shall be made as provided in paragraph (i) of 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.
(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 or pursuant to the rules of 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.
(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.
(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 an exception to, or an exemption from, the clearing requirement
under part 50 of this chapter 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 initial swap 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.
(i) Clearing swaps. Notwithstanding the provisions of paragraphs
(a) through (h) of this section, if the swap is a clearing swap, the
derivatives clearing organization that is a counterparty to such swap
shall be the reporting
[[Page 41778]]
counterparty and shall fulfill all reporting counterparty obligations
for such swap.
0
8. Revise Sec. 45.10 to read as follows:
Sec. 45.10 Reporting to a single swap data repository.
All swap data for a given swap, which shall include all swap data
required to be reported pursuant to parts 43 and 45 of this chapter,
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 or pursuant to the rules of a swap execution
facility or designated contract market. To ensure that all swap data,
including all swap data required to be reported pursuant to parts 43
and 45 of this chapter, 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, including all
swap data required to be reported pursuant to parts 43 and 45 of this
chapter, for off-facility swaps with a swap dealer or major swap
participant reporting counterparty 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 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) 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 (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, including all swap data required to be
reported pursuant to parts 43 and 45 of this chapter, 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) 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.
(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 (c)(1) of this
section (or to its successor in the event that it ceases to operate, as
provided in part 49 of this chapter).
(d) Clearing swaps. To ensure that all swap data for a given
clearing swap, and for clearing swaps that replace a particular
original swap or that are created upon execution of the same
transaction and that do not replace an original swap, is reported to a
single swap data repository:
(1) The derivatives clearing organization that is a counterparty to
such clearing swap shall report all required swap creation data for
that clearing swap to a single swap data repository. As soon as
technologically practicable after acceptance of an original swap by a
derivatives clearing organization for clearing or execution of a
clearing swap that does not replace an original swap, the derivatives
clearing organization shall transmit to the counterparty to each
clearing swap the legal entity identifier of the swap data repository
to which the derivatives clearing organization reported the required
swap creation data for that clearing swap.
(2) Thereafter, all required swap creation data and all required
swap continuation data reported for that clearing swap shall be
reported by the derivatives clearing organization to the swap data
repository to which swap data has been reported pursuant to paragraph
(d)(1) of this section (or to its successor in the event that it ceases
to operate, as provided in part 49 of this chapter).
(3) For clearing swaps that replace a particular original swap, and
for equal and opposite clearing swaps that are created upon execution
of the same transaction and that do not replace an original swap, the
derivatives clearing organization shall report all required swap
creation data and all required swap continuation data for such clearing
swaps to a single swap data repository.
0
9. Revise Appendix 1 to part 45 to read as follows:
Appendix 1 to Part 45--Tables of Minimum Primary Economic Terms Data
[[Page 41779]]
Exhibit A--Minimum Primary Economic Terms Data--Credit Swaps and Equity
Swaps
[Enter N/A for fields that are not applicable]
------------------------------------------------------------------------
Data categories and fields for all
swaps Comment
------------------------------------------------------------------------
Asset Class............................ Field values: Credit, equity,
FX, interest rates, other
commodities.
The Unique Swap Identifier for the swap As provided in Sec. 45.5.
The Legal Entity Identifier of the As provided in Sec. 45.6, or
reporting counterparty. substitute identifier for a
natural person.
An indication of whether the reporting Yes/No.
counterparty is a swap dealer with
respect to the swap.
An indication of whether the reporting Yes/No.
counterparty is a major swap
participant with respect to the swap.
If the reporting counterparty is not a Yes/No.
swap dealer or a major swap
participant with respect to the swap,
an indication of whether the reporting
counterparty is a financial entity as
defined in CEA section 2(h)(7)(C).
An indication of whether the reporting Yes/No.
counterparty is a derivatives clearing
organization with respect to the swap.
An indication of whether the reporting Yes/No.
counterparty is a U.S. person.
An indication that the swap will be Yes/No.
allocated.
If the swap will be allocated, or is a As provided in Sec. 45.6, or
post-allocation swap, the Legal Entity substitute identifier for a
Identifier of the agent. natural person.
An indication that the swap is a post- Yes/No.
allocation swap.
If the swap is a post-allocation swap, As provided in Sec. 45.5.
the unique swap identifier of the
initial swap transaction between the
reporting counterparty and the agent.
The Legal Entity Identifier of the non- As provided in Sec. 45.6, or
reporting party. substitute identifier for a
natural person.
An indication of whether the non- Yes/No.
reporting counterparty is a swap
dealer with respect to the swap.
An indication of whether the non- Yes/No.
reporting counterparty is a major swap
participant with respect to the swap.
If the non-reporting counterparty is Yes/No.
not a swap dealer or a major swap
participant with respect to the swap,
an indication of whether the non-
reporting counterparty is a financial
entity as defined in CEA section
2(h)(7)(C).
An indication of whether the non- Yes/No.
reporting counterparty is a U.S.
person.
The Unique Product Identifier assigned As provided in Sec. 45.7.
to the swap.
If no Unique Product Identifier is
available for the swap because the
swap is not sufficiently standardized,
the taxonomic description of the swap
pursuant to the CFTC-approved product
classification system.
If no CFTC-approved UPI and product
classification system is yet
available, the internal product
identifier or product description used
by the swap data repository.
An indication that the swap is a multi- Field values: Yes, Not
asset swap. applicable.
For a multi-asset class swap, an Generally, the asset class
indication of the primary asset class. traded by the desk trading the
swap for the reporting
counterparty. Field values:
Credit, equity, FX, interest
rates, other commodities.
For a multi-asset class swap, an Field values: Credit, equity,
indication of the secondary asset FX, interest rates, other
class(es). commodities.
An indication that the swap is a mixed Field values: Yes, Not
swap. applicable.
For a mixed swap reported to two non- Field value: LEI of the other
dually- registered swap data SDR to which the swap is or
repositories, the identity of the will be reported.
other swap data repository (if any) to
which the swap is or will be reported.
An indication of the counterparty Field values: LEI, or
purchasing protection. substitute identifier for a
natural person.
An indication of the counterparty Field values: LEI, or
selling protection. substitute identifier for a
natural person.
Information identifying the reference The entity that is the subject
entity. of the protection being
purchased and sold in the
swap. Field values: LEI, or
substitute identifier for a
natural person.
Contract type.......................... E.g., swap, swaption, forward,
option, basis swap, index
swap, basket swap.
Block trade indicator.................. Indication (Yes/No) of whether
the swap qualifies as a block
trade or large notional swap.
Execution timestamp.................... The date and time of the trade,
expressed using Coordinated
Universal Time (``UTC'').
Execution venue........................ The swap execution facility or
designated contract market on
or pursuant to the rules of
which the swap was executed.
Field values: LEI of the swap
execution facility or
designated contract market, or
``off-facility'' if not so
executed.
Start date............................. The date on which the swap
starts or goes into effect.
Maturity, termination or end date...... The date on which the swap
expires.
The price.............................. E.g., strike price, initial
price, spread.
The notional amount, and the currency
in which the notional amount is
expressed.
The amount and currency (or currencies)
of any up-front payment
[[Page 41780]]
Payment frequency of the reporting A description of the payment
counterparty. stream of the reporting
counterparty, e.g., coupon.
Payment frequency of the non-reporting A description of the payment
counterparty. stream of the non-reporting
counterparty, e.g., coupon.
Timestamp for submission to swap data Time and date of submission to
repository. the swap data repository,
expressed using UTC, as
recorded by an automated
system where available, or as
recorded manually where an
automated system is not
available.
Clearing indicator..................... Yes/No indication of whether
the swap will be submitted for
clearing to a derivatives
clearing organization.
Clearing venue......................... LEI of the derivatives clearing
organization.
If the swap will not be cleared, an Yes/No.
indication of whether an exception to,
or an exemption from, the clearing
requirement has been elected with
respect to the swap under part 50 of
this chapter.
The identity of the counterparty Field values: LEI, or
electing an exception or exemption to substitute identifier for
the clearing requirement under part 50 natural person.
of this chapter.
Clearing exception or exemption type... The type of clearing exception
or exemption being claimed.
Field values: End user, Inter-
affiliate or Cooperative.
Indication of collateralization........ Is the swap collateralized, and
if so to what extent? Field
values: Uncollateralized,
partially collateralized, one-
way collateralized, fully
collateralized.
Any other term(s) of the swap matched Use as many fields as required
or affirmed by the counterparties in to report each such term.
verifying the swap.
------------------------------------------------------------------------
Exhibit A--Minimum Primary Economic Terms Data--Credit Swaps and Equity
Swaps
[Enter N/A for fields that are not applicable]
------------------------------------------------------------------------
Additional data categories and fields
for clearing swaps Comment
------------------------------------------------------------------------
Clearing swap USIs..................... The USIs of each clearing swap
that replaces the original
swap that was submitted for
clearing to the DCO, other
than the USI for which the PET
data is currently being
reported (as ``USI'' field
above).
Original swap USI...................... The USI of the original swap
submitted for clearing to the
DCO that is replaced by
clearing swaps.
Original swap SDR...................... LEI of SDR to which the
original swap was reported.
Clearing member LEI.................... LEI of Clearing member.
Clearing member client account......... Clearing member client account
number.
Origin (house or customer)............. An indication whether the
clearing member acted as
principal for a house trade or
agent for a customer trade.
Clearing receipt timestamp............. The date and time at which the
DCO received the original swap
for clearing, expressed using
UTC.
Clearing acceptance timestamp.......... The date and time at which the
DCO accepted the original swap
for clearing, expressed using
UTC.
------------------------------------------------------------------------
Exhibit B--Minimum Primary Economic Terms Data--Foreign Exchange
Transactions (Other Than Cross-Currency Swaps)
[Enter N/A for fields that are not applicable]
------------------------------------------------------------------------
Data fields for all swaps Comment
------------------------------------------------------------------------
Asset Class............................ Field values: Credit, equity,
FX, interest rates, other
commodities.
The Unique Swap Identifier for the swap As provided in Sec. 45.5.
The Legal Entity Identifier of the As provided in Sec. 45.6, or
reporting counterparty. substitute identifier for a
natural person.
An indication of whether the reporting Yes/No.
counterparty is a swap dealer with
respect to the swap.
An indication of whether the reporting Yes/No.
counterparty is a major swap
participant with respect to the swap.
If the reporting counterparty is not a Yes/No.
swap dealer or a major swap
participant with respect to the swap,
an indication of whether the reporting
counterparty is a financial entity as
defined in CEA section 2(h)(7)(C).
An indication of whether the reporting Yes/No.
counterparty is a derivatives clearing
organization with respect to the swap.
An indication of whether the reporting Yes/No.
counterparty is a U.S. person.
An indication that the swap will be Yes/No.
allocated.
If the swap will be allocated, or is a As provided in Sec. 45.6, or
post-allocation swap, the Legal Entity substitute identifier for a
Identifier of the agent. natural person.
An indication that the swap is a post- Yes/No.
allocation swap.
[[Page 41781]]
If the swap is a post-allocation swap, As provided in Sec. 45.5.
the unique swap identifier of the
initial swap transaction between the
reporting counterparty and the agent.
The Legal Entity Identifier of the non- As provided in Sec. 45.6, or
reporting party. substitute identifier for a
natural person.
An indication of whether the non- Yes/No.
reporting counterparty is a swap
dealer with respect to the swap.
An indication of whether the non- Yes/No.
reporting counterparty is a major swap
participant with respect to the swap.
If the non-reporting counterparty is Yes/No.
not a swap dealer or a major swap
participant with respect to the swap,
an indication of whether the non-
reporting counterparty is a financial
entity as defined in CEA section
2(h)(7)(C).
An indication of whether the non- Yes/No.
reporting counterparty is a U.S.
person.
The Unique Product Identifier assigned As provided in Sec. 45.7.
to the swap.
If no Unique Product Identifier is
available for the swap because the
swap is not sufficiently standardized,
the taxonomic description of the swap
pursuant to the CFTC-approved product
classification system.
If no CFTC-approved UPI and product
classification system is yet
available, the internal product
identifier or product description used
by the swap data repository.
An indication that the swap is a multi- Field values: Yes, Not
asset swap. applicable.
For a multi-asset class swap, an Generally, the asset class
indication of the primary asset class. traded by the desk trading the
swap for the reporting
counterparty. Field values:
Credit, equity, FX, interest
rates, other commodities.
For a multi-asset class swap, an Field values: Credit, equity,
indication of the secondary asset FX, interest rates, other
class(es). commodities.
An indication that the swap is a mixed Field values: Yes, Not
swap. applicable.
For a mixed swap reported to two non- Field value: LEI of the other
dually-registered swap data SDR to which the swap is or
repositories, the identity of the will be reported.
other swap data repository (if any) to
which the swap is or will be reported.
Contract type.......................... E.g., forward, non-deliverable
forward (NDF), non-
deliverable option (NDO),
vanilla option, simple exotic
option, complex exotic option.
Block trade indicator.................. Indication (Yes/No) of whether
the swap qualifies as a block
trade or large notional swap.
Execution timestamp.................... The date and time of the trade,
expressed using Coordinated
Universal Time (``UTC'').
Execution venue........................ The swap execution facility or
designated contract market on
or pursuant to the rules of
which the swap was executed.
Field values: LEI of the swap
execution facility or
designated contract market, or
``off-facility'' if not so
executed.
Currency 1............................. ISO code.
Currency 2............................. ISO code.
Notional amount 1...................... For currency 1.
Notional amount 2...................... For currency 2.
Exchange rate.......................... Contractual rate of exchange of
the currencies.
Delivery type.......................... Physical (deliverable) or cash
(non-deliverable).
Settlement or expiration date.......... Settlement date, or for an
option the contract expiration
date.
Timestamp for submission to swap data Time and date of submission to
repository. the swap data repository,
expressed using Coordinated
Universal Time (``UTC''), as
recorded by an automated
system where available, or as
recorded manually where an
automated system is not
available.
Clearing indicator..................... Yes/No indication of whether
the swap will be submitted for
clearing to a derivatives
clearing organization.
Clearing venue......................... LEI of the derivatives clearing
organization.
If the swap will not be cleared, an Yes/No.
exception to, or an exemption from,
the clearing requirement has been
elected with respect to the swap under
part 50 of this chapter.
The identity of the counterparty Field values: LEI, or
electing an exception or exemption to substitute identifier, for a
the clearing requirement under part 50 natural person.
of this chapter.
Clearing exception or exemption type... The type of clearing exception
or exemption being claimed.
Field values: End user, Inter-
affiliate or Cooperative.
Indication of collateralization........ Is the trade collateralized,
and if so to what extent?
Field values:
Uncollateralized, partially
collateralized, one-way
collateralized, fully
collateralized.
Any other term(s) of the trade matched E.g., for options, premium,
or affirmed by the counterparties in premium currency, premium
verifying the trade. payment date; for non-
deliverable trades, settlement
currency, valuation (fixing)
date; indication of the
economic obligations of the
counterparties. Use as many
fields as required to report
each such term.
------------------------------------------------------------------------
[[Page 41782]]
Exhibit B--Minimum Primary Economic Terms Data--Foreign Exchange
Transactions (Other Than Cross-Currency Swaps)
[Enter N/A for fields that are not applicable]
------------------------------------------------------------------------
Additional data categories and fields
for clearing swaps Comment
------------------------------------------------------------------------
Clearing swap USIs..................... The USIs of each clearing swap
that replaces the original
swap that was submitted for
clearing to the DCO, other
than the USI for which the PET
data is currently being
reported (as ``USI'' field
above).
Original swap USI...................... The USI of the original swap
submitted for clearing to the
DCO that is replaced by
clearing swaps.
Original swap SDR...................... LEI of SDR to which the
original swap was reported.
Clearing member LEI.................... LEI of Clearing member.
Clearing member client account......... Clearing member client account
number.
Origin (house or customer)............. An indication whether the
clearing member acted as
principal for a house trade or
agent for a customer trade.
Clearing receipt timestamp............. The date and time at which the
DCO received the original swap
for clearing, expressed using
UTC.
Clearing acceptance timestamp.......... The date and time at which the
DCO accepted the original swap
for clearing, expressed using
UTC.
------------------------------------------------------------------------
Exhibit C--Minimum Primary Economic Terms Data--Interest Rate Swaps
(Including Cross-Currency Swaps)
[Enter N/A for fields that are not applicable]
------------------------------------------------------------------------
Data fields for all swaps Comment
------------------------------------------------------------------------
Asset Class............................ Field values: Credit, equity,
FX, interest rates, other
commodities.
The Unique Swap Identifier for the swap As provided in Sec. 45.5.
The Legal Entity Identifier of the As provided in Sec. 45.6, or
reporting counterparty. substitute identifier for a
natural person.
An indication of whether the reporting Yes/No.
counterparty is a swap dealer with
respect to the swap.
An indication of whether the reporting Yes/No.
counterparty is a major swap
participant with respect to the swap.
If the reporting counterparty is not a Yes/No.
swap dealer or a major swap
participant with respect to the swap,
an indication of whether the reporting
counterparty is a financial entity as
defined in CEA section 2(h)(7)(C).
An indication of whether the reporting Yes/No.
counterparty is a derivatives clearing
organization with respect to the swap.
An indication of whether the reporting Yes/No.
counterparty is a U.S. person.
An indication that the swap will be Yes/No.
allocated.
If the swap will be allocated, or is a As provided in Sec. 45.6, or
post-allocation swap, the Legal Entity substitute identifier for a
Identifier of the agent. natural person.
An indication that the swap is a post- Yes/No.
allocation swap.
If the swap is a post-allocation swap, As provided in Sec. 45.5.
the unique swap identifier of the
initial swap transaction between the
reporting counterparty and the agent.
The Legal Entity Identifier of the non- As provided in Sec. 45.6, or
reporting counterparty. substitute identifier for a
natural person.
An indication of whether the non- Yes/No.
reporting counterparty is a swap
dealer with respect to the swap.
An indication of whether the non- Yes/No.
reporting counterparty is a major swap
participant with respect to the swap.
If the non-reporting counterparty is Yes/No.
not a swap dealer or a major swap
participant with respect to the swap,
an indication of whether the non-
reporting counterparty is a financial
entity as defined in CEA section
2(h)(7)(C).
An indication of whether the non- Yes/No.
reporting counterparty is a U.S.
person.
The Unique Product Identifier assigned As provided in Sec. 45.7.
to the swap.
If no Unique Product Identifier is ...............................
available for the swap because the
swap is not sufficiently standardized,
the taxonomic description of the swap
pursuant to the CFTC-approved product
classification system.
If no CFTC-approved UPI and product ...............................
classification system is yet
available, the internal product
identifier or product description used
by the swap data repository.
An indication that the swap is a multi- Field values: Yes, Not
asset swap. applicable.
For a multi-asset class swap, an Generally, the asset class
indication of the primary asset class. traded by the desk trading the
swap for the reporting
counterparty. Field values:
Credit, equity, FX, interest
rates, other commodities.
For a multi-asset class swap, an Field values: Credit, equity,
indication of the secondary asset FX, interest rates, other
class(es). commodities.
An indication that the swap is a mixed Field values: Yes, Not
swap. applicable.
[[Page 41783]]
For a mixed swap reported to two non- Field value: LEI of the other
dually-registered swap data SDR to which the swap is or
repositories, the identity of the will be reported.
other swap data repository (if any) to
which the swap is or will be reported.
Contract type.......................... E.g., swap, swaption, option,
basis swap, index swap.
Block trade indicator.................. Indication (Yes/No) of whether
the swap qualifies as a block
trade or large notional swap.
Execution timestamp.................... The date and time of the trade,
expressed using Coordinated
Universal Time (``UTC'').
Execution venue........................ The swap execution facility or
designated contract market on
or pursuant to the rules of
which the swap was executed.
Field values: LEI of the swap
execution facility or
designated contract market, or
``off-facility'' if not so
executed.
Start date............................. The date on which the swap
starts or goes into effect.
Maturity, termination or end date...... The date on which the swap
expires or ends.
Day count convention...................
Notional amount (leg 1)................ The current active notional
amount.
Notional currency (leg 1).............. ISO code.
Notional amount (leg 2)................ The current active notional
amount.
Notional currency (leg 2).............. ISO code.
Payer (fixed rate)..................... Is the reporting party a fixed
rate payer? Yes/No/Not
applicable.
Payer (floating rate leg 1)............ If two floating legs, the payer
for leg 1.
Payer (floating rate leg 2)............ If two floating legs, the payer
for leg 2.
Direction.............................. For swaps: Whether the
principal is paying or
receiving the fixed rate. For
float-to-float and fixed-to-
fixed swaps: Indicate N/A.
For non-swap instruments and
swaptions: Indicate the
instrument that was bought or
sold.
Option type............................ E.g., put, call, straddle.
Fixed rate.............................
Fixed rate day count fraction.......... E.g., actual 360.
Floating rate payment frequency........
Floating rate reset frequency..........
Floating rate index name/rate period... E.g., USD-Libor-BBA.
Timestamp for submission to swap data Time and date of submission to
repository. the swap data repository,
expressed using UTC, as
recorded by an automated
system where available, or as
recorded manually where an
automated system is not
available.
Clearing indicator..................... Yes/No indication of whether
the swap will be submitted for
clearing to a derivatives
clearing organization.
Clearing venue......................... LEI of the derivatives clearing
organization.
If the swap will not be cleared, an Yes/No.
indication of whether an exception to,
or an exemption from, the clearing
requirement has been elected with
respect to the swap under part 50 of
this chapter.
The identity of the counterparty Field values: LEI, or
electing an exception or exemption to substitute identifier, for a
the clearing requirement under part 50 natural person.
of this chapter.
Clearing exception or exemption type... The type of clearing exception
or exemption being claimed.
Field values: End user, Inter-
affiliate or Cooperative.
Indication of collateralization........ Is the swap collateralized, and
if so to what extent? Field
values: Uncollateralized,
partially collateralized, one-
way collateralized, fully
collateralized.
Any other term(s) of the swap matched E.g., early termination option
or affirmed by the counterparties in clause. Use as many fields as
verifying the swap. required to report each such
term.
------------------------------------------------------------------------
Exhibit C--Minimum Primary Economic Terms Data--Interest Rate Swaps
(Including Cross-Currency Swaps)
[Enter N/A for fields that are not applicable]
------------------------------------------------------------------------
Additional data categories and fields
for clearing swaps Comment
------------------------------------------------------------------------
Clearing swap USIs..................... The USIs of each clearing swap
that replaces the original
swap that was submitted for
clearing to the DCO, other
than the USI for which the PET
data is currently being
reported (as ``USI'' field
above).
Original swap USI...................... The USI of the original swap
submitted for clearing to the
DCO that is replaced by
clearing swaps.
Original swap SDR...................... LEI of SDR to which the
original swap was reported.
Clearing member LEI.................... LEI of Clearing member.
Clearing member client account......... Clearing member client account
number.
Origin (house or customer)............. An indication whether the
clearing member acted as
principal for a house trade or
agent for a customer trade.
Clearing receipt timestamp............. The date and time at which the
DCO received the original swap
for clearing, expressed using
UTC.
[[Page 41784]]
Clearing acceptance timestamp.......... The date and time at which the
DCO accepted the original swap
for clearing, expressed using
UTC.
------------------------------------------------------------------------
Exhibit D--Minimum Primary Economic Terms Data--Other Commodity Swaps
[Enter N/A for fields that are not applicable]
------------------------------------------------------------------------
Data field for all swaps Comment
------------------------------------------------------------------------
Asset Class............................ Field values: Credit, equity,
FX, interest rates, other
commodities.
The Unique Swap Identifier for the swap As provided in Sec. 45.5.
The Legal Entity Identifier of the As provided in Sec. 45.6, or
reporting counterparty. substitute identifier for a
natural person.
An indication of whether the reporting Yes/No.
counterparty is a swap dealer with
respect to the swap.
An indication of whether the reporting Yes/No.
counterparty is a major swap
participant with respect to the swap.
If the reporting counterparty is not a Yes/No.
swap dealer or a major swap
participant with respect to the swap,
an indication of whether the reporting
counterparty is a financial entity as
defined in CEA section 2(h)(7)(C).
An indication of whether the reporting Yes/No.
counterparty is a derivatives clearing
organization with respect to the swap.
An indication of whether the reporting Yes/No.
counterparty is a U.S. person.
An indication that the swap will be Yes/No.
allocated.
If the swap will be allocated, or is a As provided in Sec. 45.6, or
post-allocation swap, the Legal Entity substitute identifier for a
Identifier of the agent. natural person.
An indication that the swap is a post- Yes/No.
allocation swap.
If the swap is a post-allocation swap, As provided in Sec. 45.5.
the unique swap identifier of the
initial swap transaction between the
reporting counterparty and the agent.
The Legal Entity Identifier of the non- As provided in Sec. 45.6, or
reporting party. substitute identifier for a
natural person.
An indication of whether the non- Yes/No.
reporting counterparty is a swap
dealer with respect to the swap.
An indication of whether the non- Yes/No.
reporting counterparty is a major swap
participant with respect to the swap.
If the non-reporting counterparty is Yes/No.
not a swap dealer or a major swap
participant with respect to the swap,
an indication of whether the non-
reporting counterparty is a financial
entity as defined in CEA section
2(h)(7)(C).
An indication of whether the non- Yes/No.
reporting counterparty is a U.S.
person.
The Unique Product Identifier assigned As provided in Sec. 45.7.
to the swap.
If no Unique Product Identifier is
available for the swap because the
swap is not sufficiently standardized,
the taxonomic description of the swap
pursuant to the CFTC-approved product
classification system.
If no CFTC-approved UPI and product
classification system is yet
available, the internal product
identifier or product description used
by the swap data repository.
An indication that the swap is a multi- Field values: Yes, Not
asset swap. applicable.
For a multi-asset class swap, an Generally, the asset class
indication of the primary asset class. traded by the desk trading the
swap for the reporting
counterparty. Field values:
Credit, equity, FX, interest
rates, other commodities.
For a multi-asset class swap, an Field values: Credit, equity,
indication of the secondary asset FX, interest rates, other
class(es). commodities.
An indication that the swap is a mixed Field values: Yes, Not
swap. applicable.
For a mixed swap reported to two non- Field value: LEI of the other
dually- registered swap data SDR to which the swap is or
repositories, the identity of the will be reported.
other swap data repository (if any) to
which the swap is or will be reported.
Contract type.......................... E.g., swap, swaption, option,
basis swap, index swap.
Block trade indicator.................. Indication (Yes/No) of whether
the swap qualifies as a
``block trade'' or ``large
notional off-facility swap''
as defined in part 43 of the
CFTC's regulations.
Execution timestamp.................... The date and time of the trade,
expressed using Coordinated
Universal Time (``UTC''), as
recorded by an automated
system where available, or as
recorded manually where an
automated system is not
available.
[[Page 41785]]
Execution venue........................ The swap execution facility or
designated contract market on
or pursuant to the rules of
which the swap was executed.
Field values: LEI of the swap
execution facility or
designated contract market, or
``off-facility'' if not so
executed.
Timestamp for submission to swap data Time and date of submission to
repository. the swap data repository,
expressed using UTC, as
recorded by an automated
system where available, or as
recorded manually where an
automated system is not
available.
Start date............................. The date on which the swap
commences or goes into effect
(e.g., in physical oil, the
pricing start date).
Maturity, termination, or end date..... The date on which the swap
expires or ends (e.g., in
physical oil, the pricing end
date).
Buyer.................................. The counterparty purchasing the
product: (E.g., the payer of
the fixed price (for a swap),
or the payer of the floating
price on the underlying swap
(for a put swaption), or the
payer of the fixed price on
the underlying swap (for a
call swaption). Field values:
LEI, if available, or
substitute identifier, for a
natural person.
Seller................................. The counterparty offering the
product: (E.g., the payer of
the floating price (for a
swap), the payer of the fixed
price on the underlying swap
(for a put swaption), or the
payer of the floating price on
the underlying swap (for a
call swaption). Field values:
LEI, or substitute identifier,
for a natural person.
Quantity unit.......................... The unit of measure applicable
for the quantity on the swap.
E.g., barrels, bushels,
gallons, pounds, tons.
Quantity............................... The amount of the commodity
(the number of quantity units)
quoted on the swap.
Quantity frequency..................... The rate at which the quantity
is quoted on the swap. E.g.,
hourly, daily, weekly,
monthly.
Total quantity......................... The quantity of the commodity
for the entire term of the
swap.
Settlement method...................... Physical delivery or cash.
Price.................................. The price of the swap. For
options, the strike price.
Price unit............................. The unit of measure applicable
for the price of the swap.
Price currency......................... ISO code.
Buyer pay index........................ The published price as paid by
the buyer (if applicable). For
swaptions, applies to the
underlying swap.
Buyer pay averaging method............. The averaging method used to
calculate the index of the
buyer pay index. For
swaptions, applies to the
underlying swap.
Seller pay index....................... The published price as paid by
the seller (if applicable).
For swaptions, applies to the
underlying swap.
Seller pay averaging method............ The averaging method used to
calculate the index of the
seller pay index. For
swaptions, applies to the
underlying swap.
Grade.................................. If applicable, the grade of the
commodity to be delivered,
e.g., the grade of oil or
refined product.
Option type............................ Descriptor for the type of
option transaction. E.g., put,
call, straddle.
Option style........................... E.g., American, European,
European Daily, European
Monthly, Asian.
Option premium......................... The total amount paid by the
option buyer.
Hours from through..................... For electric power, the hours
of the day for which the swap
is effective.
Hours from through time zone........... For electric power, the time
zone prevailing for the hours
during which electricity is
transmitted.
Days of week........................... For electric power, the profile
applicable for the delivery of
power.
Load type.............................. For electric power, the load
profile for the delivery of
power.
Clearing indicator..................... Yes/No indication of whether
the swap will be submitted for
clearing to a derivatives
clearing organization.
Clearing venue......................... LEI of the derivatives clearing
organization.
If the swap will not be cleared, an Yes/No.
indication of whether an exception to,
or an exemption from, the clearing
requirement has been elected with
respect to the swap under part 50 of
this chapter.
The identity of the counterparty Field values: LEI, or
electing an exception or exemption to substitute identifier, for a
the clearing requirement under part 50 natural person.
of this chapter.
Clearing exception or exemption type... The type of clearing exception
or exemption being claimed.
Field values: End user, Inter-
affiliate or Cooperative.
Indication of collateralization........ Is the swap collateralized, and
if so to what extent? Field
values: Uncollateralized,
partially collateralized, one-
way collateralized, fully
collateralized.
Any other term(s) of the swap matched Use as many fields as required
or affirmed by the counterparties in to report each such term.
verifying the swap.
------------------------------------------------------------------------
[[Page 41786]]
Exhibit D--Minimum Primary Economic Terms Data--Other Commodity Swaps
[Enter N/A for fields that are not applicable]
------------------------------------------------------------------------
Additional data categories and fields
for clearing swaps Comment
------------------------------------------------------------------------
Clearing swap USIs..................... The USIs of each clearing swap
that replaces the original
swap that was submitted for
clearing to the DCO, other
than the USI for which the PET
data is currently being
reported (as ``USI'' field
above).
Original swap USI...................... The USI of the original swap
submitted for clearing to the
DCO that is replaced by
clearing swaps.
Original swap SDR...................... LEI of SDR to which the
original swap was reported.
Clearing member LEI.................... LEI of Clearing member.
Clearing member client account......... Clearing member client account
number.
Origin (house or customer)............. An indication whether the
clearing member acted as
principal for a house trade or
agent for a customer trade.
Clearing receipt timestamp............. The date and time at which the
DCO received the original swap
for clearing, expressed using
UTC.
Clearing acceptance timestamp.......... The date and time at which the
DCO accepted the original swap
for clearing, expressed using
UTC.
------------------------------------------------------------------------
Issued in Washington, DC, on June 14, 2016, by the Commission.
Christopher J. Kirkpatrick,
Secretary of the Commission.
Note: The following appendices will not appear in the Code of
Federal Regulations.
Appendices to Amendments to Swap Data Recordkeeping and Reporting
Requirements for Cleared Swaps--Commission Voting Summary and
Chairman's Statement
Appendix 1--Commission Voting Summary
On this matter, Chairman Massad and Commissioners Bowen and
Giancarlo voted in the affirmative. No Commissioner voted in the
negative.
Appendix 2--Statement of Chairman Timothy G. Massad
Regular reporting of data on swaps is a key component of the
swaps reforms that were agreed to by the G-20 leaders and codified
in the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Since taking office, a priority of mine has been to improve data
quality and to simplify reporting obligations for market
participants. I know that my fellow Commissioners Bowen and
Giancarlo share this goal. That is why I am very pleased that today,
the Commission has acted unanimously to improve the process for
reporting data on cleared swaps.
This final rule will significantly enhance data quality and
reduce reporting costs in a number of ways. It streamlines the
reporting process to ensure there are not duplicate records of a
swap, which can lead to double counting that can distort the data.
It makes sure that accurate valuations of swaps are provided on an
ongoing basis. And it eliminates some needless reporting
requirements for swap dealers and major swap participants. This rule
provides clarity and certainty in a number of areas, and will
improve our ability to trace a swap through all phases of its
lifecycle. Ultimately, it will provide us with a better picture of
the swaps market, and enhance our ability to identify the buildup of
risk that may pose a threat to the financial system.
Today's final rule reflects the largely positive feedback we
received on our proposal, which was released in August, 2015. We
very much appreciate the input that market participants have given
us.
This effort is just one piece of our work to ensure accuracy and
completeness in data reporting, to harmonize data standards, and to
improve data quality, while avoiding excessive burdens and
duplication. For example, our other efforts will include the
development of technical specifications for the reporting of 120
priority data elements, which will lead to greater consistency and
standardization in reporting. We are also leading international
efforts on data harmonization, including the development of tools
that will allow regulators to identify swaps and swap activity by
product type and transaction type throughout the life of a swap.
I thank CFTC staff for their hard work on this rule, as well as
the market participants who took the time to provide us feedback.
And I also thank my fellow Commissioners Bowen and Giancarlo for
their careful consideration and unanimous support for this measure.
[FR Doc. 2016-14414 Filed 6-24-16; 8:45 am]
BILLING CODE 6351-01-P