Federal Register, Volume 85 Issue 75 (Friday, April 17, 2020) 
[Federal Register Volume 85, Number 75 (Friday, April 17, 2020)]
[Proposed Rules]
[Pages 21516-21576]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-04405]

 

[[Page 21515]]

Vol. 85

Friday,

No. 75

April 17, 2020

Part II

 

 

Commodity Futures Trading Commission

 

 

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17 CFR Part 43

 

 

Real-Time Public Reporting Requirements; Proposed Rule

Federal Register / Vol. 85 , No. 75 / Friday, April 17, 2020 /
Proposed Rules

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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 43

RIN 3038-AE60

Real-Time Public Reporting Requirements

AGENCY: Commodity Futures Trading Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Commodity Futures Trading Commission (“Commission” or
“CFTC”) is proposing revisions to its regulations setting forth the
real-time public reporting and dissemination requirements for swap data
repositories (“SDRs”), derivatives clearing organizations (“DCOs”),
swap execution facilities (“SEFs”), designated contract markets
(“DCMs”), swap dealers (“SDs”), major swap participants (“MSPs”),
and swap counterparties that are neither SDs nor MSPs. The Commission
is also proposing revisions that, among other things, change the
“block trade” definition, change the block swap categories, update
the block thresholds and cap sizes, and adjust the delay for the public
dissemination of block transactions.

DATES: Comments must be received on or before May 20, 2020.

ADDRESSES: You may submit comments, identified by RIN number 3038-AE60,
by any of the following methods:
     CFTC Website: https://comments.cftc.gov. Follow the
instructions for submitting comments through the Comments Online
process on the website.
     Mail: Send to Christopher Kirkpatrick, Secretary of the
Commission, Commodity Futures Trading Commission, Three Lafayette
Centre, 1155 21st Street NW, Washington, DC 20581.
     Hand Delivery/Courier: Same as Mail, above.
    Please submit your comments using only one method.
    All comments must be submitted in English, or if not, accompanied
by an English translation. Comments will be posted as received to
https://www.cftc.gov. You should submit only information that you wish
to make available publicly. If you wish the Commission to consider
information that you believe is exempt from disclosure under the
Freedom of Information Act (“FOIA”), a petition for confidential
treatment of the exempt information may be submitted according to the
procedures established in Sec.  145.9 of the Commission’s
regulations.1
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    1 17 CFR 145.9. Commission regulations referred to herein are
found at 17 CFR chapter I.
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    The Commission reserves the right, but shall have no obligation, to
review, pre-screen, filter, redact, refuse or remove any or all of your
submission from https://www.cftc.gov that it may deem to be
inappropriate for publication, such as obscene language. All
submissions that have been redacted or removed that contain comments on
the merits of the rulemaking will be retained in the public comment
file and will be considered as required under the Administrative
Procedure Act and other applicable laws, and may be accessible under
the FOIA.

FOR FURTHER INFORMATION CONTACT: David E. Aron, Special Counsel, (202)
418-6621, [email protected], Division of Market Oversight; Meghan Tente,
Acting Associate Director, 202-418-5785, [email protected], Division of
Market Oversight; Owen J. Kopon, Special Counsel, (202) 418-5360,
[email protected], Division of Swap Dealer and Intermediary Oversight;
Matthew Jones, Special Counsel, (202) 418-6710, [email protected],
Division of Market Oversight; John Roberts, Senior Research Analyst,
(202) 418-5943, [email protected], Office of the Chief Economist; in
each case at the Commodity Futures Trading Commission, Three Lafayette
Centre, 1155 21st Street NW, Washington, DC 20581.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background and Introduction
    A. Reporting Rules Review
    B. Statutory and Regulatory Framework for Real-Time Public
Reporting
II. Proposed Amendments to Part 43
    A. Sec.  43.1–Purpose, Scope, and Rules of Construction
    B. Sec.  43.2–Definitions
    C. Sec.  43.3–Method and Timing for Real-Time Public Reporting
    D. Sec.  43.4–Swap Transaction and Pricing Data To Be Publicly
Disseminated in Real-Time
    E. Sec.  43.5–Time Delays for Public Dissemination of Swap
Transaction and Pricing Data
    F. Sec.  43.6–Block Trades
    G. Sec.  43.7–Delegation of Authority
III. Swap Transaction and Pricing Data Reported to and Publicly
Disseminated by Swap Data Repositories
    A. General
    B. Swap Transaction and Pricing Data Elements
IV. Compliance Date
V. Related Matters
    A. Regulatory Flexibility Act
    B. Paperwork Reduction Act
    C. Cost-Benefit Considerations
    D. Antitrust Considerations

I. Background and Introduction

A. Reporting Rules Review

    The Commission’s real-time public reporting regulations were
adopted in 2012 and are located in part 43 of the Commission’s
regulations. The 2012 rulemaking set forth regulations that require
swap counterparties, SEFs, and DCMs to report publicly reportable swap
transactions (“PRST”) to SDRs.2 In addition, the 2012 RTR Final
Rule set forth regulations that require SDRs to publicly disseminate
swap transaction and pricing data (“STAPD”) in real-time.3 In 2013,
the Commission adopted a block trade rule 4 to implement the
statutory requirements of Commodity Exchange Act (“CEA”) section
2(a)(13)(E)(i)-(iv).5
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    2 Real-Time Public Reporting (“RTR”) of Swap Transaction
Data, 77 FR 1182 (Jan. 9, 2012) (“2012 RTR Final Rule”); 17 CFR
43.3(a)(1)-(3) and (b)(1).
    3 See id.; 17 CFR 43.3(b)(2).
    4 Procedures to Establish Appropriate Minimum Block Sizes for
Large Notional Off-Facility Swaps and Block Trades, 78 FR 32866 (May
31, 2013) (“Block Trade Rule”).
    5 CEA section 2(a)(13)(E)(i)-(iv). These CEA sections contain
provisions (e.g., time delays) that the Commission must include in
its required rulemakings governing public reporting of STAPD for the
categories of swaps set forth in CEA sections 2(a)(13)(C)(i) and
(ii), 7 U.S.C. 2(a)(13)(C)(i) and (ii).
—————————————————————————

    Several years ago, the Division of Market Oversight (“DMO”)
conducted a review of the Commission’s swap reporting rules. After
completing that review, on July 10, 2017, DMO announced 6 its Roadmap
to Achieve High Quality Swaps Data (“Roadmap”),7 consisting of a
comprehensive review to, among other things: “[(i)] Evaluate real-time
reporting regulations in light of goals of liquidity, transparency, and
price discovery in the swaps market[; and (ii)] Address ongoing issues
of reporting packages, prime brokerage, allocations, risk mitigation
services/compressions, EFRPs, and post-priced swaps by clarifying
obligations and identifying those distinct types of transactions to
increase the utility of the real-time public tape.8
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    6 See CFTC Letter 17-33, DMO Announces Review of Swap
Reporting Rules in Parts 43, 45, and 49 of Commission Regulations
(July 10, 2017), available at http://www.cftc.gov/idc/groups/public/@lrlettergeneral/documents/letter/17-33.pdf.
    7 The Roadmap is available at https://www.cftc.gov/sites/default/files/idc/groups/public/@newsroom/documents/file/dmo_swapdataplan071017.pdf.
    8 Roadmap at 11.
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    In April 2019, the Commission adopted its first notice of proposed
rulemaking (“NPRM”) as part of the

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Roadmap review.9 The 2019 Part 49 NPRM proposes amendments to
streamline and clarify the Commission’s SDR regulations in parts 23,
43, 45, and 49. Among other things, the 2019 Part 49 NPRM proposes
modifications to the existing requirements on SDRs for confirming the
accuracy of swap data with swap counterparties, and proposes requiring
reporting counterparties to verify the accuracy of swap data.
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    9 See generally Certain Swap Data Repository and Data
Reporting Requirements, 84 FR 21044 (May 13, 2019) (“2019 Part 49
NPRM”).
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    The Commission has received extensive feedback that addressed many
swap reporting topics.10 In connection with the Roadmap review, DMO
conducted extensive outreach with commenters. DMO held calls and
meetings, and reviewed the comment letters to better understand the
challenges facing market participants and their suggestions on how to
improve real-time public reporting. Comments raised on specific issues
are discussed in the relevant sections throughout this release.
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    10 Comment letters are available at https://comments.cftc.gov/PublicComments/CommentList.aspx?id=1824.
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    After reviewing the Roadmap feedback, the Commission is proposing
revisions to the following aspects of the part 43 real-time public
reporting regulations: The method and timing of real-time reporting and
public dissemination, generally and for specific types of swaps; the
delay and anonymization of the public dissemination of block trades or
large notional trades; the standardization and validation of real-time
reporting fields; the delegation of specific authority to Commission
staff; and the clarification of specific real-time reporting questions
and common issues.11
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    11 At the same time, the Commission is proposing a separate
NPRM for publication in the Federal Register amending the part 45
swap data reporting regulations (“2020 Part 45 NPRM”).
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B. Statutory and Regulatory Framework for Real-Time Public Reporting

    Section 2(a)(13)(B) of the CEA authorizes the Commission to make
STAPD available to the public in such form and at such times as the
Commission determines appropriate to enhance price discovery. Section
2(a)(13)(C) requires that the Commission publish rules for the public
availability of STAPD. Section 2(a)(13)(D) permits the Commission to
require registered entities to publicly disseminate STAPD.
    In 2012, the Commission adopted part 43 to implement rules
providing for the public availability of STAPD as directed by section
2(a)(13).12 Section 2(a)(13)(E) required that the Commission’s rules
contain provisions for: (i) Ensuring the STAPD publicly disseminated
does not identify the swap counterparties; (ii) specifying the criteria
for large notional swaps (block trades), for particular markets and
contracts; (iii) specifying an appropriate time delay for reporting
block trades to the public; and (iv) taking into account whether the
public disclosure will materially reduce market liquidity. In 2013, the
Commission adopted the Block Trade Rule to further implement the
statutory requirements of CEA section 2(a)(13)(E)(i)-(iv).13
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    12 2012 RTR Final Rule.
    13 See Block Trade Rule.
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    Part 43 currently requires reporting parties to report PRSTs to
SDRs as soon as technologically practicable (“ASATP”) after
execution.14 Part 43 defines a PRST as: (i) Any executed swap that is
an arm’s-length transaction between two parties that results in a
corresponding change in the market risk position between the two
parties; or (ii) any termination, assignment, novation, exchange,
transfer, amendment, conveyance, or extinguishing of rights or
obligations of a swap that changes the pricing of the swap.15
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    14 17 CFR 43.3(a).
    15 17 CFR 43.2.
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    Part 43 currently defines execution as an agreement by the parties
(whether orally, in writing, electronically, or otherwise) to the terms
of a swap that legally binds the parties to such terms under applicable
law.16 In addition, execution is defined to occur simultaneously with
or immediately following the affirmation of the swap.17
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    16 Id.
    17 Id.
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    For a PRST executed on or pursuant to the rules of a SEF or DCM, a
party to such transaction satisfies its requirement to report the
transaction to an SDR by executing it on the SEF or DCM.18 For off-
facility transactions, Sec.  43.3(a)(3) specifies the reporting party
for PRSTs and requires the reporting party to report the swap to an SDR
ASATP following execution.
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    18 17 CFR 43.3(a)(2).
—————————————————————————

    SDRs are required to ensure that STAPD is publicly disseminated
ASATP after receiving it from a SEF, DCM, or reporting party, unless it
is subject to a time delay described in Sec.  43.5, in which case the
PRST must be publicly disseminated in the manner described in Sec. 
43.5.19 Regulation 43.3(b)(3), the “embargo rule,” generally
prohibits SEFs, DCMs, SDs, and MSPs from disseminating STAPD to their
customers and participants prior to the public dissemination of such
data to an SDR.
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    19 17 CFR 43.3(b)(2).
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    The STAPD to be disseminated in real-time consists of the data
elements listed in appendix A to part 43.20 SDRs are permitted to
request additional information from reporting parties, SEFs, and DCMs,
but may not publicly disseminate it.21 SDRs must comply with other
regulations concerning how STAPD is disseminated, including ensuring
they do not disclose the identities of the counterparties; 22
restrictions on disclosing underlying assets for certain swaps in the
other commodity asset class; 23 and rounding and capping notional or
principal amounts.24
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    20 17 CFR 43.4(b).
    21 17 CFR 43.4(c).
    22 17 CFR 43.4(d)(1).
    23 17 CFR 43.4(d)(4).
    24 17 CFR 43.4(g)-(h).
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    With respect to the delay for block trades, the Commission assigned
swap contracts to “swap categories” in the Block Trade Rule for the
purpose of applying a common appropriate minimum block size (“AMBS”)
to different swap transactions. To create these swap categories, the
Commission divided swaps into five asset classes: Interest rates;
equity; credit; foreign exchange; and other commodities. The Commission
then split these asset classes into the various swap categories.25
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    25 17 CFR 43.6(b).
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    The Commission phased-in the time delays for the public
dissemination of block trades based on four factors: (1) Whether the
swap is executed on or pursuant to the rules of a SEF or DCM; (2) the
swap’s asset class; (3) whether the swap is mandatorily cleared; and
(4) whether at least one counterparty is an SD or MSP.26
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    26 17 CFR 43.5.
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    The initial time delays were: 30 minutes for blocks executed on a
SEF or DCM; 27 30 minutes for large notional off-facility swaps
(“LNOFs”) 28 subject to mandatory clearing with a SD/MSP
counterparty; 29 4 hours for LNOFs subject to mandatory clearing with
no SD/MSP counterparty; 30 1 hour for

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LNOFs not subject to mandatory clearing in the interest rate, credit,
foreign exchange, or equity asset classes with at least one SD/MSP
counterparty; 31 4 hours for LNOFs in the other commodity asset class
not subject to mandatory clearing with at least one SD/MSP
counterparty; 32 and 48 business hours for LNOFs in all asset classes
not subject to mandatory clearing for which neither counterparty is an
SD/MSP.33 The Commission has not established post-initial AMBS under
Sec.  43.6(f)(1).
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    27 17 CFR 43.5(c)(2) and (d)(1). After the first year, the
delay reduced to 15 minutes. 17 CFR 43.5(d)(2).
    28 Large notional off-facility swaps are off-facility swaps
with notional or principal amounts at or above the AMBS applicable
to such PRST and that are not a block trade as defined in Sec. 
43.2. 17 CFR 43.2 (definition of “large notional off-facility
swap”).
    29 17 CFR 43.5(c)(3) and (e)(2)(i). After the first year, the
delay reduced to 15 minutes. 17 CFR 43.5(e)(2)(ii).
    30 17 CFR 43.5(c)(3) and (e)(3)(i). During year 2, the time
delay reduced to 2 hours. 17 CFR 43.5(e)(3)(ii). After year 2, the
time delay reduced to 1 hour. 17 CFR 43.5(e)(3)(iii).
    31 17 CFR 43.5(c)(4) and (f)(1). After the first year, the
time delay reduced to 30 minutes. 17 CFR 43.5(f)(2).
    32 17 CFR 43.5(c)(5) and (g)(1). After the first year, the
time delay reduced to 2 hours. 17 CFR 43.5(g)(2) and (g)(3).
    33 17 CFR 43.5(c)(6) and (h)(1). During year 2, the time delay
reduced to 36 business hours. 17 CFR 43.5(h)(2). After year 2, the
time delay reduced to 24 business hours. 17 CFR 43.5(h)(3).
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II. Proposed Amendments to Part 43

A. Sec.  43.1–Purpose, Scope, and Rules of Construction

    The Commission is proposing several non-substantive changes to
Sec.  43.1. The Commission is proposing to remove Sec.  43.1(b).
Regulation 43.1(b)(1), titled “Scope,” states that part 43 applies to
all swaps, as defined in CEA Sec.  1a(47),34 and lists certain
categories of swaps as examples. Regulation 43.1(b)(2) states that part
43 applies to registered entities and parties to a swap and lists
certain categories of swap parties. The Commission preliminarily
believes that these provisions are superfluous, given that the scope of
what part 43 covers is clear from various CEA sections and the
operative provisions of part 43.
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    34 7 U.S.C. 1a(47).
—————————————————————————

    The Commission also proposes to redesignate current Sec.  43.1(c),
entitled “Rules of construction,” as Sec.  43.1(b). The first
sentence of Sec.  43.1(c) currently reads as follows: The examples in
this part and in appendix A to this part are not exclusive. The
Commission proposes to delete the reference to “appendix A” to
reflect that the Commission proposes to replace appendix A with new
appendix C.35 The Commission is not proposing to remove this full
requirement, however, in case there are other places within part 43 in
which market participants would rely on examples.
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    35 As discussed in section II.E.3., the Commission is
proposing to delete appendix C in connection with changes to the
block delays. In its place, the Commission is proposing to update
the list of STAPD elements in current appendix A and move them to
appendix C. At the same time, DMO is publishing draft technical
specifications on https://www.cftc.gov for comment.
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    The Commission also proposes to delete Sec.  43.1(d), entitled
“Severability.” Regulation 43.1(d) currently provides that if any
provision of this part, or the application thereof to any person or
circumstance, is held invalid, such invalidity shall not affect other
provisions or application of such provision to other persons or
circumstances which can be given effect without the invalid provision
or application. The Commission believes that a severability provision
is not appropriate because, without knowing which provision a future
court might hold invalid, it is unclear that the Commission would
interpret all related remaining provisions of part 43 as continuing to
be effective without the invalid provision(s), and the Commission
wishes to maintain the flexibility to make that determination at the
time of any such holding.

B. Sec.  43.2–Definitions

    The Commission is proposing several changes to Sec.  43.2. The
Commission is proposing to add a number of new definitions, amend
certain existing definitions, and remove certain definitions. Within
each of those categories, because Sec.  43.2 is arranged
alphabetically, the Commission discusses its proposed changes to Sec. 
43.2 in that order as well, except as otherwise noted.
    Currently, Sec.  43.2 does not have lettered paragraphs. The
Commission is proposing to add new paragraphs (a) and (b) to Sec. 
43.2. Proposed new paragraph (a) would contain all of the definitions
in current Sec.  43.2, as the Commission proposes to modify them.
Proposed new paragraph (b) would provide that terms not defined in part
43 have the meanings assigned to those terms in Sec.  1.3 of the
Commission’s regulations.
1. Proposed New Definitions
    The Commission is proposing to add a definition of “execution
date” to Sec.  43.2. As proposed, “execution date” would mean the
date, determined by reference to eastern time, on which swap execution
has occurred. This proposed new definition is used in a discussion of
proposed changes to the reporting deadline for post-priced swaps
(“PPSs”) in section II.C.2. below.
    The Commission is proposing to add a definition of “post-priced
swap” to Sec.  43.2. As proposed, a “post-priced swap” would mean an
off-facility swap for which the price has not been determined at the
time of execution. This proposed new definition is used in a discussion
of proposed changes to reporting deadlines for PPSs in section II.C.2.
below.
    The Commission is proposing to add a definition of “reporting
counterparty.” The Commission notes that the definition itself would
be the same as the current definition of “reporting party” in Sec. 
43.2. This proposed new definition is used in a discussion of proposed
changes to the Sec.  43.3 regulations for the method and timing of
real-time public reporting in section II.C.1. below.
    The term “swap execution facility” is used throughout parts 43
and 45. While part 45 provides a definition of “swap execution
facility,” no such definition exists in part 43. Therefore, in order
to harmonize parts 43 and 45, the Commission is proposing to add a
definition of “swap execution facility” in part 43. As proposed,
“swap execution facility” means a trading system or platform that is
a swap execution facility as defined in CEA section 1a(50) and in Sec. 
1.3 of this chapter and that is registered with the Commission pursuant
to CEA section 5h and Sec.  37 of this chapter. The proposed definition
reflects the proposed non-substantive minor technical changes that are
proposed to the definition of “swap execution facility” in the
concurrent part 45 proposal.
    The Commission is proposing to add a definition of “swap
transaction and pricing data” to Sec.  43.2. As proposed, “swap
transaction and pricing data” means all data for a swap in appendix C
to part 43 required to be reported or publicly disseminated pursuant to
part 43. The Commission believes that providing a definition for the
type of data addressed in part 43 should help distinguish between the
different types of data reported pursuant to the different reporting
regulations.
    The Commission is also proposing to add the following six
definitions to Sec.  43.2: “Mirror swap;” “pricing event;” “prime
broker;” “prime brokerage agency arrangement;” “prime brokerage
agent;” and “trigger swap.” These proposed definitions are all
related to swaps entered into by prime brokers. Because all of these
six proposed definitions are used in the text of proposed Sec. 
43.3(a)(6) or are used in one or more of the proposed definitions that
are in turn used in proposed Sec.  43.3(a)(6), all of the six proposed
definitions are set forth and discussed in section II.C.4. below.
2. Proposed Amendments to Existing Definitions
    The Commission is proposing non-substantive ministerial changes to
the

[[Page 21519]]

following definitions in Sec.  43.2: “As soon as technologically
practicable;” “asset class;” “novation;” “other commodity;” and
“reference price.”
    The Commission is also proposing to amend the definition of
“appropriate minimum block size” in Sec.  43.2. Currently, Sec.  43.2
defines “appropriate minimum block size” to mean the minimum notional
or principal amount for a category of swaps that qualifies a swap
within such category as a block trade or large notional off-facility
swap. This proposed amended definition is used in a discussion of
proposed changes to the Sec.  43.5(a) regulations for the time delays
for the public dissemination of STAPD in section II.E.1. below.
    The Commission is proposing to amend the definition of “block
trade” in Sec.  43.2. Currently, Sec.  43.2 defines “block trade” to
mean a PRST that: (1) Involves a swap that is listed on a registered
SEF or DCM; (2) occurs away from the registered SEF’s or DCM’s trading
system or platform and is executed pursuant to the registered SEF’s or
DCM’s rules and procedures; (3) has a notional or principal amount at
or above the AMBS applicable to such swap; and (4) is reported subject
to the rules and procedures of the registered SEF or DCM and the rules
described in part 43, including the appropriate time delay requirements
set forth in Sec.  43.5.
    In November 2018, the Commission issued a comprehensive proposal to
amend the SEF regulatory framework.36 Among other things, the 2018
SEF NPRM proposed to amend the definition of “block trade” as part of
the proposal’s holistic approach to amending the SEF regulatory
framework. Given the complex, expansive, and comprehensive nature of
the 2018 SEF Proposal, however, the Commission continues to evaluate
it.
—————————————————————————

    36 See Swap Execution Facilities and Trade Execution
Requirement, 83 FR 61946 (Nov. 30, 2018) (“2018 SEF NPRM”).
—————————————————————————

    In the interim, in order to provide regulatory and legal certainty
to SEFs and market participants, the Commission recently proposed to
address certain outstanding no-action relief, including relief related
to block trades that SEFs and market participants have operated under
for several years.37 In particular, in the 2020 SEF NPRM, the
Commission proposed an amendment to condition (2) of the block trade
definition that would read as follows: (2) Is executed on the trading
system or platform, that is not an order book as defined in Sec. 
37.3(a)(3), of a registered SEF or occurs away from a registered SEF’s
or DCM’s trading system or platform and is executed pursuant to the
registered SEF’s or DCM’s rules and procedures.38 While the
Commission is proposing additional amendments to the “block trade”
definition in this NPRM, this NPRM is consistent with the proposed
amendments to the definition of “block trade” under the 2020 SEF
NPRM.
—————————————————————————

    37 See Swap Execution Facility Requirements and Real-Time
Reporting Requirements, 85 FR 9407 (Feb. 19, 2020) (“2020 SEF
NPRM”).
    38 In the 2020 SEF NPRM, the Commission explained that (1)
“permitting execution of block trades on a SEF’s non-[o]rder [b]ook
trading systems or platforms promotes the statutory SEF goal of
promoting the trading of swaps on SEFs” and (2) “for swap block
trades that are [intended to be cleared] and executed on a SEF’s
non-[o]rder [b]ook trading system or platform, the Commission
believes that the proposed revised definition would (i) allow
[futures commission merchants (“FCMs”)] to conduct pre-execution
credit screenings in accordance with Sec.  1.73; and (ii) allow SEFs
to facilitate those screenings in accordance with the Commission’s
proposed requirement under Sec.  37.702(b).” 2020 SEF NPRM at 9419.
—————————————————————————

    The Commission is proposing to create a two part definition of
“block trade” in Sec.  43.2. Paragraph (3) of the current definition
of “block trade” 39 would be incorporated into paragraph (1) of the
“block trade” definition, which would apply to “off-facility
swaps.” 40 The proposed “block trade” definition from the 2020 SEF
NPRM, which would apply to swaps that are not “off-facility swaps”
and that have specified connections to a SEF or a DCM, would become
paragraph (2) of the proposed “block trade” definition in this
NPRM.41 Moreover, the Commission believes these proposed changes
would eliminate the need for separate definitions of block trades and
large notional off-facility swaps.42 Therefore, as discussed below in
section II.B.3., the Commission is removing the definition of large
notional off-facility swaps from its regulations.
—————————————————————————

    39 This paragraph currently reads: Has a notional or principal
amount at or above the appropriate minimum block size applicable to
such swap.
    40 As proposed, paragraph (1) of the “block trade”
definition would read: (1) With respect to an off-facility swap, a
publicly reportable swap that has a notional or principal amount at
or above the appropriate minimum block size applicable to such swap.
The Commission is also proposing to make minor changes to the term
“off-facility swap,” as discussed below in this section.
    41 As proposed, paragraph (2) of the “block trade”
definition would read: (2) With respect to a swap that is not an
off-facility swap, a publicly reportable swap that: (a) Involves a
swap that is listed on a swap execution facility or designated
contract market; (b) Is executed on the trading system or platform,
that is not an order book as defined in Sec.  37.3(a)(3), of a swap
execution facility or occurs away from a swap execution facility’s
or designated contract market’s trading system or platform and is
executed pursuant to the swap execution facility’s or designated
contract market’s rules and procedures; (c) Has a notional or
principal amount at or above the appropriate minimum block size
applicable to such swap; and (d) Is reported subject to the rules
and procedures of the swap execution facility or designated contract
market and the rules described in this part, including the
appropriate time delay requirements set forth in Sec.  43.5.
    42 See also n. 38, supra (noting the Commission’s belief that
the 2020 SEF NPRM would promote the statutory goal of promoting
trading on SEFs and help to facilitate the pre-execution credit
screening by SEFs and FCMs for swap block trades intended to be
cleared).
—————————————————————————

    The Commission is proposing to amend the definition of “embedded
option” in Sec.  43.2 by removing the reference to “confirmation” at
the end of the current definition.43 As proposed, “embedded option”
would mean any right, but not an obligation, provided to one party of a
swap by the other party to the swap that provides the party holding the
option with the ability to change any one or more of the economic terms
of the swap. As discussed below in section II.B.3., the Commission is
proposing to remove references to confirmations in part 43.
—————————————————————————

    43 Embedded option is currently defined as any right, but not
an obligation, provided to one party of a swap by the other party to
the swap that provides the party holding the option with the ability
to change any one or more of the economic terms of the swap as those
terms previously were established at confirmation (or were in effect
on the start date). 17 CFR 43.2.
—————————————————————————

    The Commission is proposing to amend the definition of
“execution” in Sec.  43.2 by replacing the reference to execution
occurring “orally, in writing, electronically, or otherwise” with
“by any method” to shorten the definition without substantively
altering it.44 In addition, the Commission is proposing to remove the
phrase that execution occurs simultaneous with or immediately following
the affirmation of the swap.45 As proposed, “execution” would mean
an agreement by the parties, by any method, to the terms of a swap that
legally binds the parties to such swap terms under applicable law.
—————————————————————————

    44 Execution is currently defined as an agreement by the
parties (whether orally, in writing, electronically, or otherwise)
to the terms of a swap that legally binds the parties to such swap
terms under applicable law. Execution occurs simultaneous with or
immediately following the affirmation of the swap. 17 CFR 43.2.
    45 As explained in the following section II.B.3., the
Commission is proposing to remove references to “affirmation” in
Sec.  43.2 because affirmation is not currently used in any of the
part 43 regulations.
—————————————————————————

    The Commission is proposing to amend the definition of “off-
facility swap” in Sec.  43.2 by removing the reference to “publicly
reportable” and “registered.” 46 The Commission is proposing to
remove the requirement that the swap be publicly reportable because
determining whether a swap transaction is an off-facility swap depends
only on where a swap was executed; whether it is also a PRST is

[[Page 21520]]

irrelevant. The Commission is proposing to remove the reference to
“registered” for the reasons discussed below in section II.C.1.a.
—————————————————————————

    46 Off-facility swap is currently defined as any PRST that is
not executed on or pursuant to the rules of a registered swap
execution facility or designated contract market. 17 CFR 43.2.
—————————————————————————

    The Commission is proposing to amend the definition of “public
dissemination and publicly disseminate” in Sec.  43.2. Currently,
Sec.  43.2 defines “public dissemination and publicly disseminate” as
to publish and make available STAPD in a non-discriminatory manner,
through the internet or other electronic data feed that is widely
published and in machine-readable electronic format. Separately,
current Sec.  43.3(d)(1) requires that SDRs “publicly disseminate”
STAPD in a consistent, usable, and machine-readable electronic format
that allows the data to be downloaded, saved, and analyzed.
    The Commission is concerned that the definition of “public
dissemination and publicly disseminate” currently varies enough from
Sec.  43.3(d)(1) to create ambiguity for SDRs as to the format they
must use in publicly disseminating STAPD. For instance, the definition
of “publicly disseminate” requires that access be non-discriminatory,
but the requirement for SDRs to “publicly disseminate” STAPD in Sec. 
43.3(d)(1) does not explicitly require that access be non-
discriminatory.
    Therefore, the Commission is proposing to re-locate the
qualification in current Sec.  43.3(d)(1) that SDRs publicly
disseminate STAPD in a consistent, usable, and machine-readable
electronic format that allows the data to be downloaded, saved, and
analyzed to the definition of “public dissemination and publicly
disseminate” in Sec.  43.2.47 As revised, the definition of “public
dissemination and publicly disseminate” would mean to make freely
available and readily accessible to the public [STAPD] in a non-
discriminatory manner, through the internet or other electronic data
feed that is widely published. Such public dissemination shall be made
in a consistent, usable, and machine-readable electronic format that
allows the data to be downloaded, saved, and analyzed.48
—————————————————————————

    47 As discussed below in section II.C.8., the Commission is
proposing to remove current Sec.  43.3(d)(1) in conjunction with
moving the substance of the requirement to the definition of
“publicly disseminate.”
    48 The revised definition of “public dissemination and
publicly disseminate” is also discussed below in section II.C.7.
with respect to the responsibilities of SDRs to make publicly
disseminated STAPD available to the public.
—————————————————————————

    The Commission is proposing to amend the definition of “trimmed
data set” in Sec.  43.2 by changing the standard deviation used in the
calculation of the trimmed data set from four to two for the “other
commodity” asset class, and from four to three for all other asset
classes.49 This proposed amended definition is used in a discussion
of proposed changes to the Sec.  43.6(c) regulations for determining
AMBSs and cap sizes discussed in section II.F.2. below.
—————————————————————————

    49 Trimmed data set is currently defined as a data set that
has had extraordinarily large notional transactions removed by
transforming the data into a logarithm with a base of 10, computing
the mean, and excluding transactions that are beyond four standard
deviations above the mean. 17 CFR 43.2.
—————————————————————————

3. Proposed Removal of Definitions
    The Commission is proposing to remove the definition of “Act”
from Sec.  43.2 because the Commission preliminarily believes the
definition of “Act” is unnecessary in part 43 because the term is
defined in Sec.  1.3.
    The Commission is proposing to remove the definition of “business
day” from Sec.  43.2 because the Commission preliminarily believes
that the definition of “business day” is unnecessary in part 43
because it is defined in Sec.  1.3. Further, the Commission is
proposing to remove the definition of “business hours” because it
believes the definition of “business hours” would no longer be
necessary as a result of the Commission’s proposal to remove references
to “business hours” in the Sec.  43.5 regulations for the timing
delays for block trades. Those proposed changes are discussed below in
section II.E.
    The Commission is proposing to remove from Sec.  43.2 the
“confirmation” definition and the following related definitions:
“Affirmation” and “confirmation by affirmation.” The Commission
believes these definitions are unnecessary in part 43, and have created
confusion as the terms are not used in any of the regulations in part
43.
    The Commission is proposing to remove from Sec.  43.2 the
definition of “executed.” The Commission believes the current
definition is vague. In addition, the Commission believes the proposed
definition for “execution date,” discussed above in section II.B.1.
would provide the specificity that the current “executed” definition
lacks.
    The Commission is proposing to remove from Sec.  43.2 the
definition of “real-time public reporting.” Currently, Sec.  43.2
defines “real-time public reporting” as the reporting of data
relating to a swap transaction, including price and volume, ASATP after
the time at which the swap transaction has been executed. The CEA
currently already defines “real-time public reporting” as to report
data relating to a swap transaction, including price and volume, ASATP
after the time at which the swap transaction has been executed.” 50
Therefore, to avoid creating confusion, the Commission is proposing to
remove the definition in part 43 because it would be redundant.
—————————————————————————

    50 7 U.S.C. 2(a)(13)(A).
—————————————————————————

    The Commission is proposing to remove the definition of “reporting
party” because it is proposing to add a definition of “reporting
counterparty” to Sec.  43.2 that would be the same as the current
definition of “reporting party” in Sec.  43.2, as discussed above in
section II.B.1.
    The Commission is proposing to remove the following definitions
from Sec.  43.2 as a result of proposed changes to Sec. Sec.  43.5 and
43.6 for block trades and large notional off-facility swaps: “Futures
related swap,” “large notional off-facility swap,” “major
currencies,” “non-major currencies,” and “super-major currencies.”
Those proposed changes are discussed below in sections II.E. and II.F.
    The Commission is proposing to remove the following definitions
from Sec.  43.2 as a result of proposed changes to simplify the
definition of “novation:” “Remaining party,” “transferee,” and
“transferor.”
    The Commission is proposing to remove the “unique product
identifier” (“UPI”) definition from Sec.  43.2. “Unique product
identifier” is currently only used in Sec.  43.4(e). The Commission is
proposing to delete current Sec.  43.4(e), which is discussed below in
section II.D.1. Therefore, the Commission believes the definition of
UPI in Sec.  43.2 is no longer necessary.
    The Commission is proposing to remove the definition of “widely
published” from Sec.  43.2. “Widely published” means to publish and
make available through electronic means in a manner that is freely
available and readily accessible to the public. “Widely published” is
currently referenced in the definition for “public dissemination and
publicly disseminate” as the standard by which SDRs must publish
data.51 The Commission believes that the term “widely published”
has a clear meaning and that the definition therefore is unnecessary
and may cause confusion.
—————————————————————————

    51 The term “widely published” is also used in current Sec. 
43.6(g)(4) for currency conversions.
—————————————————————————

Request for Comment
    The Commission requests comment on all aspects of the proposed
changes to Sec.  43.2. The Commission requests specific comment on the
following:

[[Page 21521]]

    (1) Does the Commission’s proposed definition of “execution date”
present problems for SEFs, DCMs, SDRs, or reporting counterparties?
Should the Commission instead adopt a definition that aligns with other
regulations, including, for instance, the definition of “day of
execution” in Sec.  23.501(a)(5)(i)? 52
—————————————————————————

    52 For the purposes of Sec.  23.501, “day of execution”
means the calendar day of the party to the swap transaction that
ends latest, provided that if a swap transaction is–(a) entered
into after 4:00 p.m. in the place of a party; or (b) entered into on
a day that is not a business day in the place of a party, then such
swap transaction shall be deemed to have been entered into by that
party on the immediately succeeding business day of that party, and
the day of execution shall be determined with reference to such
business day. 17 CFR 23.501(a)(5)(i). For the purposes of Sec. 
23.501, “business day” means any day other than a Saturday,
Sunday, or legal holiday. 17 CFR 23.501(a)(5)(ii).
—————————————————————————

C. Sec.  43.3–Method and Timing for Real-Time Public Reporting

1. Sec.  43.3(a)(1)-(3)–Method and Timing for Reporting Off-Facility
Swaps and Swaps Executed on or Pursuant to the Rules of a SEF or a DCM
a. Sec.  43.3(a)(1)–General Rule
    The Commission is proposing a number of clarifying and substantive
changes to Sec.  43.3(a)(1). As background, Sec.  43.3(a)(1) currently:
(i) Requires reporting parties to report PRSTs to SDRs ASATP after
execution; and (ii) states that for purposes of part 43, a registered
SDR includes any SDR provisionally registered with the Commission
pursuant to part 49 of this chapter.
    The Commission proposes to make a non-substantive amendment to
Sec.  43.3(a)(1) by changing the reference to the person required to
report a PRST to an SDR ASATP after execution. The current term
“reporting party” is defined in Sec.  43.2 as the party to a swap
with the duty to report a PRST in accordance with this part and section
2(a)(13)(F) of the Act. The Commission proposes to replace the
reference to the catchall term “reporting party” with more specific
references to the persons that, depending on the circumstances, have
the reporting obligation for a PRST, namely: A reporting counterparty;
a SEF; or a DCM.53 The Commission is also proposing to slightly
reword Sec.  43.3(a)(1) for brevity and to add a cross-reference to
proposed Sec. Sec.  43.3(a)(2)-(6), which address matters such as who
must report PRSTs and the timing thereof. Proposed Sec. Sec. 
43.3(a)(2)-(6) would provide additional detail about how (and, in the
case of proposed Sec.  43.3(a)(6), whether) the ASATP requirement would
apply to real-time public reporting of certain swap transactions and by
certain reporting parties. Consequently, the Commission is also
proposing to add language to Sec.  43.3(a)(1) stating that it would be
“subject to” proposed Sec. Sec.  43.3(a)(2)-(6) to reflect that, with
respect to the transactions and persons covered by proposed Sec. Sec. 
43.3(a)(2)-(6), the provisions thereof apply instead of the general
ASATP requirement of proposed Sec.  43.3(a)(1).
—————————————————————————

    53 To limit repetition, this change will not be discussed in
each section throughout this release. The circumstances dictating
which of these specific persons has the PRST reporting obligation
are specified in existing and proposed Sec. Sec.  43.3(a)(2) and
(3). Although the Commission is not proposing to change these
circumstances, the Commission is proposing other changes to
Sec. Sec.  43.3(a)(2) and (3), which are discussed below in this
section II.C.1.
—————————————————————————

    The Commission also is proposing to add a requirement that the PRST
reporting required pursuant to proposed Sec. Sec.  43.3(a)(1)-(6) be
done in the manner set forth in proposed Sec.  43.3(d), discussed below
in section II.C.8.
    Finally, the Commission proposes to delete the sentence in Sec. 
43.3(a)(1) stating that for purposes of this part, a registered SDR
includes any SDR provisionally registered with the Commission pursuant
to part 49 of this chapter and proposes to replace references to
registered SDRs with references to SDRs in proposed Sec.  43.3(a)
specifically and throughout part 43.54 The Commission has also
proposed to remove the term “registered swap data repository” from
part 49.55 The term “registered swap data repository” is not needed
in part 49 because a definition of “swap data repository” already
exists in Sec.  1.3,56 and the definition is identical to the
definition contained in section 1a(48) of the CEA.57 Because the
definitions in Sec.  43.2 have the meanings assigned to them in Sec. 
1.3 unless the context otherwise requires, the definition of “swap
data repository” already applies to part 43, and would continue to
apply to part 43, including proposed Sec.  43.3(a), thus removing the
need for a separate defined term for “registered swap data
repository.” Furthermore, the word “registered” in the term
“registered swap data repository” creates unnecessary confusion as to
whether part 43 applies to entities that are in the process of
registering as SDRs or are provisionally registered pursuant to Sec. 
49.3(b); part 43 applies to SDRs whether they are registered or
provisionally registered. The Commission emphasizes that removing the
defined term “registered swap data repository” is a technical
amendment that does not in any way modify the requirements applicable
to current or future SDRs.
—————————————————————————

    54 To limit repetition, this change will not be discussed in
each section throughout this release.
    55 See Certain Swap Data Repository and Data Reporting
Requirements, 84 FR 21044, 21101.
    56 See 17 CFR 1.3 (definition of “swap data repository”)
(This term means any person that collects and maintains information
or records with respect to transactions or positions in, or the
terms and conditions of, swaps entered into by third parties for the
purpose of providing a centralized recordkeeping facility for
swaps).
    57 7 U.S.C. 1a(48) (The term `SDR’ means any person that
collects and maintains information or records with respect to
transactions or positions in, or the terms and conditions of, swaps
entered into by third parties for the purpose of providing a
centralized recordkeeping facility for swaps).
—————————————————————————

    Therefore, revised Sec.  43.3(a)(1) would require reporting
counterparties, SEFs, or DCMs to report any PRST to an SDR ASATP after
execution subject to Sec.  43.3(a)(2)-(6) and in the manner set forth
in Sec.  43.3(d).
b. Sec.  43.3(a)(2)–Swaps Executed on or Pursuant to the Rules of a
SEF or a DCM
    The Commission is proposing several amendments to Sec.  43.3(a)(2).
As background, current Sec.  43.3(a)(2) states that a party to a PRST
can satisfy its part 43 real-time public reporting obligations by
executing PRSTs on or pursuant to the rules of a SEF or DCM.
    The Commission is proposing to replace the language in Sec. 
43.3(a)(2) with the current requirement in Sec.  43.3(b)(1). Current
Sec.  43.3(b)(1) states that SEFs and DCMs satisfy their real-time
public reporting obligations by transmitting STAPD to SDRs ASATP after
the PRST was executed on or pursuant to the rules of the trading
platform or facility. Revised Sec.  43.3(a)(2) would therefore state
that that SEFs or DCMs must report PRSTs executed on or pursuant to the
rules of a SEF or DCM ASATP after execution. As a result, Sec. 
43.3(a)(2) would contain SEFs’ and DCMs’ part 43 reporting obligations
instead of Sec.  43.3(b)(1). In revising Sec.  43.3(a)(2), the
Commission would also replace the reference to a “registered [SEF]”
with a reference to SEFs because, similar to the reasoning discussed
above in section II.C.1.a. with respect to “registered” SDRs, the
term “registered” is unnecessary and could create confusion.58 The
Commission considers the above amendments to be non-substantive.
—————————————————————————

    58 The Commission is proposing this change elsewhere in part
43. To limit repetition in this release, the change will not be
discussed repeatedly in this preamble.
—————————————————————————

c. Sec.  43.3(a)(3)–Off-Facility Swaps
    The Commission proposes to amend Sec.  43.3(a)(3) in two respects.
As background, current Sec.  43.3(a)(3) requires reporting parties to
report all off-facility swaps to an SDR for the appropriate

[[Page 21522]]

asset class in accordance with the rules set forth in part 43 ASATP
following execution, and sets out the reporting hierarchy for these
PRSTs.59
—————————————————————————

    59 The Commission is not proposing substantive amendments to
the reporting hierarchy.
—————————————————————————

    The Commission proposes to clarify in Sec. Sec.  43.3(a)(3)(iii)-
(v) that, in situations where the parties to an off-facility PRST must
designate which of them is the reporting counterparty, they must make
such designation prior to the execution of the off-facility PRST so
that there is no delay in reporting the off-facility PRST pursuant to
part 43, as there could be if the parties do not make such designation
until after the off-facility PRST is executed or cannot agree on such
designation.
    Because the Commission is proposing to add part 43 reporting
requirements specific to PPSs, clearing swaps, and mirror swaps,
respectively, in proposed new Sec. Sec.  43.3(a)(4)-(6), the Commission
proposes to introduce proposed Sec.  43.3(a)(3) with except as
otherwise provided in paragraphs (a)(4)-(6) of this section. The
proposed part 43 reporting requirements applicable to PPSs, clearing
swaps and mirror swaps are discussed below in sections II.C.2.-4.,
respectively.
2. Sec.  43.3(a)(4)–Post-Priced Swaps
    The Commission is proposing new Sec.  43.3(a)(4) to address issues
market participants face in reporting PPSs. As background, the purpose
of CEA Sec.  2(a)(13), the primary source of the Commission’s authority
to promulgate real-time public reporting rules, is to authorize the
Commission to make [STAPD] available to the public in such form and at
such times as the Commission determines appropriate to enhance price
discovery.60 Congress also directed the Commission to include
provisions in its real-time reporting rules that take into account
whether the public disclosure will materially reduce market
liquidity.61 Swap counterparties must report STAPD to the appropriate
registered entity in a timely manner as may be prescribed by the
Commission.62 The Commission, therefore, has some discretion in
determining when STAPD should be reported and publicly disseminated.
—————————————————————————

    60 7 U.S.C. 2(a)(13)(B) (emphasis added).
    61 7 U.S.C. 2(a)(13)(E)(iv).
    62 7 U.S.C. 2(a)(13)(F) (emphasis added).
—————————————————————————

    Regulation 43.3(a) generally requires the reporting party for each
PRST to report it to an SDR ASATP after execution of the transaction.
Market participants have raised concerns with complying with the ASATP
requirement for a category of swaps with respect to which one or more
terms are unknown at the time the swap is executed. One Roadmap
commenter suggested that such swaps should only be reported when all of
the final primary economic terms of the transaction are determined,
rather than at execution.63
—————————————————————————

    63 Letter from The International Swaps and Derivatives
Association (“ISDA”) and The Securities Industry and Financial
Markets Association (“SIFMA”) (“Joint ISDA-SIFMA Letter”) (Aug.
21, 2017) at 10.
—————————————————————————

    The Commission understands that these swaps are generally
characterized by the price, size and/or other terms of the transaction
being contingent upon the outcome of SD hedging, market results during
an observation period (a point in time or a longer period), or the
occurrence of certain events–such as the price for a swap underlier
being determined at the close of trading on a trading platform–that
occur after an SD accepts a client request (collectively, “Variable
Terms”). Although the parties may know the non-Variable Terms at the
time of execution,64 the Variable Terms generally are not known until
the subsequent dealer hedging or other market activity has taken place
because the Variable Terms are, wholly or partly, contingent on the
occurrence of such triggers and determined, wholly or in part, by some
aspect of such contingencies.
—————————————————————————

    64 “Execution” is defined in Sec.  43.2, in relevant part,
as an agreement by the parties to the terms of a swap that legally
binds the parties to such swap terms under applicable law.
—————————————————————————

    The Commission understands that some market participants do not
report swaps with Variable Terms to SDRs until hours, or even days,
after the execution thereof.65 Reporting parties have contended that
they report these swaps to SDRs only after the Variable Terms are set
because (i) they want to foreclose the possibility of market
participants “front running” reporting parties’ customers’/
counterparties’ swaps; and (ii) neither reporting parties nor SDRs have
the technological processes in place to support reporting prior to the
determination of a numerical price, volume or other Variable Terms.
—————————————————————————

    65 However, this approach is not followed universally: Other
market participants report PPSs differently. For example, some
market participants report to an SDR PPSs with a price of zero at
the time of execution and amend the price reported to the SDR once
the price is known.
—————————————————————————

    Currently, PPSs and other swaps with Variable Terms not determined
at execution (“Variable Terms Swaps”) account for a significant but
unknown percentage of swaps that are not reported to SDRs in a timely
manner.66 However, through Roadmap outreach, the Commission has
learned that these PPSs and other Variable Terms Swaps may constitute a
large percentage of certain market participants’ equity derivatives
business subject to CFTC jurisdiction.67 The Commission preliminarily
believes that the reporting of PPSs and other Variable Terms Swaps is
not consistent across SDs, with some reporting swaps shortly after
execution and others not reporting until the Variable Terms are known.
—————————————————————————

    66 The percentage is unknown because there is no SDR data
field to indicate that a swap is a PPS. Although, as noted above,
some reporting parties may report PPSs with zero or blank prices or
other Variable Terms and later amend such reports once the Variable
Terms are known, there are other reasons a zero price may be
reported or that blanks may be reported for the Variable Terms, so
there currently is no definitive method of quantifying the scope of
the PPS reporting issue.
    67 One market participant estimated that PPSs are a bigger
percentage of equity swaps than of any other asset class and
constitute approximately 80-90% of CFTC-reportable equity swaps.
—————————————————————————

    The Commission also preliminarily believes that the reporting of
PPSs ASATP after execution but before the price is determined does not
serve a significant price discovery function and that the omission of a
price, or the use of a placeholder price, by reporting parties who
report PPSs before the price is determined may confuse market
participants or constitute unhelpful “noise” on the public tape. The
Commission understands that requiring public reporting of PPSs before
their prices are determined could allow market participants to transact
in swaps ahead of any necessary hedging by SDs, potentially
disadvantaging the SDs’ counterparties driving the PPS transactions by
increasing the cost of the hedges. This could, in turn, lead such
counterparties to forego the use of swaps to achieve their investment
or other goals, thereby reducing swap market liquidity.
    However, the Commission seeks to balance permitting the delayed
reporting of swaps that appear to lack a significant price discovery
benefit with encouraging or permitting indefinitely delayed reporting
of PPSs. The latter possibility could encourage swap counterparties to
structure some of their swaps as PPSs to take advantage of the longer
proposed reporting deadline for PPSs.68
—————————————————————————

    68 However, to the extent the Commission’s proposal raises
concerns in this regard, Sec.  23.402(a)(1) does require SDs to have
written policies and procedures reasonably designed to prevent a
swap dealer from evading or participating in or facilitating an
evasion of any provision of the CEA or any regulation promulgated
thereunder.
—————————————————————————

    In light of the foregoing, the Commission is proposing a longer
deadline for reporting STAPD for certain PPSs than for PRSTs generally.
To effectuate such longer deadline, the

[[Page 21523]]

Commission proposes to add new Sec.  43.3(a)(4) to its regulations.
Proposed Sec.  43.3(a)(4)(i) would permit the reporting counterparty to
delay reporting a PPS to an SDR until the earlier of the price being
determined and 11:59:59 p.m. eastern time on the execution date.69
Proposed Sec.  43.3(a)(4)(i) would further provide that, if the price
of a PRST that is a PPS is not determined by 11:59:59 p.m. eastern time
on the execution date, the reporting counterparty shall report to an
SDR by 11:59:59 p.m. eastern time on the execution date all STAPD for
such PPS other than the price and any other then-undetermined Variable
Terms and shall report each such item of previously undetermined STAPD
ASATP after such item is determined.70 Proposed Sec.  43.3(a)(4)(ii)
would provide that the more lenient proposed reporting deadline in
Sec.  43.3(a)(4)(i) would not apply to PRSTs with respect to which the
price is known at execution but one or more other Variable Terms are
not yet known at the time of execution.71
—————————————————————————

    69 By “11:59:59 p.m. eastern time on the execution date,”
the Commission means 11:59:59 p.m. in the eastern time zone of the
United States on the date the relevant swap is executed,
irrespective of where either counterparty’s headquarters or
personnel or office involved in executing the swap are located and
irrespective of any other factors. This could result in the
reporting counterparty having more or less time to report a swap
depending on how close it is to 11:59:59 p.m. eastern time at
execution in any time zones relevant to the reporting counterparty
reporting the STAPD.
    70 While the proposed definition of “post-priced swap” would
be a swap for which the price has not been determined at the time of
execution, such a swap with additional terms that are also not
determined at the time of execution would also fall within the
proposed “post-priced swap” definition. Consequently, if a PPS
also has non-price terms that are not determined at the time of
execution, a value for such non-price terms must be reported ASATP
after it is determined. If a placeholder value that satisfies the
allowable values parameters for an unknown Variable Term was
previously reported for such undetermined STAPD, then such STAPD
must be corrected ASATP after it is determined.
    71 The Commission notes that when the price is known at
execution but one or more Variable Terms are not yet known, the
reporting counterparty must report the swap ASATP and then amend the
swap later to report the Variable Terms.
—————————————————————————

3. Sec.  43.3(a)(5)–Clearing Swaps
    The Commission proposes to amend Sec.  43.3(a) to add DCOs to the
reporting counterparty hierarchy for clearing swaps that are PRSTs. As
background, in 2016, the Commission adopted rules that, among other
things, added DCOs to the hierarchy for determining the reporting
counterparty for clearing swaps in Sec.  45.8.72 Although the Cleared
Swap Final Rule added DCOs to the reporting counterparty hierarchy in
Sec.  45.8, it did not add DCOs to the reporting hierarchy in part 43.
—————————————————————————

    72 Amendments to Swap Data Recordkeeping and Reporting
Requirements for Cleared Swaps, 81 FR 41736 (June 27, 2016)
(“Cleared Swap Final Rule”). Specifically, Sec.  45.8(i) now
states, in relevant part, if the swap is a clearing swap, the DCO
that is a counterparty to such swap shall be the reporting
counterparty and shall fulfill all reporting counterparty
obligations for such swap.
—————————————————————————

    Most clearing swaps are the result of an original swap being
accepted for clearing by a DCO. In these cases, there is no part 43
real-time public reporting for the clearing swaps. For most clearing
swaps, there is no conflict between the part 43 and part 45 reporting
hierarchies.
    However, there are limited circumstances in which DCOs create
clearing swaps for which there is no original swap, and the clearing
swaps may meet the definition of a PRST in part 43, while also being
required to be reported pursuant to part 45. In these circumstances,
the part 43 and part 45 reporting hierarchies may conflict. For
example, if a DCO enters into PRSTs to manage the default of a clearing
member, the DCO would be the reporting counterparty under Sec.  45.8(i)
but not under current Sec.  43.3(a)(3).
    To avoid this conflict, the Commission proposes to add DCOs to the
hierarchy in Sec.  43.3 for clearing swaps. Proposed Sec.  43.3(a)(5)
would state that notwithstanding the provisions of paragraphs (a)(1)-
(3) of this section, if a clearing swap, as defined in Sec.  45.1 of
this chapter, is a PRST, the DCO that is a party to such swap shall be
the reporting counterparty and shall fulfill all reporting counterparty
obligations for such swap as soon as technologically practicable after
execution.
4. Sec.  43.3(a)(6)–Mirror Swaps
    As explained above, the CEA authorizes the Commission to make STAPD
available to the public in such form and at such times as the
Commission determines appropriate to enhance price discovery.73 In
2017, DMO announced its intention to review the reporting regulations
to address ongoing issues of reporting prime brokerage
transactions.74 As a result of this review, and as discussed below in
this section, the Commission is proposing new regulations in Sec. 
43.3(a)(6) to help ensure that the STAPD associated with mirror swaps,
which some market participants view as duplicative, non-price-forming
data, does not distort the volume of trading activity or unnecessarily
impede price discovery for market participants and others who rely on
the real-time public tape for those purposes. The Commission notes that
the swap data associated with all mirror swaps would be required to be
reported to SDRs pursuant to part 45 so the Commission can fulfill its
risk monitoring, compliance, and market manipulation responsibilities.
—————————————————————————

    73 7 U.S.C. 2(a)(13)(B) (emphasis added).
    74 Roadmap at 11. DMO has previously provided no-action relief
from the real-time public reporting requirements for swaps executed
pursuant to prime brokerage arrangements in response to concerns
that reporting both legs of prime brokerage transactions would
incorrectly suggest the presence of more trading activity and price
discovery in the market than actually exists. See CFTC Letter No.
12-53, Time-Limited No-Action Relief from (i) Parts 43 and 45
Reporting for Prime Brokerage Transactions, and (ii) Reporting
Unique Swap Identifiers in Related Trades under Part 45 by Prime
Brokers (Dec. 17, 2012), available at https://www.cftc.gov/sites/default/files/idc/groups/public/@lrlettergeneral/documents/letter/12-53.pdf. The Financial Markets Lawyers Group (“FMLG”) and the
International Swaps and Derivatives Association (“ISDA”), which
requested the relief that DMO provided in CFTC Letter No 12-53, also
sought and received relief from certain reporting requirements of
part 45 of the Commission’s rules, but this proposal discusses only
the part 43 reporting aspects of the relief.
—————————————————————————

    The Commission understands that prime brokerage swaps begin with a
counterparty opening an account with a prime broker (“PB”) that
grants limited agency powers to the counterparty. These limited powers
enable the counterparty, as an agent for the PB, to enter into swaps
with approved executing dealers (“ED”), subject to specific limits
and parameters, such as credit limits and collateral requirements. The
PB also enters into “give-up” arrangements with approved EDs in which
the EDs agree to negotiate swaps with the counterparty, acting as an
agent for the PB, within the specified parameters and to face the PB as
counterparty for the resulting ED-PB swap (“ED-PB Swap”).
    The Commission understands that in a prime brokerage swap, the
counterparty seeks bids for the desired swap from one or more of the
approved EDs, within the parameters established by the PB. Once the
counterparty and ED agree on the terms, the Commission believes that
both the counterparty and ED provide a notice of the terms to the PB,
and those terms constitute the ED-PB Swap, which the PB must accept if:
The swap is with an approved ED; the counterparty and ED have committed
to the material terms; and the terms are within the parameters
established by the PB. Once the ED-PB Swap is accepted by the PB, the
PB enters into a mirror swap (“Mirror Swap”) with the counterparty
with identical economic terms and pricing, subject to adjustment, as a
result of the prime brokerage servicing fee.
    In 2012, DMO granted no-action relief, subject to conditions
described below, where: (i) An ED reports an ED-

[[Page 21524]]

PB Swap under part 43, including any required post-trade event
reporting; and (ii) the related Mirror Swap is not reported for part 43
purposes by the ED, PB or any other party, unless there is a
modification to the economic terms of the ED-PB swap.75 The relief
was conditioned on: The allocation of part 43 reporting
responsibilities being agreed upon by the parties; the ED and the PB
each being a registered SD; and the ED-PB Swap and Mirror Swap having
identical economic terms and pricing, subject to adjustment in the case
of the Mirror Swap as a result of a prime brokerage servicing fee.76
—————————————————————————

    75 See id. at 5.
    76 Id.
—————————————————————————

    CFTC Letter No. 12-53 expired on June 30, 2013, but the Commission
believes that concerns about the impact on price discovery of mirror
swap STAPD on the public tape are still concerns today. To address
these concerns, the Commission is proposing new Sec.  43.3(a)(6), and
related definitions in Sec.  43.2(a). The Commission believes the
proposed regulations would address issues raised by swaps executed
pursuant to prime brokerage arrangements and related mirror swaps.77
—————————————————————————

    77 The Commission notes that the Securities and Exchange
Commission (“SEC”) has adopted a different approach with respect
to security-based swaps, with the result that mirror security-based
swaps would be PRSTs and thus reported. See Regulation SBSR–
Reporting and Dissemination of Security-Based Swap Information, 81
FR 53546, at 53583-86 (Aug. 12, 2016) (declining to exempt from
public dissemination certain prime brokerage SBSs discussed
therein).
—————————————————————————

a. Proposed New Definitions
    The Commission is proposing to add the term “prime brokerage
agency arrangement” to Sec.  43.2(a). “Prime brokerage agency
arrangement” would mean an arrangement pursuant to which a prime
broker authorizes one of its clients, acting as agent for such prime
broker, to cause the execution of a trigger swap. The Commission
proposes to use the term “prime brokerage agency arrangement” in the
new proposed definitions of “prime brokerage agent” and “trigger
swap” in Sec.  43.2(a) to establish the parameters of the proposed new
definition of a “mirror swap,” also in Sec.  43.2(a), which would not
be reportable under part 43 if it satisfied the terms of proposed Sec. 
43.3(a)(6)(i). The Commission’s goal in proposing the “prime brokerage
agency arrangement” definition and using it in other definitions in
Sec.  43.2(a) is to help ensure that the scope of unreported mirror
swaps is limited to swaps that are, among other things, integrally
related to trigger swaps and their related pricing events.
    The Commission is proposing to add the term “prime brokerage
agent” to Sec.  43.2(a) as a new definition that would mean a client
of a prime broker who causes the execution of a trigger swap acting
pursuant to a prime brokerage agency arrangement.
    The Commission is also proposing to add the term “prime broker”
to Sec.  43.2(a). “Prime broker” would mean with respect to a mirror
swap and its related trigger swap, a swap dealer acting in the capacity
of a prime broker with respect to such swaps. The Commission proposes
to use the term “prime broker” in the proposed definitions of “prime
brokerage agency arrangement,” “prime brokerage agent,” and
“trigger swap” in Sec.  43.2(a), and in proposed Sec.  43.3(a)(6), to
establish the parameters of when a “mirror swap” would not be
reportable under part 43 if it satisfied the terms of proposed Sec. 
43.3(a)(6)(i).
    The Commission is proposing to add the term “trigger swap” to
Sec.  43.2(a) as a new definition that would mean a swap: (1) That is
executed pursuant to one or more prime brokerage agency arrangements;
78 (2) to which a prime broker is a counterparty or both
counterparties are prime brokers; (3) that serves as the contingency
for, or triggers, the execution of one or more corresponding mirror
swaps; and (4) that is a PRST that is required to be reported to a swap
data repository pursuant to this part and part 45 of this chapter. The
Commission proposes to use the term “trigger swap” as an element of a
“mirror swap,” which the Commission proposes to make not
reportable.79
—————————————————————————

    78 The Commission understands that some pricing events (as
proposed to be defined in Sec.  43.2(a) and as discussed in the
paragraph following the paragraph in the body of the preamble with
which this footnote is associated) that result in trigger swaps and
related mirror swaps (e.g., in the context of a reverse give-up,
which is discussed below in section II.C.4.b.) are negotiated by
persons that are acting pursuant to a prime brokerage agency
arrangement with more than one prime broker. The Commission
understands that some pricing events that lead to related trigger
swaps and related mirror swaps (e.g., in the context of a double
give-up, which is discussed below in section II.C.4.b.) are
negotiated by two persons that are each acting pursuant to a prime
brokerage agency arrangement with its respective prime broker.
    79 See proposed Sec.  43.6(a)(6)(i), discussed below in
section II.C.4.b.
—————————————————————————

    The Commission is proposing to add the term “pricing event” to
Sec.  43.2(a) as a new definition that would mean the completion of the
negotiation of the material economic terms and pricing of a trigger
swap. The Commission is proposing to use the term “pricing event” in
proposed Sec.  43.3(a)(6)(i) to make it clear when execution of a
trigger swap, which would be required to be reported under proposed
Sec.  43.3(a)(6)(iv) (discussed below in section II.C.4.b.), occurs.
    The Commission is proposing to add the term “mirror swap” to
Sec.  43.2(a) to mean a swap: (1) To which a prime broker is a
counterparty or both counterparties are prime brokers; (2) that is
executed contemporaneously with a corresponding trigger swap; (3) that
has identical terms and pricing as the contemporaneously executed
trigger swap (except that a mirror swap, but not the corresponding
trigger swap, may include any associated prime brokerage service fees
agreed to by the parties and except as provided in the final sentence
of this “mirror swap” definition); (4) with respect to which the sole
price forming event is the occurrence of the contemporaneously executed
trigger swap; and (5) the execution of which is contingent on, or is
triggered by, the execution of the contemporaneously executed trigger
swap. The notional amount of a mirror swap may differ from the notional
amount of the corresponding trigger swap, including, but not limited
to, in the case of a mirror swap that is part of a partial reverse
give-up; 80 provided, however, that in such cases, (i) the aggregate
notional amount of all such mirror swaps to which the prime broker that
is a counterparty to the trigger swap is also a counterparty shall be
equal to the notional amount of the corresponding trigger swap and (ii)
the market risk and contractual cash flows of all such mirror swaps to
which a prime broker that is not a counterparty to the corresponding
trigger swap is a party will offset each other (and the aggregate
notional amount of all such mirror swaps on one side of the market and
with cash flows in one direction shall be equal to the aggregate
notional amount of all such mirror swaps on the other side of the
market and with cash flows in the opposite direction), resulting in
each prime broker having a flat market risk position.
—————————————————————————

    80 A “partial reverse give-up” is described below in section
II.C.4.b.
—————————————————————————

    The Commission is proposing to define the term “mirror swap” to
delineate a group of swaps that do not have to be reported under part
43 if the related conditions set forth in proposed Sec.  43.3(a)(6) are
satisfied. The Commission preliminarily believes that because the terms
and pricing of a trigger swap and its related mirror swaps are the
same, part 43 reporting of both a trigger swap and the related

[[Page 21525]]

mirror swaps could falsely indicate the occurrence of two or more
(depending on how many mirror swaps there are for a given trigger swap)
pricing events and incorrectly suggest the presence of more trading
activity and price discovery in the market than actually exist.
    The Commission preliminarily believes the STAPD of trigger swaps
should be reported pursuant to part 43 ASATP after the occurrence of
the related pricing event for the following reasons: (1) All the terms
of a trigger swap are determined at the time of its related pricing
event, so execution of the trigger swap occurs at that time (as stated
expressly in proposed Sec.  43.3(a)(6)(i)), so the ASATP clock should
“start ticking” at that time; (2) any delay in the mirror swap
counterparties learning of the related trigger swap terms should not
delay part 43 reporting of the trigger swap given that the mirror swaps
would not be reported under proposed Sec.  43.3(a)(6); 81 (3) one or
both of the parties to a pricing event often are the reporting
counterparties in other swaps so have the infrastructure in place to
report the related trigger swap ASATP after the execution of the
pricing event; and (4) to the extent that (3) is untrue, one or more of
the prime brokers involved in the related mirror swaps (all of whom
currently are SDs, the Commission understands) can amend the terms of
their prime brokerage arrangements (as proposed to be defined in Sec. 
43.2) to require the parties thereto who are also parties to pricing
events to ensure that their prime brokers learn of the terms of the
pricing events in a manner that is sufficiently timely to permit their
prime brokers to report trigger swaps ASATP after the execution of the
related pricing events.
—————————————————————————

    81 To the extent a trigger swap is outside the permitted scope
of a prime brokerage arrangement, as proposed to be defined in Sec. 
43.2(a), the relevant party can cancel it. The Commission
understands that this happens today but preliminarily believes that
the potential for a trigger swap to be cancelled as a result of its
being outside the scope of the relevant prime brokerage arrangement,
as proposed to be defined in Sec.  43.2(a), should not delay
reporting STAPD.
—————————————————————————

    The Commission is proposing to use the word “contemporaneously”
in clause (2) of the “mirror swap” definition (i.e., a swap “that is
executed contemporaneously with a corresponding trigger swap”) rather
than “simultaneously” to reflect the fact that it may take some time
for potential parties to a mirror swap to receive the terms of such
mirror swap from the parties to the related trigger swap and to verify
that the terms of the potential mirror swap are within the parameters
established by the governing prime brokerage arrangement, as proposed
to be defined in Sec.  43.2(a). However, the Commission expects the
parties to a trigger swap to promptly convey those terms to the
relevant prime broker(s) that would be a party or parties to related
mirror swaps; any delay in conveying such terms should not be used as
an opportunity to find additional counterparties to take part in
unreported mirror swaps.82 The Commission may construe any purported
mirror swaps resulting from such activity as not executed
contemporaneously with the related trigger swap, and thus not within
the scope of the proposed mirror swap definition or, as a result,
proposed Sec.  43.3(a)(6), and therefore reportable under Sec. Sec. 
43.3(a)(1)-(3), as applicable, depending on the facts and
circumstances.
—————————————————————————

    82 This could include, but would not be limited to, a
potential party to a mirror swap receiving the terms of a related
trigger swap from one party to the trigger swap and seeking
additional counterparties to a mirror swap while waiting to receive
the matching terms of the trigger swap from the other party thereto.
—————————————————————————

    The Commission is proposing the language regarding associated prime
brokerage service fees in clause (3) of the proposed “mirror swap”
definition (i.e., as is relevant here, a swap that has identical terms
and pricing as the contemporaneously executed trigger swap (except that
a mirror swap, but not the corresponding trigger swap, may include any
associated prime brokerage service fees agreed to by the parties)) to
reflect that a mirror swap may contain fees that a prime broker that is
a counterparty to a mirror swap may charge its counterparty to that
mirror swap as a fee for serving as a prime broker in such swap. The
Commission understands that prime brokers typically charge their
clients a service fee for the swap intermediation service that prime
brokers provide (i.e., serving as swap counterparties in lieu of
counterparties that prime brokers’ clients would prefer not to face as
swap counterparties for credit reasons). The prime broker service fee
is meant to reflect prime brokers’ credit intermediation costs as well
as prime brokers’ back-office and middle-office administrative services
costs related to trigger swaps and mirror swaps (e.g., booking,
reconciling, settling and maintaining such trigger swaps and mirror
swaps). The prime broker service fee is typically agreed upon by a
prime broker and its client before a pricing event. To be considered
prime brokerage service fees for purposes of clause (3) of the proposed
“mirror swap” definition, such fees must be limited to the foregoing
purpose and cannot contain any other elements.83
—————————————————————————

    83 For example, the Commission would not consider a purported
prime brokerage service fee providing the prime broker or its
counterparty exposure to a commodity to be a prime brokerage service
fee within the meaning of clause (3) of the proposed “mirror swap”
definition, as a result of which the related “mirror swap” would
not be a mirror swap, and thus would not be within the scope of
proposed Sec.  43.3(a)(6) (discussed below in section II.C.4.b.),
and therefore would be reportable under Sec. Sec.  43.3(a)(1)-(3),
as applicable, depending on the facts and circumstances.
—————————————————————————

b. Other Proposed Regulations
    Proposed new Sec.  43.3(a)(6)(i) would provide that a mirror swap,
which the Commission is proposing to define in Sec.  43.2(a), as
discussed above in section II.B.1., is not a PRST. Proposed new Sec. 
43.3(a)(6)(i) would also state that, for purposes of determining when
execution occurs under Sec. Sec.  43.3(a)(1)-(3), execution of a
trigger swap shall be deemed to occur at the time of the pricing event
for such trigger swap.
    Proposed new Sec.  43.3(a)(6)(ii) would provide parameters for
determining which counterparty is the reporting counterparty for a
given trigger swap in situations where it is unclear, with respect to a
given set of swaps, which are mirror swaps and which is the related
trigger swap. More specifically, proposed new Sec.  43.3(a)(6)(ii)
would state that if, with respect to a given set of swaps, it is
unclear which are mirror swaps and which is the related trigger swap
(including, but not limited to, situations where there is more than one
prime broker counterparty within such set of swaps and situations where
the pricing event for each set of swaps occurs between prime brokerage
agents of a common prime broker), the PBs would be required to
determine which swap is the trigger swap and which are mirror swaps.
Proposed new Sec.  43.3(a)(6)(ii) would also specify that, with respect
to the trigger swap to which a PB is a party, the counterparty that
falls within the highest level of the reporting counterparty
determination hierarchy set forth in Sec.  43.3(a)(3) is the reporting
counterparty; proposed new Sec.  43.3(a)(6)(ii) would further specify
that, if both counterparties fall within the same level of that
hierarchy, they must determine who is the reporting counterparty for
such trigger swap pursuant to Sec. Sec.  43.3(a)(3)(iii), (iv), or (v),
as applicable. Proposed new Sec.  43.3(a)(6)(ii) would add that,
notwithstanding the foregoing, if the counterparty to a trigger swap
that is not a PB is an SD, then that counterparty will be the reporting
counterparty for the trigger swap.

[[Page 21526]]

    Proposed new Sec.  43.3(a)(6)(iii) would provide that, if, with
respect to a given set of swaps, it is clear which are mirror swaps and
which is the related trigger swap, the reporting counterparty for the
trigger swap shall be determined pursuant to Sec.  43.3(a)(3).
    Proposed new Sec.  43.3(a)(6)(iv) would provide that trigger swaps
described in proposed Sec.  43.3(a)(6)(ii) (situations in which it is
unclear which of a set of swaps are mirror swaps and which is the
related trigger swap) and (iii) (situations in which it is clear which
of a set of swaps are mirror swaps and which is the related trigger
swap) shall be reported pursuant to the requirements set out in
Sec. Sec.  43.3(a)(2) or (a)(3), as applicable, except that the
provisions of proposed Sec.  43.3(a)(6)(ii), rather than of proposed
Sec.  43.3(a)(3), shall govern the determination of the reporting
counterparty for purposes of the trigger swaps described in proposed
Sec.  43.3(a)(6)(ii).
    CFTC Letter No. 12-53 provided relief for what it termed a
“Typical Prime Brokerage Transaction” in which an ED that is an SD
agrees with its counterparty to the terms of matching swaps entered
into between the ED and the counterparty’s PB and between the PB and
the counterparty. The Commission understands that the scope of proposed
Sec.  43.3(a)(6) would expand the scope of CFTC Letter No. 12-53 in
that it would encompass both the “typical prime brokerage
transactions” covered by CFTC Letter No. 12-53 and at least three
other forms of PB transactions: reverse give-up PB swaps; partial
reverse give-up PB swaps; and double give-up PB swaps. The Commission
understands that other forms of prime brokerage swap transactions also
may be covered by proposed Sec.  43.3(a)(6) and does not intend, by
describing herein reverse give-up PB swaps, partial reverse give-up PB
swaps, and double give-up PB swaps, to limit the scope of proposed
Sec.  43.3(a)(6) to such forms of prime brokerage swap transactions.
    In a reverse give-up PB swap structure, the executing broker
(“EB”) 84 and one or more clients of a PB, or of both PBs involved
in the structure,85 negotiate swap terms forming the basis of a
trigger swap entered into between the EB and a PB 86 and related
mirror swaps entered into between the PB and one or more other PBs, the
other PB(s) and one or more clients and, in some reverse give-up prime
brokerage swap structures, the client and the EB-facing PB.87 In a
double give-up prime brokerage swap structure, a client of one PB and a
client of a different PB negotiate with each other swap terms forming
the basis of a trigger swap entered into between the two PBs 88 and
of the related mirror swaps entered into between each of the PBs and
its respective client.
—————————————————————————

    84 The Commission understands that EBs are always SDs today,
but proposed Sec.  43.3(a)(6) does not require EBs to be SDs. EBs
play the same role in the prime brokerage swap transactions
discussed in today’s proposal that EDs did in CFTC Letter No. 12-53.
Thus, other than when it is discussing CFTC Letter No. 12-53, which
used the term “ED,” the Commission is using the term EB rather
than ED in the preamble to reflect the fact that proposed Sec. 
43.3(a)(6) does not require EBs to be SDs.
    85 As noted above, the Commission understands that some
pricing events (as proposed to be defined in Sec.  43.2(a) and as
discussed in the paragraph following the paragraph in the body of
the preamble with which this footnote is associated) that result in
trigger swaps and related mirror swaps (e.g., in the context of a
reverse give-up, which is discussed below in section II.C.4.b.) are
negotiated by persons that are acting pursuant to a prime brokerage
agency arrangement with more than one prime broker.
    86 The EB and the PB client are said to “give up” the swap
that otherwise would have been entered into between the EB and the
PB client to the EB and PB. That “given up” swap becomes the
trigger swap.
    87 The mirror swaps between the PBs, pursuant to instructions
from a client, are said to be “reverse give-ups” from the EB-
facing PB to the other PB(s). If the reverse give-up is for 100% of
the notional of the trigger swap, then the PB that is a swap
counterparty to the EB in the trigger swap will not also be a swap
counterparty to a client in a mirror swap. If the reverse give-up is
for less than 100% of the notional of the trigger swap (i.e., a
partial reverse give-up), then there will be a mirror swap between:
the EB-facing PB and at least one client participating in the
partial reverse give-up; the EB-facing PB and each of the other PBs
participating in the partial reverse give-up; and each of such other
PBs and at least one of the clients participating in the partial
reverse give-up.
    88 The two clients are said to “give up” to their respective
PBs the swap that otherwise would be entered into between the two
clients. That “given up” swap becomes the trigger swap.
—————————————————————————

    CFTC Letter No. 12-53 permitted the ED to be the reporting party
for the ED-PB Swap, subject to the conditions that the ED and PB
allocated reporting responsibility between them and both parties were
SDs. Proposed Sec.  43.3(a)(6)(ii) would differ from the reporting
structure in CFTC Letter No. 12-53 in that proposed Sec. 
43.3(a)(6)(ii) would instead incorporate the reporting counterparty
hierarchy of Sec.  43.3(a)(3). The goal of proposed Sec. 
43.3(a)(6)(ii) is to have each trigger swap be reported ASATP after its
pricing event. The Commission understands that one counterparty to a
trigger swap often will have participated in negotiating the related
pricing event, so should be well-placed to report the trigger swap
pursuant to part 43 in such circumstances, particularly if that
counterparty is an SD, given that SDs are experienced with part 43
reporting. If the PB is an SD, but its counterparty is not, the PB
would be the reporting counterparty for the trigger swap even though
the PB may not learn of the pricing event for some time, although,
pursuant to proposed Sec.  43.3(a)(7), discussed below in section
II.C.5., it could contract with a third-party service provider (which
could include a party to the pricing event (e.g., an EB)) to handle
such reporting if it believes reporting such PRST in a timely manner
(i.e., ASATP after the pricing event, per proposed Sec.  43.3(a)(6)(i))
would be problematic for it, while remaining fully responsible for such
reporting. Similarly, even in circumstances in which neither
counterparty to a trigger swap participated in negotiating the related
pricing event (e.g., a double give-up prime brokerage swap structure),
such counterparties can contract with a third-party service provider to
handle such reporting if they believe that reporting such trigger swap
in a timely manner (i.e., ASATP after the pricing event, per proposed
Sec.  43.3(a)(6)(i)) would be problematic for them, while remaining
fully responsible for such reporting.
5. Sec.  43.3(a)(7)–Third-Party Facilitation of Data Reporting
    The Commission proposes to add Sec.  43.3(a)(7) to provide for the
third-party facilitation of data reporting. As background, in the 2012
RTR NPRM, Real-Time Public Reporting of Swap Transaction Data, 75 FR
76140 (Dec. 7, 2010), the Commission noted that SEFs, DCMs, and SDRs
may enter into contractual relationships with third party service
providers to facilitate reporting, while remaining responsible for the
reporting requirement under part 43.89 Regulation 45.9 contains a
parallel provision for part 45 reporting. Regulation 45.9 provides for
third-party facilitation of data reporting, and specifies that
registered entities and swap counterparties that contract with third-
party service providers remain fully responsible for the reporting
requirement under part 45. Proposed Sec.  43.3(a)(7) would codify the
Commission’s previously-stated position with respect to third party
facilitation of part 43 reporting in a manner consistent with Sec. 
45.9 and expressly expand it to reporting parties for off-facility
swaps. Therefore, proposed Sec.  43.3(a)(7) would state that any person
required by part 43 to report STAPD, while remaining fully responsible
for reporting as required by part 43, may contract with a third-party
service provider to facilitate reporting.
—————————————————————————

    89 Real-Time Public Reporting of Swap Transaction Data, 77 FR
1182, 1201.

—————————————————————————

[[Page 21527]]

6. Sec.  43.3(b)–Public Dissemination of Swap Transaction and Pricing
Data
    The Commission is proposing several revisions to the rules for
SEFs, DCMs, SDs, MSPs, and SDRs in disseminating STAPD. First, as
discussed above in section II.C.1.b., the Commission is proposing to
move the substance of current Sec.  43.3(b)(1) to revised Sec. 
43.3(a)(2).90
—————————————————————————

    90 Moving current Sec.  43.3(b)(1) to Sec.  43.3(a)(2) would
consolidate the requirements for SEFs and DCMs to report STAPD in
Sec.  43.3(a)(2).
—————————————————————————

    Second, the Commission is proposing to relocate current Sec. 
43.3(b)(2) to Sec.  43.3(b)(1) and revise the regulation. As
background, current Sec.  43.3(b)(2) states that registered SDRs shall
ensure that STAPD is publicly disseminated ASATP after such data is
received from a SEF, DCM, or reporting party, unless such PRST is
subject to a time delay described in Sec.  43.5, in which case the PRST
shall be publicly disseminated in the manner described in Sec.  43.5.
    The Commission is also proposing to replace the language in current
Sec.  43.3(b)(2) stating that SDRs shall “ensure” STAPD is publicly
disseminated with an SDR shall publicly disseminate STAPD ASATP to
clarify that SDRs must disseminate the data, rather than ensure it is
done. The Commission believes that this revision should not result in
any changes in current practice for SDRs. Finally, the Commission is
proposing to replace the two references to “publicly reportable swap
transaction” with references to “swap transaction and pricing data”
for consistency both within proposed Sec.  43.3(b)(1) and with Sec. 
43.5, which is cross-referenced by current Sec.  43.3(b)(2) and would
continue to be cross-referenced by proposed Sec.  43.3(b)(1).
Therefore, proposed Sec.  43.3(b)(1) would state that an SDR shall
publicly disseminate STAPD ASATP after receiving it from a SEF, DCM, or
reporting counterparty, unless the STAPD is subject to a time delay
described in Sec.  43.5, in which case the SDR must publicly
disseminate the STAPD pursuant to Sec.  43.5.
    Third, the Commission is proposing to relocate Sec.  43.3(c)(1) to
Sec.  43.3(b)(2) in conjunction with the above relocation of Sec. 
43.3(b)(2) to Sec.  43.3(b)(1). As background, current Sec.  43.3(c)(1)
states that any SDR that accepts and publicly disseminates STAPD in
real-time shall comply with part 49 and shall publicly disseminate
STAPD in accordance with part 43 ASATP upon receipt of such data,
except as otherwise provided in part 43.
    The Commission is proposing to locate the regulations for SDRs to
follow in disseminating STAPD in Sec.  43.3(b). Because current Sec. 
43.3(c)(1) is an SDR obligation regarding the public dissemination of
STAPD, the Commission believes it should be located in revised Sec. 
43.3(b). The Commission is also proposing to remove the last phrase of
Sec.  43.3(c)(1), which states that SDRs must publicly disseminate
STAPD in accordance with part 43 ASATP upon receipt of such data,
except as otherwise provided in part 43. The Commission believes this
language unnecessary given the similar, but more precise, reference to
Sec.  43.5 in current Sec.  43.3(b)(2) and in proposed Sec. 
43.3(b)(1), discussed above in this section II.C.6.91 Therefore,
proposed Sec.  43.3(b)(2) would state that any SDR that accepts and
publicly disseminates STAPD in real-time shall comply with part 49.
—————————————————————————

    91 The reference in Sec.  43.3(c)(1) to “except as otherwise
provided in part 43” rather than solely to Sec.  43.5 is
unnecessarily broad, given that Sec.  43.5 currently is the only
regulation in part 43 containing a delay to public dissemination.
—————————————————————————

    The Commission is proposing to redesignate current Sec. Sec. 
43.3(c)(2) and (3) as Sec. Sec.  43.3(b)(4) and (5), respectively.
7. Sec.  43.3(c)–Availability of Swap Transaction and Pricing Data to
the Public
    The Commission is proposing to relocate the requirements to make
STAPD available to the public from Sec.  43.3(d)(2) to Sec. Sec. 
43.3(c)(1) and (2).92 As background, current Sec.  43.3(d)(2)
specifies that SDRs must make “publicly disseminated” STAPD “freely
available and readily accessible” to the public. Currently, publicly
disseminated is defined to mean to publish and make available STAPD in
a non-discriminatory manner, through the internet or other electronic
data feed that is widely published and in machine readable electronic
format.
—————————————————————————

    92 As discussed above in section II.C.6., the Commission is
proposing to relocate the text of current Sec.  43.3(c)(1), as the
Commission proposes to modify it, to Sec.  43.3(b)(2), and current
Sec. Sec.  43.3(c)(2) and (3) as Sec. Sec.  43.3(b)(4) and (5),
respectively.
—————————————————————————

    The requirement in Sec.  43.3(d)(2) supports the fairness and
efficiency of markets and increases transparency, which in turn
improves price discovery and decreases risk (e.g., liquidity risk).93
Most SDRs currently make historical STAPD spanning multiple years
available on their websites for market participants to download, save,
and analyze.94 However, without clear requirements on how long SDRs
must make this data available, or to make instructions available, a
situation could arise where STAPD is reported, publicly disseminated,
and then quickly or unreasonably made unavailable to the public.
Removing STAPD in this fashion would deny the public a sufficient
opportunity to review such data and ultimately impede the goals of
increasing market transparency, improving price discovery, and
mitigating risk.
—————————————————————————

    93 See Real-Time Public Reporting of Swap Transaction Data, 77
FR 1182, 1183.
    94 DTCC-SDR’s historical STAPD is available at https://rtdata.dtcc.com/gtr/; CME SDR’s historical STAPD is available at
https://www.cmegroup.com/market-data/repository/data.html; and ICE
Trade Vault’s historical STAPD is available at https://www.icetradevault.com/tvus-ticker/#.
—————————————————————————

    Therefore, the Commission is proposing to move the requirement in
current Sec.  43.3(d)(2) to new Sec. Sec.  43.3(c)(1) and (2), along
with revising the definition of “publicly disseminate” in Sec. 
43.2,95 to establish requirements for SDRs to make STAPD available to
the public on their websites. First, the Commission is proposing to
specify that SDRs must make STAPD available on their websites for a
period of a least one year after the initial “public dissemination”
of such data. Second, the Commission is proposing to move the format
requirements for SDRs in making this STAPD available to the revised
definition of “public dissemination.” 96
—————————————————————————

    95 The revisions to the definition of “publicly disseminate”
are discussed above in section II.B.2.
    96 Id.
—————————————————————————

    Therefore, proposed Sec.  43.3(c) would state that SDRs shall make:
STAPD available on their websites for a period of time that is at least
one year after the initial public dissemination thereof; instructions
freely available on their websites on how to download, save, and search
such STAPD; and STAPD that is publicly disseminated pursuant to part 43
available free of charge.
8. Sec.  43.3(d)–Data Reported to SDRs
a. Sec.  43.3(d)(1)–Standards for Reporting STAPD to SDRs
    As discussed above in section II.B.2., the Commission is proposing
to relocate the current requirement for SDRs to use a specific format
in making STAPD available to the public from Sec.  43.3(d)(1) to the
definition of “public dissemination and publicly disseminate” in
Sec.  43.2.
    Currently, Sec.  45.13(b) requires reporting entities or
counterparties to use the facilities, methods, or data standards
provided or required by the SDR to which the entity or counterparty
reports the data. An SDR may permit reporting entities and
counterparties to use various facilities, methods, or data standards,
provided that its requirements in this regard enable it to

[[Page 21528]]

report the data to the Commission in a format acceptable to the
Commission, and transmit all swap data requested by the Commission to
the Commission in an electronic file in a format acceptable to the
Commission pursuant to Sec.  45.13(a).
    As explained in section III. below, the Commission had intended
that part 43 data would be a subset of part 45 data reported to SDRs.
As a result, Sec.  45.13(b) indirectly required reporting entities or
counterparties to use the data standards of their SDRs, as long as the
standards enabled the SDR to report the data to the Commission in the
format acceptable to the Commission. The Commission believes reporting
counterparties would benefit from having a distinct regulatory
requirement in part 43 for real-time public reporting. Therefore, the
Commission is proposing Sec.  43.3(d)(1), which would require reporting
counterparties, SEFs, and DCMs to report the STAPD elements in appendix
C in the form and manner provided in the technical specifications
published by the Commission. The Commission is proposing a parallel
requirement in Sec.  45.13(a) in a separate part 45 NPRM.
b. Sec.  43.3(d)(2)–Data Validations
    As discussed above in section II.C.7., the Commission is proposing
to relocate the current requirement for SDRs to make STAPD available to
the public from Sec.  43.3(d)(2) to Sec. Sec.  43.3(c)(1) and (2).
    Proposed Sec.  43.3(d)(2) would require reporting counterparties,
SEFs, and DCMs to satisfy SDR validation procedures when reporting
STAPD to SDRs. Currently, the Commission’s regulations do not require
that SDRs validate STAPD. In a related NPRM, the Commission is
proposing to require that SDRs implement validations, including on
STAPD reported to SDRs.97 As explained below in section II.C.9., the
Commission is proposing to add related regulations for SDRs for STAPD
validations in Sec.  43.3(f). In general, Sec.  43.3(f) would require
SDRs to notify SEFs, DCMs, and reporting counterparties if the reported
STAPD satisfied the SDR’s validation procedures. The rule would further
specify that SEFs, DCMs, and reporting counterparties have not
fulfilled their reporting obligations until the STAPD passes an SDR’s
validation procedures.
—————————————————————————

    97 2019 Part 49 NPRM.
—————————————————————————

    The Commission believes that the SDR validation procedures in
proposed Sec.  43.3(f) would help improve the timeliness and accuracy
of STAPD SDRs disseminate to the public. However, the Commission also
believes that a companion requirement for reporting counterparties,
SEFs, and DCMs to satisfy SDR validation procedures is necessary.
Without such a requirement, the Commission is concerned about ambiguity
as to the responsibilities of reporting counterparties, SEFs, and DCMs
to respond to and satisfy the validation requirements specified in
proposed Sec.  43.3(f).
c. Sec.  43.3(d)(3)–SDR Facilities, Methods, and Data Standards
    The Commission is proposing to delete current Sec.  43.3(d)(3).
Currently, Sec.  43.3(d)(3) requires SDRs to provide to the Commission
a hyperlink to the internet website where publicly disseminated STAPD
can be accessed by the public. This requirement is unnecessary, as SDRs
have this information on their websites in a manner that is simple for
the Commission and market participants to locate.
    Proposed Sec.  43.3(d)(3) would require reporting counterparties,
SEFs, and DCMs to use the facilities, methods, or data standards
provided or required by the SDR to which the reporting counterparty,
SEF, or DCM, reports the data. The Commission understands that
reporting counterparties, SEFs, and DCMs are currently using the
facilities, methods, or data standards provided or required by the SDRs
to which they are reporting data. Otherwise, reporting counterparties,
SEFs, and DCMs would be unable to send STAPD to SDRs. However, as
discussed throughout this section II.C.8., specifying this requirement
for market participants would provide regulatory certainty.
9. Sec.  43.3(f)–Data Validation Acceptance Message
    The Commission is proposing new regulations for SDRs in validating
STAPD in Sec.  43.3(f). The Commission’s regulations do not currently
require that SDRs validate STAPD. The Commission understands, however,
that SDRs have implemented validations as a best practice. As a result,
each SDR runs a number of checks, or validations, on each STAPD message
prior to publicly disseminating it. A failed validation can cause an
SDR to reject the message without disseminating it to the public.
    The Commission is concerned that the lack of validation
requirements has resulted in reporting counterparties, SEFs, and DCMs
being unaware of, or unfamiliar with, the existence of such
validations. The Commission is concerned that the lack of awareness may
be resulting in reporting counterparties, SEFs, and DCMs being unclear
about their responsibilities to monitor their submissions to SDRs for
errors that may result in validation failures that ultimately result in
non-dissemination. As a result, the Commission is proposing in Sec. 
43.3(d)(2) to require reporting counterparties, SEFs, and DCMs to
satisfy SDR validation procedures when reporting STAPD to SDRs. The
Commission is also proposing Sec.  43.3(f) to make clear the
requirement for each SDR to notify submitting parties of their failure
to meet the SDR’s validation procedures and that an entity’s reporting
obligation is not satisfied until the SDR’s validation procedures have
been satisfied.
    Therefore, proposed Sec.  43.3(f)(1) would require that for an SDR
to validate each STAPD report submitted it, the SDR shall notify the
reporting counterparty, SEF, or DCM submitting the report whether the
report satisfied the data validation procedures of the SDR. The SDR
would have to provide such notice ASATP after accepting the STAPD
report. Proposed Sec.  43.3(f)(1) would provide that an SDR may satisfy
the validation requirements by transmitting data validation acceptance
messages as required by proposed Sec.  49.10.98
—————————————————————————

    98 The Commission is proposing new regulations for SDRs to
validate STAPD in a separate Roadmap proposal amending parts 45, 46,
and 49.
—————————————————————————

    Proposed Sec.  43.3(f)(2) would provide that if a STAPD report
submitted to an SDR does not satisfy the data validation procedures of
the SDR, the reporting counterparty, SEF, or DCM required to submit the
report has not satisfied its obligation to report STAPD in the manner
provided by Sec.  43.3(d). The reporting counterparty, SEF, or DCM
would not have satisfied its obligation until it submits the STAPD
report in the manner provided by Sec.  43.3(d), which includes the
requirement to satisfy the data validation procedures of the SDR.
10. Sec.  43.3(h)–Timestamp Requirements
    The Commission is proposing to delete the current timestamp
requirements in Sec.  43.3(h).99 Regulation 43.3(h) sets forth
timestamp requirements for registered entities, SDs, and MSPs with
respect to STAPD for all PRSTs.100 Pursuant to Sec.  43.3(h)(1), SEFs

[[Page 21529]]

and DCMs must timestamp STAPD relating to a PRST with the date and
time, to the nearest second, of when such SEF or DCM receives data from
a swap counterparty (if applicable), and transmits such data to an SDR
for public dissemination. Pursuant to Sec.  43.3(h)(2), SDRs must
timestamp STAPD relating to a PRST with the date and time, to the
nearest second when such SDR receives data from a SEF, DCM, or
reporting party, and publicly disseminates such data. Pursuant to Sec. 
43.3(h)(3), SDs or MSPs must timestamp STAPD for off-facility swaps
with the date and time, to the nearest second when such SD or MSP
transmits such data to an SDR for public dissemination. Regulation
43.3(h)(4) requires that records of all timestamps required by Sec. 
43.3(h) must be maintained for a period of at least five years from the
execution of the PRST.
—————————————————————————

    99 The Commission notes that it has proposed to remove and
reserve current Sec.  43.3(g), and move the substance of the current
requirements in Sec.  43.3(g) regarding SDR hours of operation to
Sec.  49.28. See 2019 Part 49 NPRM at 20164. In this release, the
Commission is proposing to relocate current Sec.  43.3(i) to Sec. 
43.3(g), in conjunction with the proposed removal of current Sec. 
43.3(h) discussed above, as well as make conforming changes to the
wording.
    100 In addition to allowing the Commission to monitor
compliance with the timing requirements, timestamps also confirm for
market participants that publicly reported STAPD is in fact being
reported ASATP after transactions have been executed.
—————————————————————————

    As discussed in section III. below, the Commission is proposing an
updated list of STAPD elements in appendix C where the timestamps
described in Sec.  43.3(h) would be covered. Therefore, the Commission
proposes to remove the requirements in Sec. Sec.  43.3(h)(1)-(3) for
SEFs, DCMs, SDs, MSPs, and SDRs to timestamp STAPD.
    In addition, the Commission believes that the separate
recordkeeping requirement for timestamps is duplicative of other
recordkeeping requirements for SEFs, DCMs, SDs, MSPs, and SDRs. For
instance, SDRs must already keep swap data for five years following the
final termination of the swap and for an additional ten years in
archival storage.101 In the 2019 Part 49 NPRM, the Commission is
proposing to more clearly include part 43 STAPD in the recordkeeping
requirement in Sec.  49.12(b)(1).102 SEFs, DCMs, SDs, and MSPs have
similar recordkeeping requirements for swaps.103 As a result, when
timestamps are reported or disseminated, SEFs, DCMs, SDs, MSPs, and
SDRs subject to Commission jurisdiction have to maintain them as part
of recordkeeping requirements separate from Sec.  43.3(h)(4).
Therefore, the Commission is also proposing to remove the requirement
in Sec.  43.3(h)(4) for these entities to keep records of the
timestamps for at least five years from execution.
—————————————————————————

    101 See Sec. Sec.  45.2(f) and (g) (containing recordkeeping
requirements for SDRs); see also Sec.  49.12(a) (referencing part 45
recordkeeping requirements). In the 2019 Part 49 NPRM, the
Commission is proposing to move the requirements in Sec. Sec. 
45.2(f) and (g) to Sec.  49.12. See Certain Swap Data Repository and
Data Reporting Requirements, 84 FR 21044, 21103-04.
    102 The Commission is doing so by replacing the term “swap
data” with “SDR data,” which the Commission proposes to define as
data required to be reported pursuant to two or more of parts 43,
45, 46, or 49 of the Commission’s regulations. See Certain Swap Data
Repository and Data Reporting Requirements, 84 FR 21044, 21103-04.
    103 17 CFR 45.2(c) requires SDs, MSPs, SEFs, and DCMs subject
to Commission jurisdiction to maintain records for each swap
throughout the life of the swap for a period of at least five years
following the final termination of the swap.
—————————————————————————

Request for Comment
    The Commission requests comment on all aspects of the proposed
changes to Sec.  43.3. In addition, the Commission requests specific
comment on the following:
    (2) Instead of permitting a delay for PPS, should reporting
counterparties be required to submit PPSs ASATP after execution using
the Post-priced swap indicator (59), leaving the price empty and then
be required to update that entry after the price is determined?
    (3) Should the Commission permit an indefinite delay for reporting
STAPD for PPSs? In other words, should reporting such data be required
only once the price and/or other Variable Terms is/are known regardless
of how long that takes? The Commission notes that such swaps could be
flagged on the public tape as PPSs once reported. Alternatively, should
the Commission set a shorter deadline for reporting STAPD for PPS?
    (4) Should the Commission exclude from the PPS definition and/or
from the reporting delay in proposed Sec.  43.3(a)(4) swaps for which a
price is not known at execution because it is contingent upon the
outcome of SD hedging? Would permitting such swaps to receive the
reporting delay in proposed Sec.  43.3(a)(4) cause market participants
to intentionally delay reporting in reliance on the need to hedge a
swap where such market participants do not delay their reporting under
current Commission reporting regulations?
    (5) Should market participants be required to rely on the
Commission’s block trade reporting delays and capping and rounding
rules, rather than proposed Sec.  43.3(a)(4), to avoid the front-
running concerns discussed above in section II.C.2.? Conversely, are
the CEA’s provisions and the Commission’s regulations sufficient to
deter market participants from intentionally altering their behavior to
delay their reporting of swaps for which a price is not known at
execution because it is contingent upon the outcome of SD hedging?
    (6) Should the Commission modify its PPS indicator in appendix C,
or add another indicator, to require market participants to indicate
whether a swap is a PPS because it is contingent upon the outcome of SD
hedging?
    (7) Should the Commission modify its PPS indicator, or add another
indicator, to require market participants to indicate whether a swap is
a PPS based on other common reasons, such as the price being determined
based on the volume-weighted average price (also known as “VWAP”) of
an index level at market close?
    (8) The Commission understands that trade at settlement (“TAS”)
futures orders 104 are displayed to the market when entered, in
contrast to PPS executions under proposed Sec.  43.3(a)(4). Do the
similarities between PPSs and TAS futures orders warrant reporting PPSs
when executed, rather than by the deadline specified in proposed Sec. 
43.3(a)(4)? Conversely, do PPSs’ relative illiquidity vis-a-vis TAS
futures orders warrant the reporting delay in proposed Sec. 
43.3(a)(4)? 105
—————————————————————————

    104 See, e.g., Trading at Settlement (TAS), CME Group Inc.,
available at https://www.cmegroup.com/trading/trading-at-settlement.html (explaining that “Trading at Settlement (TAS) order
types . . . allow you to buy or sell a contract at the settlement
price”).
    105 See Paul Peterson, Trading at Settlement for Agricultural
Futures: Results from the First Month, farmdocdaily, available at
https://farmdocdaily.illinois.edu/2015/07/trading-at-settlement-for-agricultural-futures.html (Jul. 29, 2015) (noting that “[t]o
prevent [“banging the close” and other forms of manipulation] . .
. from happening in the ag markets, TAS is available only in the
most liquid commodities, and only in the most liquid contract
months” and “[s]ome energy market participants claim that . . .
price discovery is reduced because TAS trades are simply assigned a
price without having to compete (like a limit or `price’ order
would) for a price in the open market”).
—————————————————————————

    (9) Did the Commission accurately describe the prime brokerage swap
transaction structures discussed above? Should the real-time public
tape reflect the number of mirror swaps related to a given trigger swap
to provide information to the public on the number of prime brokerage
swap transaction structures with multiple mirror swaps? Would such an
indicator provide useful information to market participants?
    (10) Should the Commission scale back the scope of the exclusion of
mirror swaps from the PRST definition in proposed Sec.  43.3(a)(6)(i)
such that each of the following swaps would be PRSTs: (a) Swaps
executed as part of partial reverse give-up arrangements and/or (b)
swaps executed as part of other prime brokerage transaction structures
in which the notional amount of a mirror swap may differ from the
notional amount of the corresponding trigger swap? Should the
Commission scale back the scope of the exclusion of mirror swaps from
the PRST definition in proposed Sec.  43.3(a)(6)(i) such that the
exclusion would be limited to “plain vanilla” mirror swaps?

[[Page 21530]]

    (11) If a SD executed one or more swaps to hedge a swap that the SD
had executed with a counterparty, and the hedging swap(s) was/were
executed at the same price as the swap being hedged, the hedging
swap(s) generally would be a PRST or PRSTs and, thus, subject to part
43 reporting.106 Given the similarity of such transaction structures
to trigger swap-mirror swap transactions structures, is it appropriate
to treat mirror swaps as non-PRSTs pursuant to proposed Sec. 
43.3(a)(6)?
—————————————————————————

    106 But see paragraph (2) of the “Publicly reportable swap
transaction” definition in Sec.  43.2, which states that examples
of executed swaps that do not fall within the definition of publicly
reportable swap transaction may include internal swaps between one-
hundred percent owned subsidiaries of the same parent entity.
—————————————————————————

    (12) Should the Commission modify proposed Sec.  43.2(a) to include
a carve out for prime brokerage service fees to reflect that such fees
might not be included in all such mirror swaps?
    (13) Is the proposed definition of “prime broker” sufficient and
clear enough to accurately describe the term as understood in common
industry practice? Is it sufficiently narrow to limit the non-reporting
of mirror swaps to transactions involving “prime brokers,” as that
term is understood in the market? If the Commission should propose a
different definition of “prime broker,” what should that definition
be?
    (14) In order to ensure data quality, should the Commission mandate
a certain standard for reporting to the SDRs? If so, what standard
should the Commission mandate and what would be the benefits of
mandating this standard? If not, why should the Commission not mandate
a standard?

D. Sec.  43.4–Swap Transaction and Pricing Data To Be Publicly
Disseminated in Real-Time

1. Sec.  43.4(a)-(e)–Public Dissemination, Additional Swap
Information, Anonymity, and Unique Product Identifiers
    The Commission proposes to make several primarily non-substantive
changes to current Sec. Sec.  43.4(a)-(e), (g) and (h). As background,
Sec.  43.4(a) generally requires that STAPD must be reported to an SDR
so that the SDR can publicly disseminate it in real-time, including
according to the manner described in Sec.  43.4 and appendix A. The
Commission proposes to delete current Sec.  43.4(a). The Commission
believes that current Sec.  43.4(a) is overly general. As a result of
removing current Sec.  43.4(a), the Commission proposes to re-designate
Sec. Sec.  43.4(b)-(d) as Sec. Sec.  43.4(a)-(c).
    Current Sec.  43.4(b) requires that any SDR that accepts and
publicly disseminates STAPD in real-time shall publicly disseminate the
information described in appendix A, as applicable, for any PRST. The
Commission proposes to re-designate Sec.  43.4(b) as Sec.  43.4(a), and
make conforming changes. As proposed, Sec.  43.4(a) would require that
any SDR that accepts and publicly disseminates STAPD in real-time shall
publicly disseminate the information for the STAPD elements in appendix
C to part 43 in the form and manner provided in the technical
specifications published by the Commission.
    Current Sec.  43.4(c) states that SDRs that accept and publicly
disseminate STAPD in real-time may require reporting parties, SEFs, and
DCMs to report to the SDR information necessary to compare the STAPD
that was publicly disseminated in real-time to the data reported to an
SDR pursuant to section 2(a)(13)(G) of the CEA or to confirm that
parties to a swap have reported in a timely manner pursuant to Sec. 
43.3. The Commission proposes to re-designate Sec.  43.4(c) as Sec. 
43.4(b) and make minor non-substantive changes.
    Current Sec.  43.4(d) contains regulations for maintaining the
anonymity of the parties to a PRST. The Commission is proposing to re-
designate Sec.  43.4(d) as Sec.  43.4(c) and make minor non-substantive
changes. Among these changes, the Commission is proposing to remove
current Sec.  43.4(d)(4)(i)-(iii); re-designate Sec.  43.4(d)(4) as
Sec.  43.4(c)(4); and consolidate the substance of Sec. Sec. 
43.4(d)(4)(i) and (iii) in proposed Sec.  43.4(c)(4). These actions
would remove the requirement in current Sec.  43.4(d)(4)(ii) that
registered SDRs publicly disseminate the actual assets underlying other
commodity swaps that either reference one of the contracts described in
appendix B to part 43 107 or that are economically related to such
contracts.108
—————————————————————————

    107 See current Sec.  43.3(d)(4)(ii)(A).
    108 See current Sec.  43.3(d)(4)(ii)(B).
—————————————————————————

    Currently, depending on the assets underlying other commodity
swaps, such assets are either disseminated as reported or are
disseminated as described in Sec.  43.4(d)(4)(iii). Current Sec. 
43.4(d)(4)(iii) states that the underlying assets of swaps in the
“other commodity” asset class that are not described in Sec. 
43.4(d)(4)(ii) shall be publicly disseminated by limiting the detail of
the underlying assets. Current Sec.  43.4(d)(4)(iii) also states that
the identification of any specific delivery point or pricing point
associated with the underlying asset of such “other commodity” swap
shall be publicly disseminated pursuant to appendix E to part 43.
    As proposed to be amended, Sec.  43.4(c)(4) would provide the same
geographic masking treatment for all assets underlying “other
commodity” swaps, namely the geographic masking described in current
Sec.  43.4(d)(4)(iii). The Commission believed when adopting part 43
that other commodity swaps referencing or economically related to one
of the contracts described in appendix B to part 43 were sufficiently
liquid that publicly disseminating such information would not identify
the swap counterparties 109 or materially reduce swap market
liquidity.110 However, the Commission preliminarily believes that
other commodity swaps referencing, or economically related to, the
contracts in appendix B may still be sufficiently bespoke to warrant
additional masking. Consequently, the Commission proposes to remove the
requirement in current Sec.  43.4(d)(4)(ii) that registered SDRs
publicly disseminate the actual assets underlying other commodity swaps
that either reference one of the contracts described in appendix B to
part 43 or that are economically related to such contracts. Because the
Commission proposes to remove that requirement from current Sec. 
43.4(d)(4)(ii), the Commission also proposes to remove appendix B to
part 43 from its regulations. The Commission also proposes to
redesignate current appendix E as appendix B.
—————————————————————————

    109 See Real-Time Public Reporting of Swap Transaction Data,
77 FR 1182, 1211. CEA section 2(a)(13)(E)(i) requires the Commission
to ensure that information disseminated pursuant to its real-time
reporting rules does not identify swap “participants.” 7 U.S.C.
2(a)(13)(E)(i).
    110 CEA section 2(a)(13)(E)(iv) requires the Commission to
take into account whether public disclosure pursuant to its real-
time reporting rules will materially reduce market liquidity. 7
U.S.C. 2(a)(13)(E)(iv).
—————————————————————————

    Finally, current Sec.  43.4(e) permits SDRs to disseminate UPIs for
certain data fields once a UPI is available. The Commission proposes to
delete current Sec.  43.4(e), which gives SDRs discretion regarding
what fields to publicly disseminate after a UPI exists.111 As
discussed below in section III., the UPI will be addressed in the STAPD
elements in appendix C.
—————————————————————————

    111 The Commission has not yet designated a UPI and product
classification system to be used in recordkeeping and swap data
reporting pursuant to Sec.  45.7.
—————————————————————————

2. Sec.  43.4(f)-(g)–Process To Determine Appropriate Rounded Notional
or Principal Amounts
    Current Sec.  43.4(f) requires that reporting parties, SEFs, and
DCMs report the actual notional or principal amount of any swap,
including block

[[Page 21531]]

trades, to an SDR that accepts and publicly disseminates such data
pursuant to part 43.112
—————————————————————————

    112 17 CFR 43.4(f)(1)-(2).
—————————————————————————

    As discussed above, the Commission is proposing to remove
Sec. Sec.  43.4(a) and (e), and re-designate Sec.  43.4(b)-(d) as Sec. 
43.4(a)-(c). As a result of these changes, the Commission proposes to
re-designate Sec.  43.4(f) as Sec.  43.4(d) and make minor non-
substantive changes.
3. Sec.  43.4(g)–Public Dissemination of Rounded Notional or Principal
Amounts
    As discussed above, the Commission is proposing to redesignate
current Sec.  43.4(f) as Sec.  43.4(d). As a result of these changes,
the Commission is proposing to re-designate current Sec.  43.4(g) as
Sec.  43.4(e) and make minor non-substantive edits.
    One of these non-substantive edits is a structural change in the
regulations. Current Sec.  43.4(g), titled “Public dissemination of
rounded notional or principal amounts,” states that the notional or
principal amount of a PRST, as described in appendix A to this part,
shall be rounded and publicly disseminated by a registered SDR, and
then sets out the rules for rounding.
    The Commission is proposing to rephrase Sec.  43.4(g), which would
be re-designated as Sec.  43.4(e), to state that the notional or
principal amount of a PRST shall be publicly disseminated by an SDR
subject to rounding as set forth in Sec.  43.4(f) and a cap size as set
forth in Sec.  43.4(g).
    Then, the rounding rules in current Sec.  43.4(g) would be in a new
section Sec.  43.4(f) titled “Process to determine appropriate rounded
notional or principal amounts.” Section Sec.  43.4(f) would then
contain the rounding rules for SDRs, subject to two substantive changes
explained below, among other non-substantive changes.
    The Commission proposes amending Sec. Sec.  43.4(g)(8) and (9),
which would be re-designated as Sec. Sec.  43.4(f)(8) and (9). Current
Sec.  43.4(g)(8) requires a registered SDR to round the notional or
principal amount of a PRST to the nearest one billion if it is less
than 100 billion but equal to or greater than one billion. The
Commission proposes to amend proposed Sec.  43.4(f)(8) to require
rounding to the nearest 100 million instead of one billion. Current
Sec.  43.4(g)(9) requires a registered SDR to round the notional or
principal amount of a PRST to the nearest 50 billion if it is greater
than 100 billion. The Commission proposes to amend Sec.  43.4(f)(9) to
require rounding to the nearest 10 billion and to add the words “equal
to or” before “greater than 100 billion” to include swaps with
notional or principal amounts that are exactly 100 billion, the
omission of which from the 2012 RTR Final Rule appears to have been an
oversight.113
—————————————————————————

    113 The omission of swaps with notional or principal amounts
of exactly 100 billion did not change the rounding result. Although
such swaps are not presently subject to rounding due to their
omission from Sec.  43.4(g)(9), even if they were included therein,
because their notional or principal amount is a round number
already, they would not have been rounded, and would not be rounded
as a result of proposed Sec.  43.4(f)(9). However, because all swaps
with notional or principal amounts of greater than 100 billion will
be rounded to the nearest 10 billion if Sec.  43.4(f)(9) is adopted
as proposed, such swaps would still obtain the anonymizing benefits
of Sec. Sec.  43.4(f)(8) and (9) when 100 billion is the nearest
number to round to pursuant to Sec. Sec.  43.4(f)(8) or (9), as
applicable.
—————————————————————————

    The Commission is concerned that broadly rounded notional or
principal amounts could undermine the price discovery purpose of real
time reporting.114 The Commission is particularly concerned about
swaps with notional or principal amounts over 1 billion, because there
tend to be fewer swaps of such size relative to swaps with smaller
notional or principal amounts. The Commission preliminarily believes
that smaller rounding increments for the notional or principal amount
of swaps covered by proposed Sec. Sec.  43.4(f)(8) and (9) would
improve price discovery for such swaps. Rounding the notional or
principal amounts in smaller increments in proposed Sec. Sec. 
43.4(f)(8) and (9) also would be consistent with the rounding
increments prescribed in Sec.  43.4(g)(1)-(7) (i.e., proposed Sec. 
43.4(f)(1)-(7)) on a percentage basis. The Commission preliminarily
believes that the rounding increments in proposed Sec. Sec.  43.4(f)(8)
and (9) are sufficiently wide to protect the anonymity of swap
counterparties, but invites comment on this issue. Additionally, the
Commission intends to continue to limit geographic detail about
delivery and pricing points and to provide notional or principal cap
sizes, each of which further protects swap counterparties’
anonymity.115
—————————————————————————

    114 See CEA section 2(a)(13), 7 U.S.C. 2(a)(13) (stating that
the purpose of this section is to authorize the Commission to make
swap transaction and pricing data available to the public in such
form and at such times as the Commission determines appropriate to
enhance price discovery).
    115 See proposed Sec. Sec.  43.4(c)(4) (limiting geographic
detail) and 43.4(g) (notional or principal cap sizes).
—————————————————————————

4. Sec.  43.4(h)–Process To Determine Cap Sizes
    As a result of the above proposal to re-designate current Sec. 
43.4(g) as Sec.  43.4(e) and create a separate section for rounding in
Sec.  43.4(f), the Commission is proposing to re-designate current
Sec.  43.4(h) as Sec.  43.4(g). Current Sec.  43.4(h) contains, and
proposed Sec.  43.4(g) would contain, the cap size rules for SDRs.
    As background, the initial cap sizes were to be equal to the
greater of the initial AMBS for the respective swap category in
appendix F or the respective cap sizes in Sec.  43.4(h)(1)(i)-(v).116
The Commission was to establish post-initial cap sizes, according to
the process in Sec.  43.6(f)(1), using reliable data collected by SDRs
based on a one-year window of STAPD corresponding to each relevant swap
category, recalculated no less than once each calendar year and using
the 75-percent notional amount calculation described in Sec. 
43.6(c)(3) applied to the STAPD.117 The Commission was to publish
post-initial cap sizes on its website at https://www.cftc.gov,118 and
the caps were to be effective on the first day of the second month
following the date of publication.119
—————————————————————————

    116 17 CFR 43.4(h)(1). If appendix F did not provide an
initial AMBS for a particular swap category, the initial cap size
for such swap category would be equal to the appropriate cap size as
set forth in Sec.  43.4(h)(1)(i)-(v). As discussed in section
II.F.3., the Commission is proposing to remove appendix F and
publish the AMBSs and cap sizes on the Commission’s website, https://www.cftc.gov. Current Sec.  43.4(h)(1) also requires SDRs, when
publicly disseminating the notional or principal amounts for each
such category, to disseminate the cap size specified for a
particular category rather than the actual notional or principal
amount in those cases where the actual notional or principal amount
of a swap is above the cap size for its category. Current Sec. 
43.4(h) does not explicitly state that an SDR must publicly
disseminate swap data subject to the cap size limit, but the
Commission clarified this requirement in the preamble to the 2012
RTR Final Rule. See Real-Time Public Reporting of Swap Transaction
Data, 77 FR 1182, 1214.
    117 17 CFR 43.4(h)(2).
    118 17 CFR 43.4(h)(3).
    119 17 CFRC 43.4(h)(4).
—————————————————————————

    Since the Commission has not yet moved to the post-initial period,
the Commission now proposes to move to the post-initial cap sizes based
on the 75% notional calculation, as the Commission directed itself to
do in current Sec.  43.4(h)(2). In addition, the Commission is
proposing several amendments to the substance of the cap size
regulations that the Commission will discuss in this section.
    Structurally, the Commission proposes to remove the “initial cap
sizes” and relabel the “post-initial cap sizes” as the “cap
sizes.” Because the initial cap sizes will be superseded by the post-
initial cap sizes once adopted, there is no longer any need to
distinguish between initial cap sizes and post-initial cap sizes.
Specifically, the Commission proposes to remove the initial cap sizes
in Sec.  43.4(h)(1) and establish cap sizes, which would not be
referred to as post-initial cap sizes, in proposed Sec.  43.4(g) that
align with the

[[Page 21532]]

methodology for setting block sizes in proposed Sec.  43.6(e).
    The initial cap sizes for the asset classes other than equities are
currently equal to the greater of the initial AMBS set forth in
appendix F to part 43 or the applicable cap size set forth in
Sec. Sec.  43.4(h)(1)(i)-(v). Appendix F sets forth initial AMBS by
asset class and, within asset class, by various other categories.
Current Sec. Sec.  43.4(h)(1)(i)-(v) contain cap sizes for swaps,
categorized by asset class,120 expressed in notional or principal
amounts.
—————————————————————————

    120 For swaps in the interest rate asset class, there are
three separate cap sizes for different tenors.
—————————————————————————

    The proposed cap sizes would be based on a 75-percent notional
amount calculation for a select set of swap categories in the interest
rate, credit, foreign exchange (“FX”) (consisting of U.S. currency
and specified non-U.S. currency pairs), and other commodity asset
classes,121 as the Commission had intended when finalizing the Block
Trade Rule. The Commission proposes to establish the cap sizes for
these swap categories set forth in proposed Sec. Sec.  43.6(b)(1)(i)
(interest rate), (b)(2)(i)-(vii) (credit), (b)(4)(i) (FX), and
(b)(5)(i) (other commodity), using the same methodology that the
Commission proposes to use to establish AMBSs for those categories, but
using a 75% notional amount calculation for the cap sizes rather than
the 67% notional amount calculation that the Commission proposes to use
to establish AMBSs.122
—————————————————————————

    121 The Commission is not proposing to revise the current cap
size for equities in Sec.  43.4(h)(1)(iii). Instead, the Commission
proposed to redesignate current Sec.  43.4(h)(1)(iii) as Sec. 
43.4(g)(6) and leave the cap size for swaps in the equity category
as USD 250 million.
    122 See section II.F.3. below for a discussion of the
Commission’s proposal to revise the process to determine AMBS. As
mentioned above, using the 75% notional amount calculation would be
consistent with what the Commission had intended when it adopted the
Block Trade Rule. See 17 CFR 43.4(h)(2).
—————————————————————————

    Additionally, the proposed cap sizes for those swap categories
containing swaps with limited trading activity in the interest rate,
credit, equity, FX, and other commodity asset classes would be set at
USD 100 million, USD 400 million, USD 250 million, USD 150 million, and
USD 100 million, respectively, in Sec.  43.4(g)(4)-(8).123
—————————————————————————

    123 Proposed Sec.  43.4(g)(4)-(8) would reference the
regulations containing the categories for swaps with limited trading
activity: Sec.  43.6(b)(1)(i) (interest rate); Sec. 
43.6(b)(2)(viii) (credit); Sec.  43.6(b)(3) (equity); Sec. 
43.6(b)(4)(iii) (FX); Sec.  43.6(b)(5)(ii) (other commodity). The
Commission’s process for determining these categories is discussed
in section II.F.1. below.
—————————————————————————

    Furthermore, as discussed below in II.F.2., the Commission also
proposes to revise the current 75-percent notional amount calculation
currently used for setting post-initial cap sizes and, as discussed
below in II.F.1, to revise the swap categories used to calculate cap
sizes.
    The Commission preliminarily believes that requiring itself to
recalculate the cap size no less than once each calendar year, as
required by current Sec.  43.4(h)(2)(i), could lead to frequent updates
to systems for SDRs without a clear benefit to the real-time public
tape. Instead, the Commission is proposing a flexible approach to
determine if recalculating those cap sizes, based on the 75-percent
notional amount calculation, is merited. The Commission expects to
evaluate the swap markets and trading in the proposed swap categories
on an ongoing basis. The Commission believes this approach would strike
the right balance between updating the cap sizes when doing so would
benefit the public tape and not wanting to require SDRs to make
unnecessary system changes.
    For those cap sizes for which the Commission has established fixed
USD amounts, there is no calculation or calculation method to update.
Instead, the Commission expects to propose new cap sizes for these swap
categories in the future if the Commission believes it warranted.
Request for Comment
    The Commission requests comment on all aspects of the proposed
changes to Sec.  43.4. In addition, the Commission specifically
requests comment on the following:
    (15) Each of Sec.  43.4(f)(1)-(9) directs an SDR to “round” to
the nearest specified amount, rather than to round up or down to the
nearest specified amount. Should the Commission specify in proposed
Sec. Sec.  43.4(f)(1)-(9) that an SDR must round up, or down, to the
nearest specified amount and in which circumstances an SDR must round
up or down to the nearest specified amount? If so, what rounding
convention should the Commission specify?
    (16) Should the Commission require the removal of any caps that
were applied pursuant to Sec.  43.4(h) after six months and thereby
reveal the actual notional amount of any capped amounts once six months
has passed? Would six months be long enough to mitigate any anonymity
concerns?

E. Sec.  43.5–Time Delays for Public Dissemination of Swap Transaction
and Pricing Data

1. Sec.  43.5(a)–General Rule
    The Commission proposes several changes to Sec.  43.5(a). Current
Sec.  43.5(a) states that the time delay for the real-time public
reporting of a block trade or LNOF begins upon execution, as defined in
Sec.  43.2. Current Sec.  43.5(a) goes on to state that it is the
responsibility of the registered SDR that accepts and publicly
disseminates STAPD in real-time to ensure that the block trade or LNOF
STAPD is publicly disseminated pursuant to part 43 upon the expiration
of the appropriate time delay described in Sec. Sec.  43.5(d) through
(h).
    The Commission proposes to change the reference to “public
reporting” of a block trade or LNOF to “dissemination” thereof to
reflect that reporting counterparties report STAPD to an SDR pursuant
to part 43 but SDRs “disseminate” it by making such STAPD public. The
Commission also proposes to remove references to LNOF transactions in
Sec.  43.5(a), and throughout part 43, to reflect that the Commission
is proposing to establish, in Sec.  43.5(c), discussed below in section
II.E.3., a single time delay for public dissemination of STAPD of a
swap with a notional or principal amount at or above the AMBS. The
other proposed changes to Sec.  43.5(a) are ministerial, conform to the
proposed removal of Sec. Sec.  43.5(c)-(h), or are discussed elsewhere
in this NPRM.
    As revised, proposed Sec.  43.5(a) would state that the time delay
for the real-time public dissemination of a block trade begins upon
execution, as defined in Sec.  43.2(a). Proposed Sec.  43.5(a) would go
on to state that it is the responsibility of the SDR that accepts and
publicly disseminates STAPD in real-time to ensure that the STAPD for
block trades is publicly disseminated pursuant to part 43 upon the
expiration of the appropriate time delay described in Sec.  43.5(c).
2. Sec.  43.5(b)–Public Dissemination of Publicly Reportable Swap
Transactions Subject to a Time Delay
    The Commission proposes to remove unnecessary text from Sec. 
43.5(b). Currently, Sec.  43.5(b) uses a three-part description of the
timing for a registered SDR to publicly disseminate STAPD that is
subject to a time delay. Specifically, Sec.  43.5(b) states that a
registered SDR shall publicly disseminate STAPD that is subject to a
time delay pursuant to this paragraph, as follows: (1) No later than
the prescribed time delay period described in this paragraph; (2) no
sooner than the prescribed time delay period described in this
paragraph; and (3) precisely upon the expiration of the time delay
period described in this paragraph.124 The Commission proposes to
remove the

[[Page 21533]]

requirements of Sec. Sec.  43.5(b)(1) and (2) that registered SDRs must
disseminate the specified STAPD no sooner than, and no later than the
prescribed time delay period and to retain the requirement of Sec. 
43.5(b)(3) that SDRs must disseminate the specified STAPD precisely
upon the expiration of the time delay period. The precisely upon
language implicitly includes prohibitions on both disseminating the
STAPD sooner that the prescribed time delay period and disseminating it
any later than such period, so these proposed changes are not
substantive. The Commission also proposes to make ministerial
rephrasing amendments to Sec.  43.5(b).
—————————————————————————

    124 Emphasis added.
—————————————————————————

    As revised, proposed Sec.  43.5(b) would state that an SDR shall
publicly disseminate STAPD that is subject to a time delay precisely
upon the expiration of the time delay period described in Sec. 
43.5(c).
3. Sec.  43.5(c)-(h)–Removal of Certain Regulations Related to Time
Delays
    The Commission proposes to remove current Sec. Sec.  43.5(c)-(h)
and add a new Sec.  43.5(c) that requires SDRs to implement a time
delay of 48 hours for disseminating STAPD for each applicable swap
transaction with a notional or principal amount above the corresponding
AMBS, if the parties to the swap have elected block treatment. Because
the time delays in proposed Sec.  43.5(c) would replace the time delays
in current appendix C, the Commission also proposes to remove appendix
C.125
—————————————————————————

    125 As discussed in section III, the Commission is proposing
to replace appendix C with the list of STAPD elements that would be
publicly disseminated by SDRs.
—————————————————————————

    Current Sec.  43.5(c) provides interim time delays for each PRST,
not just block trades and LNOFs, until an AMBS is established for such
PRST. The Commission adopted Sec.  43.5(c) in case compliance with part
43 was required before the establishment of AMBSs.126 Because the
Commission has now established AMBSs by swap category,127 current
Sec.  43.5(c) is no longer applicable. Therefore, the Commission
proposes to remove current Sec.  43.5(c).
—————————————————————————

    126 See Real-Time Public Reporting of Swap Transaction Data,
77 FR 1182, 1217 (stating “it is possible that compliance with part
43 may be required before the establishment of [AMBSs] for certain
asset classes and/or groupings of swaps within an asset class”).
    127 See Sec.  43.6 (setting forth the block sizes for various
swap categories).
—————————————————————————

    Current Sec. Sec.  43.5(d)-(h) phased in the various time delays
for the dissemination of swap block trades and LNOFs over a one to two
year period. The Commission believed when it adopted those regulations
that “providing longer time delays for public dissemination during the
first year or years of real-time reporting [would] enable market
participants to perfect and develop technology and to adjust hedging
and trading strategies in connection with the introduction of post-
trade transparency.” 128 Now that the phasing in of the time delays
in current Sec. Sec.  43.5(d)-(h) is complete, the Commission is
proposing to remove the text remaining from the phase-in concept.
—————————————————————————

    128 Real-Time Public Reporting of Swap Transaction Data, 77 FR
1182, 1217.
—————————————————————————

    Current Sec. Sec.  43.5(d)-(h) provide specific time delays for the
public dissemination of STAPD by an SDR.129 As background, CEA
section 2(a)(13)(E)(iv) directs the Commission to take into account
whether public disclosure of STAPD “will materially reduce market
liquidity.” When the Commission adopted the Block Trade Rule in 2013,
the Commission understood that the publication of detailed information
regarding “outsize swap transactions” (i.e., block trades and LNOFs)
could expose swap counterparties to higher trading costs.130 In this
regard, the publication of detailed information about an outsize swap
transaction could alert the market to the possibility that the original
liquidity provider to the outsize swap transaction will be re-entering
the market to offset that transaction. Other market participants,
alerted to the liquidity provider’s large unhedged position, would have
a strong incentive to exact a premium from the liquidity provider when
the liquidity provider seeks to enter into offsetting trades to hedge
this risk. As a result, liquidity providers may be deterred from
becoming counterparties to outsize swap transactions if STAPD is
publicly disseminated before liquidity providers can adequately offset
their positions.
—————————————————————————

    129 The time delays are discussed above in section I.B.
    130 See Block Trade Rule at 32871 n.44 (stating that an
“outsize swap transaction” is a transaction that, as a function of
its size and the depth of the liquidity of the relevant market (and
equivalent markets), leaves one or both parties to such transaction
unlikely to transact at a competitive price).
—————————————————————————

    If a liquidity provider agrees to execute an outsize swap
transaction, it likely will charge the counterparty the additional cost
associated with hedging this transaction. In consideration of these
potential outcomes, the Commission established the time delays for
block trades and LNOFs to balance public transparency and the concerns
that post-trade reporting would reduce market liquidity.131 The
Commission noted when proposing the time delays for block trades and
LNOFs that it would continue to analyze and study the effects of
increased transparency on post-trade liquidity in the context of block
trades and LNOFs.132
—————————————————————————

    131 Cf. Federal Reserve Bank of New York Staff Reports, An
Analysis of OTC Interest Rate Derivatives Transactions: Implications
for Public Reporting (Mar. 2012, revised Oct. 2012) at 3 (explaining
that most post-trade reporting regimes allow for reduced reporting
requirements for large transactions since immediate reporting of
trade sizes has the potential to disrupt market functioning, deter
market-making activity, and increase trading costs).
    132 See Real-Time Public Reporting of Swap Transaction Data,
75 FR 76140, 76159 n.67 (Dec. 7, 2010).
—————————————————————————

    When the Commission adopted the block delays in 2012, it noted that
commenters to the proposal recommended a range of time delays for
public dissemination of block trades and LNOFs, including end-of-day,
24 hours, T+1, T+2, a minimum of four hours, and 180 days.133 In the
Roadmap, DMO stated an intention to evaluate real-time reporting
regulations in light of goals of liquidity, transparency, and price
discovery in the swaps market.134 In response, the Commission
received additional comments on the block delays.
—————————————————————————

    133 See Real-Time Public Reporting of Swap Transaction Data,
77 FR 1182, 1216.
    134 Roadmap at 11.
—————————————————————————

    One commenter generally supported DMO’s efforts to review public
dissemination requirements in light of product liquidity, and asserted
that DMO should consider whether there should be increased time delays
for public reporting of block trades.135 Another commenter requested
that as DMO considered whether to shorten reporting deadlines and,
relatedly, public dissemination of the data, DMO evaluate the impacts,
if any, on market liquidity and counterparty confidentiality.136 This
commenter went on to explain that any changes in the speed for public
dissemination could potentially be counterproductive and harmful and
could further the need to examine block trade thresholds to protect
counterparties and markets.137
—————————————————————————

    135 Joint ISDA-SIFMA Letter at 9.
    136 Letter from SIFMA-AMG at 3.
    137 Id.
—————————————————————————

    In response to a later-announced Commission review of its rules, a
commenter expressed concern that, with respect to block trades, fifteen
minutes is too short a window within which to execute large hedging
programs, which typically take several days or even weeks to execute,
and current block trade reporting delays do not give end-users
sufficient flexibility for creating

[[Page 21534]]

efficient trade execution strategies without the risk of potentially
revealing counterparty identities.138 According to this commenter,
anecdotal evidence suggests that data mining is pervasive, and that
market participants have reported repeated instances in which markets
have moved away from them shortly after beginning to execute large
transactions as part of a hedging strategy.139
—————————————————————————

    138 Letter from the Financial Services Roundtable at 27.
    139 Id.
—————————————————————————

    DMO and the Commission did receive comments supporting the current,
shorter, block delay. One commenter stated that the “delay periods
governing block trades should be minimized to what is truly essential
and the size thresholds should be similarly high to minimize opacity in
the market.” 140 Similarly, another commenter requested that given
the existing 15 minute delay from real-time public reporting, the
Commission should endeavor to update the block thresholds using recent
market data to avoid risking that too many, or not enough, transactions
are eligible for the delay from real-time public reporting
requirements.141
—————————————————————————

    140 Letter from Better Markets at 7.
    141 Letter from Citadel at 3.
—————————————————————————

    In particular, the Commission is receptive to concerns that market
participants may generally seek to hedge their portfolios before the
close of business on the day a swap is executed, which would seem to
support an either 24-hour or end-of-day reporting delay. The Commission
understands that there are many variables that influence the time a
market participant may take to put on a hedge, including risk tolerance
to a price change, the risk of information leakage, the asset class
involved and perceived demand for the hedge from other market
participants, as well as consideration of the deadlines imposed by
other authorities.142 In light of these considerations, the
Commission proposes to extend the delay to 48 hours for all block
trades as a conservative measure to account for potential situations
when a market participant requires additional time to place a hedge
position without significant unfavorable price movement and to create
some consistency with the disclosure requirements of other authorities
for non-liquid swaps.
—————————————————————————

    142 The Commission notes that that the European Union’s
regulatory technical standards on transparency requirements for
trading venues and investment firms for non-equity financial
instruments under MiFID II (commonly referred to as RTS 2) provides
that large-in scale swap transactions are eligible for deferred
publication for two working days. See Article 8 of (EU) 2017/583
supplementing Regulation (EU) No 600/2014 of the European Parliament
and of the Council on markets in financial instruments with regard
to regulatory technical standards on transparency requirements for
trading venues and investment firms in respect of bonds, structured
finance products, emission allowances and derivatives (July 14
2016).
—————————————————————————

    A 48 hour time delay would extend, in each case, the time delay
applicable to block trades or LNOFs pursuant to current Sec. Sec. 
43.5(d)-(g).143 The longest current time delay is the 24 business
hour time delay in Sec.  43.5(h)(3) for LNOFs that are not subject to
mandatory clearing or are exempt from such mandatory clearing and in
which neither counterparty is an SD or MSP. Due to weekends and
holidays, that delay is often longer than 48 hours. Although the
proposed 48 hour time delay may in some cases be shorter than the 24
business hour time delay,144 as noted above, the Commission
preliminarily believes that a 48 hour time delay is more appropriate
and should be sufficient.
—————————————————————————

    143 The Commission supports setting the same time delay for
all outsize swap transactions. The Commission believes that setting
dissimilar (i.e., relatively shorter and longer) time delays for
different swap transactions may inappropriately disadvantage hedging
the risk of swaps in certain categories compared to hedging the risk
of others, as discussed below in the context of Sec.  43.5(h)(3).
    144 For example, during a typical five business day work week,
a block trade executed midday Monday would have to be disseminated
no later than midday Tuesday, whereas a 48 hour time delay would
permit delaying the dissemination of such swap until midday
Wednesday.
—————————————————————————

Request for Comment
    The Commission requests comment on all aspects of the proposed
changes to Sec.  43.5. In particular, the Commission requests comment
on the following:
    (17) The Commission understands that for many trades that meet the
definition of a block trade, the hedging process is often completed as
quickly as possible and typically by the end of the trading day in
which the block trade is executed so that the liquidity provider can
establish its profit or loss on the transaction. On the other hand,
some block trades that are very large in size or have unique
characteristics could take longer than a single trading period to
hedge. To balance the competing interest of price discovery and
allowing hedging to occur, should the Commission consider two delay
periods? For example, would a 15 minute, one hour, end of day, or 24
hour time delay be appropriate for swaps that fall within a 67 percent
to 90 or 95 percent of the total notional amount of transactions range,
while block trades that exceed the higher level would have a 48 hour
time delay? If so, what would be the appropriate ranges for the total
notional amounts and time delay periods? The Commission invites
comments on all aspects of the block delay, including how the
Commission should analyze swaps in each asset class for the purpose of
analyzing the block delay with respect to data sets and methodologies,
among other factors.

F. Sec.  43.6–Block Trades

1. Sec.  43.6(b)–Swap Categories
    In the Block Trade Rule, the Commission assigned swap contracts to
“swap categories” for the purpose of applying a common AMBS to
different swap transactions.145 Section 43.6(a) states that the
Commission shall establish the AMBS for PRSTs based on the swap
categories set forth in Sec.  43.6(b) in accordance with the provisions
set forth in paragraphs (c), (d), (e), (f) or (h) of Sec.  43.6, as
applicable.146
—————————————————————————

    145 As discussed above in section II.D.3., the process to
determine cap sizes in proposed Sec.  43.4(g) depends on the swap
categories in proposed Sec.  43.6(b) and the methodologies in
proposed Sec.  43.6(c).
    146 Regulation 43.6(c) sets forth the methodologies to
determine AMBS and cap sizes. Regulation 43.6(d) specifies that
there are no AMBSs for equity swaps. Regulation 43.6(e) sets forth
the initial AMBSs, and Sec.  43.6(f) sets forth the post-initial
process to set AMBSs. Regulation 43.6(h) sets forth special
provisions relating to AMBSs and cap sizes. The proposed changes to
each of Sec. Sec.  43.6(c), (e), and (f) will be discussed in
II.F.2., 3., and 4., respectively. The Commission is not proposing
to amend Sec.  43.6(d).
—————————————————————————

    To create the swap categories, the Commission divided swap
contracts into five asset classes: Interest rates; equity; credit; FX;
and other commodity. The Commission then subdivided these asset classes
into the various swap categories in Sec.  43.6(b). The swap category
criteria used by the Commission were intended to address the following
two policy objectives: (1) Categorizing together swaps with similar
quantitative or qualitative characteristics that warrant being subject
to the same AMBS; and (2) minimizing the number of swap categories
within an asset class in order to avoid unnecessary complexity in the
determination process.147
—————————————————————————

    147 See Block Trade Rule at 32872.
—————————————————————————

    The Commission is concerned that some of the current swap
categories include multiple swap transaction types that have different
average notional amounts resulting in an AMBS for the swap category
that has a disparate impact on swap transaction types that currently
fall within the same swap category. For instance, current swap
categories group together economically distinct swaps, such as interest
rate swaps (“IRSs”) denominated in U.S. dollars (“USD IRSs”) and
IRSs denominated in Japanese yen (“JPY

[[Page 21535]]

IRSs”). Because the notional amounts of USD IRS transactions is, on
average, higher than the notional amounts of JPY IRS transactions, the
Commission preliminarily believes that the current IRS AMBS, which
includes transactions from a group of currencies, is too high for some
products, like JPY IRSs, and too low for others, like USD IRSs. In
other words, USD IRSs are eligible for a dissemination delay, even
though a delay may be unnecessary for a counterparty to hedge the trade
at minimal additional cost due to the trade size, and that JPY IRSs are
not eligible for a dissemination delay when the Commission
preliminarily believes a delay is necessary for a counterparty to hedge
the trade without incurring material additional costs due to the trade
size.
    In publishing the Block Trade Rule, the Commission had to rely on a
small, private data set limited to IRSs and credit swaps.148 Today,
the Commission is able to analyze swap data from the SDRs. As described
in the below sections, based on Commission staff analysis of SDR swap
data across all asset classes, as well as discussions with market
participants, the Commission preliminarily believes it is appropriate
to re-evaluate the current swap categories for IRSs, credit swaps, FX
swaps, and other commodity swaps in Sec.  43.6(b).149
—————————————————————————

    148 See Block Trade Rule at 32873. For the Block Trade Rule,
the Commission relied on transaction-level data for credit swaps and
IRSs from Over-the-Counter Derivatives Supervisors Group, IRS data
from MarkitSERV, and credit data from The Warehouse Trust Company.
    149 As discussed below in section II.F.1.c., the Commission is
not proposing to amend the equity asset class in current Sec. 
43.6(b)(3).
—————————————————————————

    Although maintaining a limited set of swap categories is necessary,
as a practical matter, to implement the block protocol and avoid excess
complications and costs for market participants, the Commission
believes that the AMBS for a swap category should be suited to the
specific swap products in the swap category. Consequently, in some
cases, the Commission is recommending increasing the number of swap
categories to encompass smaller sets of swap transactions. The
Commission preliminarily believes that the amendments to the categories
proposed below would allow better tailoring of the block size to the
profile of the swap transactions within the applicable swap category.
    For the below analysis, Commission staff reviewed swap data from
SDRs for a one-year period from May 2018 to May 2019 to develop swap
categories that would generate block sizes suitable for the individual
swap products in the category. The Commission then identified the
proposed criteria discussed below as the most relevant for purposes of
its analysis, for the reasons explained below. The Commission
anticipates that these criteria would provide an appropriate way to
group swaps with economic similarities while reducing unnecessary
complexity for market participants in determining whether their swaps
are classified within a particular swap category.
a. Interest Rate Asset Class
    Current Sec.  43.6(b)(1) sets forth the IRS categories. The current
IRS categories are based on a unique combination of three currency
groups and nine tenor ranges, for a total of 27 categories. The three
currency groups are super-major currencies,150 major currencies,151
and non-major currencies.152 The tenor ranges are: Zero to 46 days;
47 to 107 days; 108 to 198 days; 199 to 381 days; 382 to 746 days; 747
to 1,842 days; 1,843 to 3,668 days; 3,669 to 10,973 days; or 10,974
days and above.153
—————————————————————————

    150 The term “Super-major currencies” is defined in Sec. 
43.2 as the currencies of the European Monetary Union (i.e., the
euro), Japan (i.e., the yen), the United Kingdom (i.e., the pound
sterling), and the United States (i.e., the U.S. dollar).
    151 The term “Major currencies” is defined in Sec.  43.2 as
the currencies, and the cross-rates between the currencies, of
Australia (i.e., the Australian dollar), Canada (i.e., the Canadian
dollar), Denmark (i.e., the Danish krone), New Zealand (i.e., the
Kiwi dollar), Norway (i.e., the Norwegian krone), South Africa
(i.e., the South African rand), South Korea (i.e., the South Korean
won), Sweden (i.e., the Swedish krona), and Switzerland (i.e., the
Swiss franc).
    152 The term “Non-major currencies” is defined in Sec.  43.2
as all other currencies that are not super-major currencies or major
currencies.
    153 The Commission is not proposing to amend the interest rate
tenor ranges.
—————————————————————————

    At the time the categories were adopted, the Commission recognized
that using individual currencies would have correlated better with the
underlying curves.154 However, the Commission was concerned that
using individual currencies would have resulted in nearly 200 swap
categories, and the Commission had wanted to reduce the number to avoid
unnecessary complexity.155 The Commission was also concerned that
more categories would not substantially increase the explanation of
variations in notional amounts, and that some categories would contain
too few observations.156
—————————————————————————

    154 Block Trade Rule at 32880.
    155 Id.
    156 See id.
—————————————————————————

    In reviewing the 2018-2019 STAPD, the Commission found that 15
currencies made up 96% of the total population of IRS trades. These 15
currencies are the currencies of Australia, Brazil, Canada, Chile,
Czech Republic, the European Union, Great Britain, India, Japan,
Mexico, New Zealand, South Africa, South Korea, Sweden, or the United
States.
    In light of the foregoing, for IRSs, the Commission proposes to
establish separate swap categories for each combination of the 15
different currencies above 157 and the nine tenor ranges,158 for a
total of 135 swap categories. The nine tenor ranges would remain the
same as the current nine tenor ranges in Sec. Sec.  43.6(b)(1)(ii)(A)-
(I). The proposed changes to the currencies would result in adding the
currencies of Brazil, Chile, the Czech Republic, India and Mexico, and
removing the currencies of Switzerland and Norway from current Sec. 
43.6(b)(1)(i)(A). The Commission believes the new swap categories will
allow the Commission to establish AMBSs that better address the needs
of these various swap products.
—————————————————————————

    157 See proposed Sec.  43.6(b)(1)(i)(A)(I)-(XV).
    158 See proposed Sec.  43.6(b)(1)(i)(B)(I)-(IX).
—————————————————————————

    The Commission does not believe that the number of trades in
currencies outside of the top 15 currencies in proposed Sec. 
43.6.(b)(1)(i)(A) is high enough to compute a reliable and robust AMBS.
Therefore, the Commission is also proposing to create a 136th swap
category, in Sec.  43.6(b)(1)(ii), for IRSs that the Commission has
preliminarily determined are relatively illiquid. This “other”
category would include IRS transactions in currencies other than those
of the 15 countries specified in proposed Sec.  43.6(b)(1)(i)(A)(I)-
(XV) and the nine tenors specified in Sec.  43.6(b)(i)(B). The
Commission is proposing to group these low liquidity swaps together and
set their block size to zero, which would make each transaction in this
swap category eligible for delayed dissemination.159
—————————————————————————

    159 See proposed Sec.  43.6(e)(4), discussed below in section
II.F.3.
—————————————————————————

b. Credit Asset Class
    Current Sec.  43.6(b)(2) sets forth the credit swap categories. The
current credit swap categories in Sec.  43.6(b)(2) are based on
combinations of three conventional spread levels and six tenor ranges,
for a total of 18 swap categories. The current spread levels are: (1)
CDSs with spread values under 175 bps; (2) CDSs with spread values
between 175 and 350 bps; and (3) CDSs with spread values above 350
bps.160 The current tenor ranges are: (1) 0-746 days; (2) 747-1,476
days; (3) 1,477-2,207 days; (4) 2,208-3,120 days; (5) 3,121-4,581 days;
and (6) 4,581 days and above.161
—————————————————————————

    160 Sec.  43.6(b)(2)(i).
    161 Sec.  43.6(b)(2)(ii).

—————————————————————————

[[Page 21536]]

    In the Block Trade Rule, the Commission noted that it believed the
tenor and conventional spread categories sufficiently captured the
variation in notional size that is necessary for setting AMBS.162 In
particular, the Commission believed the proposed approach provided an
appropriate way to group swaps with economic similarities while
reducing unnecessary complexity for market participants in determining
whether a particular swap was classified within a particular swap
category.163
—————————————————————————

    162 See Block Trade Rule at 32883.
    163 See id.
—————————————————————————

    At the time, the Commission noted that the tenor buckets generally
resulted in separate categorization for on-the-run and off-the-run
indexes for swaps in its CDS data set, but declined to use these
designations for grouping CDSs into categories because: (i) The
underlying components of swaps with differing versions or series based
on the same method or index are broadly similar, if not the same, and
indicate economic substitutability across versions or series; (ii)
differences in the average notional amount across differing versions or
series were explained by differences in tenor; and (iii) using versions
or series as the criterion for CDS categories could result in an
unnecessary level of complexity.164
—————————————————————————

    164 See id.
—————————————————————————

    However, in analyzing 2018-2019 swap data from SDRs, the Commission
now believes that CDS spreads may not be a consistent measure on which
to base swap categories. Specifically, the Commission is concerned that
products with similar spreads are not necessarily economically similar
because all market participants may not calculate the same spread for a
given product. In addition, a product’s spread range can change, making
it difficult for parties to be certain that they are eligible for block
treatment.
    Instead, the Commission has observed that most market participants
trade specific credit products within specific tenor ranges. Based on
its review of the swap data from SDRs, the Commission believes the
most-traded CDS products are: (i) The CDXHY; (ii) iTraxx Europe,
Crossover, and Senior Financials indexes; (iii) CDXIG; (iv)
CDXEmergingMarkets; and (v) CMBX.165 For each CDS product except for
CMBX, the Commission has observed that the four to six year tenors, or
1,477 to 2,207 days, make up about 90% of all CDS trades.
—————————————————————————

    165 The Markit CDX family of indices is the standard North
American CDS family of indices, with the primary corporate indices
being the CDX North American Investment Grade (consisting of 125
investment grade corporate reference entities) (CDX.NA.IG) and the
CDX North American High Yield (consisting of 100 high yield
corporate reference entities) (CDX.NA.HY). The Markit CDX Emerging
Markets Index (CDX.EM) is composed of 15 sovereign reference
entities that trade in the CDS market. The Market CMBX index is a
synthetic tradable index referencing a basket of 25 commercial
mortgage-backed securities. Markit iTraxx indices are a family of
European, Asian and Emerging Market tradable CDS indices.
—————————————————————————

    In light of the foregoing, the Commission is proposing to replace
the current spreads and tenor ranges in Sec. Sec.  43.6(b)(2)(i) and
(ii) with the seven product types above and four to six year tenor
ranges in setting the parameters of the various credit swap categories.
The Commission is proposing to set the new credit asset class
categories in Sec.  43.6(b)(2) as: (i) Based on the CDXHY product type
and a tenor greater than 1,477 days and less than or equal to 2,207
days; (ii) based on the iTraxx Europe product type and a tenor greater
than 1,477 days and less than or equal to 2,207 days; (iii) based on
the iTraxx Crossover product type and a tenor greater than 1,477 days
and less than or equal to 2,207 days; (iv) based on the iTraxx Senior
Financials product type and a tenor greater than 1,477 days and less
than or equal to 2,207 days; (v) based on the CDXIG product type and a
tenor greater than 1,477 days and less than or equal to 2,207 days;
(vi) based on the CDXEmergingMarkets product type and a tenor greater
than 1,477 days and less than or equal to 2,207 days; and (vii) based
on the CMBX product type.
    The Commission does not believe the trade count outside of the
products and/or tenor ranges proposed in Sec.  43.6(b)(2)(i)-(vii) is
high enough to compute a robust and reliable AMBS. Therefore, the
Commission is proposing to add a swap category in Sec. 
43.6(b)(2)(viii) for credit swaps that trade at relatively low
liquidity and set the block size for these illiquid credit swaps at
zero, which would make each transaction in this swap category eligible
for delayed dissemination.166
—————————————————————————

    166 See proposed Sec.  43.6(e)(4), discussed below in section
II.F.3.
—————————————————————————

c. Equity Asset Class
    Current Sec.  43.6(b)(3) specifies that there shall be one swap
category consisting of all swaps in the equity asset class. Unlike the
other four asset class categories, the equity asset class contains no
subcategories. The Commission adopted this approach in the Block Trade
Rule based on: (i) The existence of a highly liquid underlying cash
market for equities; (ii) the absence of time delays for reporting
block trades in the underlying equity cash market; (iii) the small
relative size of the equity index swaps market relative to futures,
options, and cash equity index markets; and (iv) the Commission’s goal
of protecting the price discovery function of the underlying equity
cash market and futures market.167
—————————————————————————

    167 See Block Trade Rule at 32884.
—————————————————————————

    The Commission has not learned of anything since the Block Trade
Rule that would suggest there is not a highly liquid underlying cash
market for equities and that the equity index swaps market is not still
small relative to the futures, options, and cash equity index markets.
Based on the foregoing, the Commission is not proposing to amend the
equity asset class in Sec.  43.6(b)(3).
d. Foreign Exchange Asset Class
    Current Sec.  43.6(b)(4) sets forth the FX swap categories. The
current FX swap categories are grouped by: (i) The unique currency
combinations of one super-major currency 168 paired with another
super major currency, a major currency,169 or a currency of Brazil,
China, Czech Republic, Hungary, Israel, Mexico, Poland, Russia, and
Turkey; or (ii) unique currency combinations not included in Sec. 
43.6(b)(4)(i).170
—————————————————————————

    168 The term “Super-major currencies” is defined in Sec. 
43.2 as the currencies of the European Monetary Union (i.e., the
euro), Japan (i.e., the yen), the United Kingdom (i.e., the pound
sterling), and the United States (i.e., the U.S. dollar).
    169 The term “Major currencies” is defined in Sec.  43.2 as
the currencies, and the cross-rates between the currencies, of
Australia (i.e., the Australian dollar), Canada (i.e., the Canadian
dollar), Denmark (i.e., the Danish krone), New Zealand (i.e., the
Kiwi dollar), Norway (i.e., the Norwegian krone), South Africa
(i.e., the South African rand), South Korea (i.e., the South Korean
won), Sweden (i.e., the Swedish krona), and Switzerland (i.e., the
Swiss franc).
    170 See Sec.  43.6(b)(4).
—————————————————————————

    In establishing the FX swap categories in Sec.  43.6(b)(4)(i), the
Commission believed that the categories would cover the most liquid
currency combinations while minimizing complexity by using a small
number of swap categories.171 To establish the FX swap categories,
the Commission primarily relied on the Survey of North American FX
Volume in October 2012 conducted by the Foreign Exchange
Committee.172 The survey suggested that the categories in Sec. 
43.6(b)(4)(i) would cover more than 86% of the notional value of total
monthly volume of FX swaps that are priced or facilitated by traders in
North America.173
—————————————————————————

    171 See Block Trade Rule at 32885.
    172 The Foreign Exchange Committee is an industry group that
provides guidance and leadership to the FX market that includes
representatives of major financial institutions engaged in foreign
currency trading in the United States and is sponsored by the
Federal Reserve Bank of New York.
    173 See Block Trade Rule at 32885.

—————————————————————————

[[Page 21537]]

    In reviewing the 2018-2019 swap data from SDRs, the Commission
observed that almost 94% of the over 7 million FX swaps included USD as
one currency in each swap’s currency pair. Of these swaps, the top-20
currencies paired with USD were currencies from Argentina, Australia,
Brazil, Canada, Chile, China, Colombia, the European Union, Great
Britain, India, Indonesia, Japan, Malaysia, Mexico, New Zealand, Peru,
Philippines, Russia, South Korea, or Taiwan.
    In light of the foregoing, the Commission proposes to replace the
swap categories in Sec.  43.6(b)(4) for FX swaps with new swap
categories by currency pair. The Commission believes new swap
categories would allow the Commission to generate AMBSs that address
the needs of market participants trading these various swap products.
Proposed Sec.  43.6(b)(4)(i) would be comprised of FX swaps with one
currency of the currency pair being USD, paired with another currency
from one of the following: Argentina, Australia, Brazil, Canada, Chile,
China, Colombia, the European Union, Great Britain, India, Indonesia,
Japan, Malaysia, Mexico, New Zealand, Peru, Philippines, Russia, South
Korea, or Taiwan.
    The Commission proposes to create a new category for FX swaps where
neither currency in the currency pair is USD in proposed Sec. 
43.6(b)(4)(ii). Proposed Sec.  43.6(b)(4)(ii) would be comprised of
swaps with currencies from Argentina, Australia, Brazil, Canada, Chile,
China, Colombia, the European Union, Great Britain, India, Indonesia,
Japan, Malaysia, Mexico, New Zealand, Peru, Philippines, Russia, South
Korea, or Taiwan. As discussed further below in the discussion about
amendments to the process to determine AMBS in section II.F.1.d., the
Commission is proposing that parties to these FX swaps could elect to
receive block treatment if the notional amount of either currency in
the currency exchange is greater than the minimum block size for a FX
swap between the respective currencies, in the same amount, and USD
described in Sec.  43.6(b)(4)(i).
    The Commission does not believe there is sufficient trade count in
FX swaps outside of the currency pairs proposed in Sec.  43.6(b)(4)(i)-
(ii) to compute a reliable and robust AMBS. Therefore, the Commission
is proposing to add a swap category in Sec.  43.6(b)(4)(iii) for FX
swaps that trade at relatively low liquidity, and set the block size
for these illiquid FX swaps at zero, which would make each transaction
in this swap category eligible for delayed dissemination.174
—————————————————————————

    174 See proposed Sec.  43.6(e)(4), discussed below in section
II.F.3.
—————————————————————————

e. Other Commodity Asset Class
    Current Sec.  43.6(b)(5) sets forth the other commodity swap
categories. The current other commodity swap categories are grouped by
either (1) the relevant contract referenced in appendix B of part 43
175 with respect to swaps that are economically related to a contract
in appendix B, or (2) the following futures-related swaps with respect
to swaps that are not economically related to contracts in appendix B:
CME Cheese; CBOT Distillers’ Dried Grain; CBOT Dow Jones-UBS Commodity
Index; CBOT Ethanol; CME Frost Index; CME Goldman Sachs Commodity Index
(GSCI), (GSCI Excess Return Index); NYMEX Gulf Coast Sour Crude Oil;
CME Hurricane Index; CME Rainfall Index; CME Snowfall Index; CME
Temperature Index; or CME U.S. Dollar Cash Settled Crude Palm Oil.176
Swaps that are not covered in either Sec.  43.6(b)(5)(i) or Sec. 
43.6(b)(5)(ii) are categorized according to the relevant product type
referenced in appendix D of part 43.177
—————————————————————————

    175 Appendix B to part 43 lists 42 swap categories based on
such contracts.
    176 See Sec.  43.6(b)(5)(i)-(ii). The 18 swap categories in
Sec.  43.6(b)(5)(ii) are based on futures contracts to which swaps
in these categories are economically related.
    177 See Sec.  43.6(b)(5)(iii). Appendix D establishes
“other” commodity groups and individual other commodities within
these groups. These categories are for swaps that are not
economically related to any of the contracts listed in appendix B or
any of the contracts listed in Sec.  43.6(b)(5)(ii). If there is an
individual other commodity listed, the Commission would deem it a
separate swap category, and thereafter set an AMBS for each such
swap category. If a swap unrelated to a specific other commodity
listed in the other commodity group in appendix D, the Commission
would categorize such swap as falling under the relevant other swap
category. See Block Trade Rule at 32888. As discussed below in this
section, the Commission is proposing to redesignate appendix D as
appendix A, and replace it with updated swap categories for the
other commodity asset class.
—————————————————————————

    The swap categories in Sec.  43.6(b)(5)(i) differ from those in
Sec.  43.6(b)(5)(ii) in that the former may be economically related to
futures or swaps that are not subject to the block trade rules of a
DCM, whereas the latter are economically related to futures contracts
that are subject to the block trade rules of a DCM.178 Despite that
difference, the Commission established the Sec. Sec.  43.6(b)(5)(i)-
(ii) swap categories and related initial block sizes to correspond with
those set by DCMs for economically related futures contracts.179
—————————————————————————

    178 See id. at 32887.
    179 See id. at 32888.
—————————————————————————

    The Commission noted in the Block Trade Rule that it was relying on
DCMs’ knowledge of, and experience with, liquidity in related futures
markets until additional data became available.180 In addition, the
Commission noted that it was not using additional criteria to create
more granular swap categories in the other commodity asset class until
swap data became available.181
—————————————————————————

    180 See id.
    181 See id.
—————————————————————————

    The Commission proposes to establish swap categories for the other
commodity swaps asset class based on the list of underliers in current
appendix D to part 43. The Commission proposes to modify the list of
underliers in current appendix D and to redesignate the appendix as
appendix A as a result of the proposed removal of current appendices A
through C. For swaps that have a physical commodity underlier listed in
proposed appendix A to part 43, proposed Sec.  43.6(b)(5)(i) would
group swaps in the other commodity asset class by the relevant physical
commodity underlier. The proposed list of underliers in appendix A
would be based on broad commodity categories the Commission has
identified from its review of the swap data from SDRs, rather than
references to specific futures contracts.
    For other commodity swaps outside of those based on the underliers
in proposed appendix A, the Commission does not believe trade count is
high enough to compute a robust and reliable AMBS. Therefore, the
Commission is proposing to add a swap category in Sec.  43.6(b)(5)(ii)
for relatively illiquid other commodity swaps and set the block size
for these swaps at zero.182
—————————————————————————

    182 See proposed Sec.  43.6(e)(4), discussed below in section
II.F.3.
—————————————————————————

2. Sec.  43.6(c)–Methodologies To Determine Appropriate Minimum Block
Sizes and Cap Sizes
    The Commission adopted Sec. Sec.  43.6(c)-(f) and (h) to establish
a phased-in approach for determining AMBSs, with an initial period and
a post-initial period for determining AMBSs and cap sizes for each swap
category.183
—————————————————————————

    183 Block Trade Rule at 32918. Appendix F to part 43 currently
contains a schedule of AMBSs effective during the initial period.
Regulations 43.6(e) and (f) set forth the initial AMBSs and the
post-initial process to determine AMBSs, while Sec.  43.6(c)
contained the methodologies for the Commission to do so with the
swap categories set forth in Sec.  43.6(b).
—————————————————————————

    Regulation 43.6(c) sets forth the methodologies for the Commission
to determine AMBSs and cap sizes using the PRSTs in the swap categories

[[Page 21538]]

established pursuant to Sec.  43.6(b). Current Sec.  43.6(c) sets forth
three alternative, notional-based statistical calculations: a 50-
percent notional amount calculation; a 67-percent notional amount
calculation; and a 75-percent notional amount calculation.184 Each
methodology is intended to ensure that within a swap category, the
stated percentage of the sum of the notional amounts of all swap
transactions in that category are disseminated on a real-time basis.
—————————————————————————

    184 See Sec. Sec.  43.6(c)(1), (2), and (3), respectively.
—————————————————————————

    In general, the instructions for each of the 50-percent, 67-
percent, and 75-percent levels to calculate AMBSs and cap sizes require
the Commission to select all PRSTs within a swap category using one
year’s worth of data, converting them to the same currency and using a
trimmed data set, determine the sum of the notional amounts of swaps in
the trimmed data set, multiply the sum of the notional amounts by 50,
67, or 75 percent, rank the results from least to greatest, calculate
the cumulative sum of the observations until it is equal to or greater
than the 50, 67, or 75-percent notional amount, select and round the
notional amount, and set the AMBS equal to that amount.185
—————————————————————————

    185 See generally Sec. Sec.  43.6(c)(1)-(3). Once the AMBS is
set, the Commission sets the related cap size pursuant to Sec. 
43.6(h). For the post-initial period, current Sec.  43.6(h) requires
the Commission to use reliable data collected by SDRs based on: (i)
A one-year window of STAPD corresponding to each relevant swap
category recalculated no less than once each calendar year; and (ii)
the 75-percent notional amount calculation described in Sec. 
43.6(c)(3) applied to the STAPD described in Sec.  43.6(h)(2)(i).
The Commission’s proposed amendments to the process to determine cap
size are discussed above in section II.D.4.
—————————————————————————

    For the initial period, the Commission applied the 50-percent
notional amount calculation in Sec.  43.6(c)(1) to determine the
AMBS.186 For AMBS in the post-initial period, the Commission was to
adopt the 67-percent notional amount calculation in current Sec. 
43.6(c)(2).187
—————————————————————————

    186 See Sec.  43.6(e).
    187 See Sec.  43.6(f)(2).
—————————————————————————

    The Commission set the initial cap sizes as the greater of the
interim cap sizes (the period of time before the initial period) in all
five asset classes set forth in the 2012 RTR Final Rule and the AMBS
for the respective swap category calculated pursuant to the 50-percent
notional amount calculation.188 The Commission was to use the 75-
percent notional amount calculation in current Sec.  43.6(c)(3) to
determine the appropriate post-initial cap sizes for all swap
categories.189 However, the Commission has not calculated the block
sizes or cap sizes for the post-initial period.
—————————————————————————

    188 See Sec.  43.4(h)(1).
    189 See Sec.  43.4(h)(2)(ii). As discussed above in section
II.D.3., the Commission is proposing to revise the process to
determine cap size in Sec.  43.4(g), which the Commission proposes
to re-designate from Sec.  43.4(h), but proposes to continue to use
the 75-percent notional amount calculation for cap sizes.
—————————————————————————

    The Commission is proposing several changes to the AMBS and cap
size methodologies in Sec.  43.6(c). First, the Commission is proposing
to remove the 50-percent notional amount calculation in Sec. 
43.6(c)(1) because the 50-percent notional amount calculation was only
intended to be used for calculating the AMBS for the interest rate and
credit swap categories in the initial period,190 and the initial
period has now passed. Based on the proposed removal of Sec. 
43.6(c)(1), the Commission is proposing to re-designate Sec. Sec. 
43.6(c)(2) and (3) as Sec. Sec.  43.6(c)(1) and (2), respectively.
—————————————————————————

    190 Sec.  43.6(e)(1). The Commission applied the 50-percent
notional amount calculation methodology in Sec.  43.6(c)(1) and
published the related AMBS in appendix F to part 43.
—————————————————————————

    The Commission is also proposing minor amendments to the
calculations in current Sec. Sec.  43.6(c)(2)-(3) (the 67-percent and
75-percent notional amount calculations, respectively). The Commission
is proposing to update certain steps of the statistical calculations
set forth in current Sec. Sec.  43.6(c)(2)(i)-(ix), proposed to be re-
designated as Sec.  43.6(c)(1)(i)-(ix). Current Sec.  43.6(c)(2)(i)
requires the Commission to select all PRSTs within a specific swap
category using a one-year window of data. As re-designated, proposed
Sec.  43.6(c)(1)(i) would require the Commission to select all reliable
SDR data for at least a one-year period for each relevant swap
category. The Commission believes this revision will simplify the
language and clarify that the Commission will be using SDR data in its
calculations.
    Current Sec.  43.6(c)(2)(ii) requires the Commission to convert to
the same currency or units and use a trimmed data set but does not
specify what is being converted. As redesignated, proposed Sec. 
43.6(c)(1)(ii) would clarify that the Commission will convert the
notional amount to the same currency or units and use a trimmed data
set. The Commission considers this to be a non-substantive amendment to
improve the readability of step (ii) in the methodology.
    As mentioned above in the discussion of the proposed amendments to
the definition of “trimmed data set,” the Commission is also
proposing to change the number of standard deviations used for
excluding outliers in the data set. The current definition of “trimmed
data set” has the Commission remove extraordinarily large notional
transactions by transforming the data into a logarithm with a base of
10, computing the mean, and excluding transactions that are beyond four
standard deviations above the mean.
    As explained in the Block Trade Rule, trimming the data set is
necessary to avoid the skewing of these measures, which could lead to
the establishment of inappropriately high minimum block sizes.191
However, in applying these methodologies to propose updates to the
block and cap sizes, Commission staff found that excluding commodity
transactions beyond four standard deviations above the mean led to the
inclusion of more extraordinarily large notional transactions that
staff worried would skew results. With commodity swaps in particular,
the Commission is concerned that the wide variation in how reporting
counterparties report notional amounts leads to more outliers that
should not be included in the trimmed data set.
—————————————————————————

    191 See Block Trade Rule at 32895.
—————————————————————————

    Commission staff found a similar issue with four standard
deviations for the other asset classes, but to a lesser extent than
commodities, that the Commission preliminarily believes could be
addressed by moving from four standard deviations to three. In each
case, the Commission invites comment on staff’s approach and findings
with respect to the methodologies and accounting for outliers. Until
then, the Commission is proposing updating the definition of “trimmed
data set” to mean a data set that has had extraordinarily large
notional transactions removed by transforming the data into a logarithm
with a base of 10, computing the mean, and excluding transactions that
are beyond two standard deviations above the mean for the other
commodity asset class and three standard deviations above the mean for
all other asset classes.
    In the Block Trade Rule proposal, the Commission provided the
following example to explain the rounding instructions in Sec. 
43.6(c)(2)(viii): “if the observed notional amount is $1,250,000, the
amount should be increased to $1,300,000. This adjustment is made to
assure that at least 67 percent of the total notional amount of
transactions in a trimmed data set are publicly disseminated in real
time.” 192
—————————————————————————

    192 Block Trade Rule at 15480 n.192.
—————————————————————————

    Current Sec.  43.6(c)(2)(viii) directs the Commission to round the
notional amount of the observation discussed in Sec.  43.6(c)(2)(vii)
“to” two significant

[[Page 21539]]

digits,193 or if the notional amount is already significant “to”
two digits, increase the notional amount to the next highest rounding
point of two significant digits. The Commission is proposing to revise
Sec.  43.6(c)(1)(viii) to specify that the Commission has to round the
notional amount of the observation “up to” two significant digits, or
if it is already significant “to only” two digits, increase the
notional amount to the next highest rounding point of two significant
digits. The Commission believes changing “to” to “up to” and “to
only,” respectively, in Sec.  43.6(c)(2)(vii) would clarify the
Commission’s intent consistent with the above example.
—————————————————————————

    193 By significant digits, the Commission means the number of
digits in a figure that express the precision of a measurement
instead of its magnitude. In a measurement, commonly the in-between
or embedded zeros are included but leading and trailing zeros are
ignored. Non-zero digits, and leading zeros to the right of a
decimal point, are always significant.
—————————————————————————

    Finally, the Commission is proposing to replace the individual
instructions for the 75-percent notional amount calculation contained
in current Sec.  43.6(c)(3) with a cross-reference in proposed Sec. 
43.6(c)(2) to the procedures set out in proposed Sec.  43.6(c)(1).
Since the steps for the calculations are the same, the Commission
believes simply cross-referencing in proposed Sec.  43.6(c)(2) the
procedures in proposed Sec.  43.6(c)(1) will help ensure that market
participants do not believe the calculation procedures are different.
3. Sec.  43.6(e)–Process To Determine Appropriate Minimum Block Sizes
    The Commission is proposing several amendments to the Sec.  43.6
processes for determining AMBS. Current Sec. Sec.  43.6(e) and (f) set
forth the processes for the Commission to set the AMBS in the initial
and post-initial periods by applying the methodologies in Sec.  43.6(c)
and using the PRSTs within the swap categories established pursuant to
Sec.  43.6(b).
    For the initial period, Sec.  43.6(e) established that the AMBS for
PRSTs in the IRS category, credit swap category, FX swap category in
Sec.  43.6(b)(4)(i), and the other commodity category in Sec. 
43.6(b)(5)(i) or (ii) was the AMBS in appendix F to part 43.194 Swaps
in the FX swap category in Sec.  43.6(b)(4)(ii), and other commodity
swap category in Sec.  43.6(b)(5)(iii), were eligible to be treated as
block trades or LNOFSs, as applicable.195
—————————————————————————

    194 See Sec.  43.6(e)(1). The Commission applied the 50-
percent notional amount calculation to the credit and interest rate
swap categories in appendix F. As discussed further below in this
section, the Commission is proposing to remove appendix F and
publish the new AMBS for PRSTs on the Commission’s website, https://www.cftc.gov.
    195 See Sec.  43.6(e)(2).
—————————————————————————

    Regulation 43.6(e)(3) provided an exception from treatment as block
trades or LNOFs (as applicable) for PRSTs in the other commodity swap
category in Sec.  43.6(b)(5)(i) that were economically related to a
futures contract in appendix B of part 43, if such futures contract is
not subject to a DCM’s block trading rules.
    For the post-initial period, Sec.  43.6(f) directed the Commission
to establish, after an SDR collected at least one year of reliable data
for a particular asset class, the post-initial AMBS, by swap
categories.196 For the swap categories listed in Sec.  43.6(e)(1),
the Commission was to apply the 67-percent notional amount
calculation.197 Swaps in the FX category in Sec.  43.6(b)(4)(ii) were
eligible for block trade or LNOF treatment, as applicable.198
—————————————————————————

    196 See Sec.  43.6(f)(1). Regulation 43.6(f)(1) also specified
that the Commission had to update those AMBSs no less than once each
calendar year thereafter.
    197 See Sec.  43.6(f)(2).
    198 See Sec.  43.6(f)(3).
—————————————————————————

    Regulation 43.6(f)(4) directed the Commission to publish the post-
initial AMBSs on its website and stated that the AMBSs would be
effective on the first day of the second month following the date of
publication.199 However, the Commission has not published any post-
initial AMBSs.
—————————————————————————

    199 Sec.  43.6(f)(5).
—————————————————————————

    Since the initial period has passed, the Commission is proposing to
remove the regulations for the initial AMBS in current Sec.  43.6(e)
and appendix F, which, as described above, specifies the initial AMBSs
for PRSTs in the swap categories specified in current Sec.  43.6(e)(1).
To avoid retaining Sec.  43.6(e) in its regulations with no text other
than “Reserved,” the Commission is proposing to re-designate Sec. 
43.6(f) as Sec.  43.6(e) and rename it “Process to determine
appropriate minimum block sizes.”
    In new Sec.  43.6(e), the Commission would be required to apply the
67-percent notional amount calculation to calculate new AMBS, as
current Sec.  43.6(f) specified for the post-initial period. Proposed
Sec.  43.6(e)(1) would state that the Commission shall establish AMBS,
by swap categories, as described in Sec.  43.6(e)(2)-(5). Proposed
Sec.  43.6(e)(2) would state that the Commission shall determine the
AMBS for the swap categories described in Sec. Sec.  43.6(b)(1)(i),
(b)(2)(i)-(vii), (b)(4)(i), and (b)(5)(i) by applying the 67-percent
notional amount methodology in proposed Sec.  43.6(c)(1).
    Proposed Sec.  43.6(e)(3) would set forth a method for determining
which block sizes are applicable to FX swaps. Proposed Sec.  43.6(e)(3)
would specify that the parties to a FX swap described in Sec. 
43.6(b)(4)(ii) may elect to receive block treatment if the notional
amount of either currency would receive block treatment if the currency
were paired with USD. In other words, for each currency underlying the
FX swap, the counterparties would determine whether the notional amount
of either currency would be above the block threshold if paired with
USD, as described in Sec.  43.6(b)(4)(i). If either notional amount
paired with USD was greater than the block threshold, the swap
described in Sec.  43.6(b)(4)(ii) would qualify for block treatment.
    As discussed above in section II.F.1., the Commission is proposing
to set the block size of all swaps in the swap categories described in
Sec. Sec.  43.6(b)(1)(ii), (b)(2)(viii), (b)(4)(iii), and (b)(5)(ii) at
zero and make all such swaps eligible to be treated as block trades in
proposed Sec.  43.6(e)(4). Finally, the Commission is proposing to
remove current appendix F and specify in proposed Sec.  43.6(e)(5) that
the Commission would publish the AMBSs determined pursuant to Sec. 
43.6(e)(1) on its website at https://www.cftc.gov.
4. Sec.  43.6(f)–Required Notification
    The Commission is proposing to re-designate current Sec.  43.6(g)
as Sec.  43.6(f) to reflect the consolidation of Sec. Sec.  43.6(e) and
(f) discussed above in section II.F.3. and avoid designating Sec. 
43.6(f) as reserved in the Code of Federal Regulations. Current Sec. 
43.6(g) sets forth the requirements for parties to notify their
execution venue (i.e., SEF or DCM) of the parties’ block trade or LNOF
elections.
    The Commission is proposing to revise the content of current Sec. 
43.6(g)(1)(i) (redesignated as Sec.  43.6(f)(1)(i)) to clarify that
parties to a PRST with a notional at or above the AMBS can elect to
have the PRST treated as a block trade. As background, current Sec. 
43.6(g)(1)(i) requires the parties to a PRST that has a notional amount
at or above the AMBS to notify the relevant SEF or DCM, as applicable,
pursuant to the rules of such SEF or DCM, of their election to have the
PRST treated as a block trade. As background, current Sec. 
43.6(g)(1)(i) requires the parties to a PRST that has a notional amount
at or above the AMBS to notify the relevant SEF or DCM, as applicable,
pursuant to the rules of such SEF or DCM, of its election to have the
PRST treated as a block trade. The Commission intended for Sec. 
43.6(g)(1)(i)

[[Page 21540]]

to establish that the parties to a PRST with a notional amount at or
above the AMBS would be required to notify the SEF or DCM of their
election to have their qualifying PRST treated as a block trade.200
However, the Commission is concerned that the current phrasing of the
regulation suggests parties must elect to have a qualifying PRST
treated as a block trade, instead of providing parties with the
discretion to choose.
—————————————————————————

    200 See Block Trade Rule at 32904.
—————————————————————————

    As a result, to remove any ambiguity, proposed Sec.  43.6(f)(1)(i)
would state that if the parties make such an election, the reporting
counterparty must notify the SEF or DCM.
    Current Sec.  43.6(g)(1)(ii) requires the execution venue (i.e.,
SEF or DCM) to notify the SDR of such a block trade election when
transmitting STAPD to the SDR in accordance with Sec.  43.3(b)(1). The
Commission is retaining the substance of current Sec.  43.6(g)(1)(ii)
in re-designated Sec.  43.6(f)(1)(ii), but removing the specific
reference to Sec.  43.3(b)(1) and streamlining the language to state
that the SEF or DCM, as applicable, shall notify the SDR of such a
block trade election when reporting the STAPD to such SDR in accordance
with part 43.
    The Commission is proposing to add new Sec.  43.6(f)(1)(iii) to
clarify that SEFs and DCMs may not disclose block trades prior to the
expiration of the applicable dissemination delay. The Commission has
previously explained that the dissemination delays in part 43 are
intended to protect end users and liquidity providers from the expected
price impact of the disclosure of block trades.201 The Commission
believes that it is current practice for SEFs and DCMs to wait until
the expiration of the applicable dissemination delay before disclosing
block trades. However, the Commission believes market participants
would benefit from having this requirement codified to avoid ambiguity.
As a result, proposed Sec.  43.6(f)(1)(iii) would state that SEFs or
DCMs shall not disclose STAPD relating to block trades subject to the
block trade election prior to the expiration of the applicable delay
set forth in Sec.  43.5(c).
—————————————————————————

    201 See Block Trade Rule at 32870 n.46.
—————————————————————————

    Current Sec.  43.6(g)(2) states that reporting parties who execute
an off-facility swap that has a notional amount at or above the AMBS
shall notify the applicable registered SDR that such swap transaction
qualifies as an LNOF concurrently with the transmission of STAPD in
accordance with part 43. The Commission is proposing to revise Sec. 
43.6(g)(2), which would be re-designated as Sec.  43.6(f)(2). The
proposed amendments to Sec.  43.6(g)(2) are similar to the proposed
amendments to Sec.  43.6(f)(1)(i). Specifically, the Commission is
proposing to clarify that parties to a PRST that is an off-facility
swap with a notional at or above the AMBS can elect to have the PRST
treated as a block trade. Revised Sec.  43.6(f)(2) would state that if
the parties make such an election, the reporting counterparty must
notify the SDR.
5. Sec.  43.6(g)–Special Provisions Relating to Appropriate Minimum
Block Sizes and Cap Sizes
    The Commission is proposing to re-designate current Sec.  43.6(h)
as Sec.  43.6(g) in response to the consolidation of Sec. Sec.  43.6(e)
and (f) and to avoid designating Sec.  43.6(f) as reserved in the Code
of Federal Regulations, as discussed above in section II.F.3.202 The
Commission also proposes to remove current Sec.  43.6(h)(5), which
contains a provision for determining the appropriate currency
classification for currencies that succeed super-major currencies.
Regulation 43.6(h)(5) would no longer be necessary due to the proposed
modifications in Sec.  43.6(b) changing the swap categories to
individual currencies rather than currency groups like super-major
currencies.
—————————————————————————

    202 The Commission is proposing a related conforming change in
Sec.  43.6(a). Currently, that paragraph cross-references Sec. 
43.6(h). The Commission proposes to update that provision so it
cross-references Sec.  43.6(g) to reflect the re-designation.
—————————————————————————

    As a result of the proposed removal of Sec.  43.6(h)(5), the
Commission proposes to re-designate the current Sec.  43.6(h)(6)
aggregation provision as Sec.  43.6(g)(5) rather than Sec.  43.6(g)(6)
and to make certain substantive changes to re-designated Sec. 
43.6(g)(5).
    Current Sec.  43.6(h)(6) generally prohibits the aggregation of
orders for different accounts to satisfy minimum block trade size or
cap size requirements but contains an exception for orders on SEFs and
DCMs by certain commodity trading advisors (“CTAs”), investment
advisers, and foreign persons performing a similar role or function.
The Commission believed such a prohibition was necessary to ensure the
integrity of block trade principles and preserve the basis for the
anonymity associated with establishing cap sizes.203
—————————————————————————

    203 See Block Trade Rule at 32904.
—————————————————————————

    While the aggregation prohibition in current Sec.  43.6(h)(6) is
intended to incentivize trading on SEFs and DCMs, the Commission
recognizes this incentive does not exist for swaps that are not listed
or offered for trading on SEFs and DCMs.204 The Commission is
therefore proposing to amend the aggregation prohibition to provide for
swaps listed or offered for trading on SEFs and DCMs.
—————————————————————————

    204 In 2013, DMO granted indefinite no-action relief extending
the exception to swaps that are not listed or offered for trading on
a SEF or a DCM. See No-Action Relief For Certain Commodity Trading
Advisors and Investment Advisors From the Prohibition of Aggregation
Under Regulation 43.6(h)(6) for Large Notional Off-Facility Swaps,
CFTC Staff No-Action Letter No. 13-48 (Amended), (Aug. 6, 2013),
available at https://www.cftc.gov/sites/default/files/idc/groups/public/@lrlettergeneral/documents/letter/13-48.pdf (“NAL 13-48”).
The Commission is proposing to incorporate this no-action relief,
along with its related conditions (with one exception discussed
below), into proposed Sec.  43.6(g)(5).
—————————————————————————

    Current Sec.  43.6(h)(6)(ii) conditions the exception from the
aggregation prohibition on a CTA, investment adviser, or foreign person
having more than $25 million in assets under management. In adopting
this condition, the Commission explained that the $25 million threshold
would help ensure that persons allowed to aggregate orders were
appropriately sophisticated, while at the same time not excluding an
unreasonable number of CTAs, investment advisers, and similar foreign
persons.205
—————————————————————————

    205 Block Trade Rule at 32905.
—————————————————————————

    However, since the Block Trade Rule was adopted, the Commission has
come to believe that the $25 million threshold may be excluding more
participants from taking advantage of the exception than DMO staff
initially expected. Therefore, the Commission is proposing to remove
the $25 million threshold in current Sec.  43.6(h)(6)(ii) and,
therefore, to not incorporate that into proposed Sec.  43.6(g)(5) as a
condition, even though it was a condition of the relief in NAL 13-48.
    Finally, the Commission is proposing several non-substantive
changes throughout proposed Sec.  43.6(g)(5). These changes include
rephrasing the introductory text for clarity, updating cross-
references, and specifying in proposed Sec. Sec.  43.6(g)(5)(ii) and
(iii) that the aggregated transaction is reported as a block trade, and
the aggregated orders are executed as one swap transaction,
respectively.
6. Sec.  43.6(h)–Eligible Block Trade Parties
    The Commission is proposing to re-designate Sec.  43.6(i) as Sec. 
43.6(h) in response to the consolidation of Sec. Sec.  43.6(e) and (f)
to avoid designating Sec.  43.6(f) as reserved in the Code of Federal
Regulations, as discussed above in section II.F.3. In addition, to
conform to the proposed revisions to Sec.  43.6(h)–specifically the
removal of the $25

[[Page 21541]]

million assets under management threshold in current Sec. 
43.6(h)(6)(ii)–the Commission is proposing to remove the $25 million
threshold in current Sec.  43.6(i)(1)(iii) (i.e., Sec. 
43.6(h)(1)(iii), as re-designated). The Commission is also proposing
several non-substantive ministerial changes, such as correcting cross-
references and capitalization.
Request for Comment
    The Commission requests comment on all aspects of the proposed
changes to Sec.  43.6. In addition, the Commission requests specific
comment on the following:
    (18) Would the proposed new other commodity categories be useful to
SDRs and counterparties? Please explain why or why not.
    (19) Are there other categories the Commission should add or remove
for other commodities? Please explain any recommendations to add or
remove a category.
    (20) The Commission is proposing minor updates to the methodologies
for calculating AMBS and cap sizes. Should the Commission consider
other changes to the methodologies? Please provide examples and data,
where possible.

G. Sec.  43.7–Delegation of Authority

    The Commission is proposing several changes to Sec.  43.7, which is
a rule governing Commission delegation of certain authority to the DMO
Director or such other employee or employees as the DMO Director may
designate from time to time (“DMO staff”). The Commission is
proposing to add a new paragraph (a)(1) that would delegate to DMO the
authority to publish the technical specifications providing the form
and manner for reporting and publicly disseminating the STAPD elements
in appendix C as described in Sec. Sec.  43.3(d)(1) and 43.4(a). If it
chooses to, the Commission may, pursuant to Sec.  43.7(c), which the
Commission is not proposing to amend, exercise any authority delegated
pursuant to proposed Sec.  43.7(a)(1) (or any other authority delegated
pursuant to Sec.  43.7(a)) rather than permit DMO staff to exercise
such authority.
    Because there currently is a Sec.  43.7(a)(1) (delegation of
authority to determine whether swaps fall within specific swap
categories as described in Sec.  43.6(b)), the Commission is proposing
to renumber existing Sec.  43.7(a)(1) as Sec.  43.7(a)(3).
    The Commission is further proposing to renumber existing Sec. 
43.7(a)(2) (authority to determine and publish post-initial, AMBSs as
described in Sec.  43.6(f)) as Sec.  43.7(a)(4) and to replace the
reference to Sec.  43.6(f) (the rule pursuant to which post-initial,
AMBSs are determined) with a reference to Sec.  43.6(e) to conform to
the Commission’s proposed movement of the cap size determination
process itself from Sec.  43.6(f) Sec.  43.6(e). The proposed changes
to post-initial AMBSs are discussed above in section II.F.3.
    Additionally, the Commission is proposing to renumber existing
Sec.  43.7(a)(3) (authority to determine post-initial cap sizes as
described in Sec.  43.4(h)) as Sec.  43.7(a)(2). Related to this, the
Commission is proposing to delete the term “post-initial,” given that
the Commission already determined initial cap sizes, and is proposing
to replace the reference to Sec.  43.4(h) (the rule pursuant to which
post-initial cap sizes are determined) with a reference to Sec. 
43.4(g) to conform to the Commission’s proposed movement of the cap
size determination process itself from Sec.  43.4(h) to proposed Sec. 
43.4(g). The proposed changes to post-initial cap sizes are discussed
above in section II.D.4.
Request for Comment
    The Commission requests comment on all aspects of the proposed
changes to Sec.  43.7. The Commission also requests specific comment on
the following:
    (21) Do the Commission’s proposed amendments to the current Sec. 
43.6(h) aggregation prohibition create any problems for market
participants?
    (22) Should the Commission retain the $25 million assets under
management eligibility requirement? Please explain in detail why the
Commission should or should not retain the eligibility requirement.

III. Swap Transaction and Pricing Data Reported to and Publicly
Disseminated by SDRs

A. General

    The Commission is proposing to remove the list of STAPD elements in
appendix A to part 43 and revise the list to update it 206 to further
standardize the STAPD being reported to, and publicly disseminated by,
SDRs. The STAPD elements are currently found in appendix A, which
states that, among other things, SDRs must publicly disseminate the
information in appendix A in a “consistent form and manner” for swaps
within the same asset class.
—————————————————————————

    206 As discussed in section II.E.3., the Commission is
proposing to delete appendix C in connection with changes to the
block delays. In its place, the Commission is proposing to update
the list of STAPD elements in current appendix A and move them to
appendix C.
—————————————————————————

    Appendix A includes a description of each field, in most cases
phrased in terms of “an indication” of the data that must be reported
and disseminated and an example illustrating how the field could be
populated. For example, the description of the “Asset class” field in
table A1 of appendix A calls for an indication of one of the broad
categories as described in Sec.  43.2(e), and the example provided
states IR (e.g., interest rate asset class).
    In adopting appendix A to part 43, the Commission believed
consistency could be achieved in the data, but intentionally avoided
prescriptive requirements in favor of flexibility in reporting the
various types of swaps.207 The Commission recognizes that over the
years each SDR has further standardized the STAPD reported and
disseminated. However, SDRs have implemented the field list in appendix
A in different ways, causing publicly disseminated messages to appear
differently depending on the SDR. As such, the Commission now believes
a significant effort must be made to standardize STAPD across SDRs, as
part of a larger effort to standardize swap data both across U.S. SDRs
and across jurisdictions, as described below.
—————————————————————————

    207 See Real-Time Public Reporting of Swap Transaction Data,
77 FR 1182, 1224.
—————————————————————————

    As part of the Roadmap review, DMO announced its intention to
propose a detailed technical specification for data fields.208 DMO
received many comments on data fields in response to the Roadmap. In
general, commenters stated that the Commission should ensure that all
required fields are set forth in the appendices to parts 43 and
45.209 The same commenters suggested that the differences between the
data fields in parts 43 and 45 should be reconciled.210 Additionally,
commenters stated that data fields should be standardized 211 and
only those fields that are specified in part 43 should be disseminated
by the SDR.212 One commenter also suggested that the Commission
clarify what a reporting counterparty is obligated to report when data
fields do not apply or are not available at the time of reporting.213
—————————————————————————

    208 Roadmap at 9.
    209 Letter from CME at 3; Joint SDR Letter at 2-3.
    210 Joint SDR Letter at 2-3.
    211 Letter from the Commercial Energy Working Group (“CEWG”)
(Aug. 21, 2017) at 3; Joint ISDA-SIFMA Letter at 5-6 (noting that
data fields should be harmonized globally to the extent possible.);
Letter from LCH at 2 (noting that clarification of the CFTC’s
required minimum standards for submission of data will be helpful
following the next phase of the international setting process.);
Letter from NGSA at 1; Joint SDR Letter at 2-3.
    212 Letter from CEWG at 3.
    213 Joint ISDA-SIFMA Letter at 6.
—————————————————————————

    In response, the Commission reviewed the data fields in appendix A

[[Page 21542]]

to update the current list and provide further specifications on
reporting and public dissemination. As an initial matter, the
Commission notes that this assessment was part of a larger review of
the parts 43 and 45 data the Commission requires to be reported to, and
publicly disseminated by, SDRs. In the course of determining which data
elements to propose in parts 43 and 45, the Commission reviewed the
STAPD data fields in appendix A and the swap data elements in appendix
1 to part 45 to determine if any currently required data elements
should be eliminated and if any additional data elements should be
added. As part of this process, the Commission also reviewed the part
45 swap data elements to determine whether any differences could be
reconciled.214 With this NPRM, and the 2020 Part 45 NPRM proposed at
the same time, the Commission is proposing that the STAPD elements to
be publicly disseminated would be a subset of the part 45 swap data
elements required to be reported in appendix 1 to part 45. After
determining the set of swap data and STAPD elements, the Commission
reviewed the CDE Technical Guidance to determine which data elements
the Commission could adopt according to the CDE Technical
Guidance.215
—————————————————————————

    214 The Commission had intended that the data elements in
appendix A to part 43 would be harmonized with the data elements
required to be reported to an SDR for regulatory purposes pursuant
to part 45. See Real-Time Public Reporting of Swap Transaction Data,
77 FR 1182, 1226 (noting that it is important that the data fields
for both the real-time and regulatory reporting requirements work
together). However, the Commission did not require linking the two
sets of data elements.
    215 The Commission has also reviewed the data elements and
technical standards to determine where the Commission can adopt the
standards established in the CDE Technical Guidance. See Committee
on Payments and Market Infrastructures (“CPMI”) and the
International Organization of Securities Commissions (“IOSCO”),
Technical Guidance, Harmonisation of Critical OTC Derivatives Data
Elements (other than UTI and UPI) (Apr. 2018) (“CDE Technical
Guidance”). The CDE Technical Guidance, and the Commission’s role
in its development, are discussed in the 2020 Part 45 NPRM. From
there, the Commission set out to establish definitions, formats,
standards, allowable values, and conditions. The CDE Technical
Guidance also establishes technical standards for how to report the
data elements for jurisdictions to adopt. DMO is publishing draft
technical standards, along with validation conditions, when this
NPRM is released, so market participants can comment on both the
NPRM and technical standards at the same time.
—————————————————————————

    After completing this assessment, the Commission is proposing to
list the STAPD elements required to be publicly disseminated by SDRs
pursuant to part 43 in appendix C. In a separate NPRM, the Commission
is proposing to list the swap data elements required to be reported to
SDRs pursuant to part 45 in appendix 1 to part 45. The STAPD elements
in appendix C would be a harmonized subset of the swap data elements in
appendix 1 to part 45.
    As appendix C would contain the list of STAPD elements required to
be publicly disseminated by SDRs, the Commission notes that SDRs would
need additional swap data elements reported along with these STAPD
elements. These swap data elements include identifying information like
the reporting counterparty, unique swap identifier (“USI”) or UTI,
and the submitter. However, DMO will note these swap data elements
separately in the technical specifications published on https://www.cftc.gov to simplify the list of publicly disseminated STAPD
elements in appendix C.
    At the same time as the Commission is proposing to update the STAPD
elements in appendix C, DMO is publishing draft technical
specifications for reporting the swap data elements in appendix 1 to
part 45 to SDRs and for reporting and publicly disseminating the STAPD
elements in appendix C to part 43. DMO is publishing the draft
technical standards on https://www.cftc.gov when this release is
published so commenters can comment on both the NPRM and the technical
standards and validation conditions. DMO will then publish the
technical specifications in the Federal Register pursuant to the
delegation of authority proposed in Sec.  43.7(a)(1).
    A discussion of the STAPD elements in appendix C required to be
publicly disseminated by SDRs according to the technical standards
follows below. In general, SDRs are already publicly disseminating most
of this information. As the Commission is proposing that the part 43
STAPD would be a subset of the swap data elements, most of these data
elements are discussed in more depth in the 2020 Part 45 NPRM.

B. Swap Transaction and Pricing Data Elements

    As a preliminary matter, the Commission notes that the STAPD
elements in appendix C do not include STAPD elements specific to swap
product terms. The Commission is currently heavily involved in separate
international efforts to introduce UPIs.216 The Commission
preliminarily expects UPIs will be available within the next two
years.217 Until the Commission designates a UPI pursuant to Sec. 
45.7, the Commission is proposing SDRs continue to accept, and
reporting counterparties continue to report, the product-related data
elements unique to each SDR. The Commission believes this temporary
solution would have SDRs change their systems only once when UPI
becomes available, instead of twice if the Commission proposes
standardized product data elements in this release before UPIs are
available. Once the Commission designates the UPI, the Commission would
also work with SDRs on the humanly-readable short names for products
that SDRs would publicly disseminate.
—————————————————————————

    216 See FSB, Governance arrangements for the UPI: Conclusions,
implementation plan and next steps to establish the International
Governance Body (Oct. 9, 2019), available at https://www.fsb.org/2019/10/governance-arrangements-for-the-upi/.
    217 See id. The FSB recommends that jurisdictions undertake
necessary actions to implement the UPI Technical Guidance and that
these take effect no later than the third quarter of 2022.
—————————————————————————

    In addition, the Commission notes that it has endeavored to propose
adopting the CDE Technical Guidance data elements as closely as
possible. Where the Commission proposes adopting a CDE Technical
Guidance data element, the Commission has proposed adopting the terms
used in the CDE Technical Guidance. This means that some terms may be
different for certain concepts. For instance, “derivatives clearing
organization” is the Commission’s term for registered entities that
clear swap transactions, but the CDE Technical Guidance uses the term
central counterparty.
    To help clarify, DMO has proposed footnotes in the technical
standards to explain these differences in at least four terms as well
as provide examples and jurisdiction-specific requirements. However,
the Commission has not included these footnotes in appendix C. In
addition, the definitions from CDE Technical Guidance data elements
included in appendix C sometimes include references to allowable values
in the CDE Technical Guidance, which may not be included in appendix C
but can be found in DMO’s technical standards.
    Finally, the CDE Technical Guidance did not harmonize many fields
that would be particularly relevant for commodity and equity swap asset
classes (e.g., unit of measurement for commodity swaps). CPMI and IOSCO
have set out governance arrangements for CDE data elements (“CDE
Governance Arrangements”).218 The CDE Governance Arrangements
address both implementation and maintenance of CDE, together with their
oversight. One area of the CDE Governance Arrangements includes
updating the CDE Technical Guidance, including the

[[Page 21543]]

harmonization of certain data elements and allowable values that were
not included in the CDE Technical Guidance (e.g., data elements related
to events, and allowable values for the following data elements: Price
unit of measure and Quantity unit of measure).
—————————————————————————

    218 https://www.iosco.org/library/pubdocs/pdf/IOSCOPD642.pdf.
—————————————————————————

    The Commission invites comment on any of the swap data elements
proposed in appendix C. The Commission briefly discusses the STAPD
elements below by category to simplify the topics for comment. To the
extent any comment involves data elements adopted according to the CDE
Technical Guidance, however, the Commission anticipates raising issues
according to the CDE Governance Arrangements procedures to help ensure
that authorities follow the established processes for doing so. In
addition, the Commission anticipates updating its rules to adopt any
new or updated CDE Technical Guidance.
1. Category: Clearing
    The Commission is proposing to require SDRs to publicly disseminate
one field related to clearing: Cleared (1). This data element is
currently being publicly disseminated by SDRs according to the field in
current appendix A “Cleared or uncleared.” The Commission requests
specific comment on the following related to clearing data elements for
public dissemination:
    (23) Should the Commission publicly disseminate any additional data
elements related to clearing, including the DCO where the swap is
intended to be cleared? Please provide comment on any challenges market
participants would face in reporting this information for PRSTs.
2. Category: Custom Baskets
    The Commission is proposing to require SDRs to publicly disseminate
a custom basket indicator.219 The Commission preliminarily believes
this data element would help market participants identify that a
disseminated price is associated with a custom basket. The Commission
is proposing this data element for swaps that are based on a basket of
underlying assets. The Commission would like to preliminarily clarify
that this data element is not a field to indicate an otherwise exotic
swap.
—————————————————————————

    219 This data element is Custom basket indicator (23) in
appendix C.
—————————————————————————

3. Category: Events
    The Commission is proposing to require SDRs to publicly disseminate
four data elements related to events.220 Reporting counterparties
currently report this information to SDRs, but the Commission is
proposing to further standardize how this information is reported
across SDRs. The current event fields in appendix A include
cancellation and correction. The Commission preliminarily believes more
specific event information would help market participants understand
why certain swap changes to PRSTs are being publicly disseminated.
—————————————————————————

    220 In appendix C, these data elements are: Action type (24);
Event type (25); Event identifier (26); and Event timestamp (27).
—————————————————————————

4. Category: Notional Amounts and Quantities
    The Commission is proposing to require SDRs to publicly disseminate
eleven data elements related to notional amounts and quantities.221
SDRs are currently publicly disseminating information related to
notional amounts, but the Commission is proposing to further
standardize how this information is reported across SDRs. The notional
fields in current appendix A include notional currency and rounded
notional. SDRs would continue to cap and round the notional amounts as
required by Sec.  43.4.
—————————————————————————

    221 In appendix C, these data elements are: Notional amount
(28); Notional currency (29); Call amount (31); Call currency (32);
Put amount (33); Put currency (34); Notional quantity (35); Quantity
frequency (36); Quantity frequency multiplier (37); Quantity unit of
measure (38); and Total notional quantity (39).
—————————————————————————

5. Category: Packages
    The Commission is proposing to require SDRs to publicly disseminate
four data elements related to package transactions.222 The Commission
requests specific comment on the following related to clearing data
elements for package transactions:
—————————————————————————

    222 In appendix C, these data elements are: Package identifier
(40); Package transaction price (41); Package transaction price
currency (42); and Package transaction price notation (43).
—————————————————————————

    (24) The 2019 Part 45 NPRM requests specific comment on whether the
Commission should adopt additional data elements related to package
transactions according to the CDE Technical Guidance.223 Should the
Commission also require SDRs to publicly disseminate the additional
data elements related to package transactions? Do any of the
Commission’s proposed package transaction data elements create
implementation challenges for SDRs?
—————————————————————————

    223 In the CDE Technical Guidance, the additional package data
elements are: Package transaction spread (2.93); Package transaction
spread currency (2.94); and Package transaction spread notation
(2.95).
—————————————————————————

6. Category: Payments
    The Commission is proposing to require SDRs to publicly disseminate
eight data elements related to payments.224 SDRs are currently
publicly disseminating information related to payments, but the
Commission is proposing to further standardize how this information is
reported across SDRs. The payment fields in current appendix A include
payment frequency and reset frequency, and day count convention.
—————————————————————————

    224 In appendix C, these data elements are: Day count
convention (44); Floating rate reset frequency period (46); Floating
rate reset frequency period multiplier (47); Other payment type
(48); Other payment amount (49); Other payment currency (50);
Payment frequency period (54); and Payment frequency period
multiplier (55).
—————————————————————————

7. Category: Prices
    The Commission is proposing to require reporting counterparties to
report seventeen data elements related to swap prices for SDRs to
publicly disseminate.225 SDRs are currently publicly disseminating
information related to prices, but the Commission is proposing to
further standardize how this information is reported across SDRs. The
payment fields in current appendix A include payment price, price
notation, and additional price notation.
—————————————————————————

    225 In appendix C, these data elements are: Exchange rate
(56); Exchange rate basis (57); Fixed rate (58); Post-priced swap
indicator (59); Price (60); Price currency (61); Price notation
(62); Price unit of measure (63); Spread (64); Spread currency (65);
Spread notation (66); Strike price (67); Strike price currency/
currency pair (68); Strike price notation (69); Option premium
amount (70); Option premium currency (71); and First exercise date
(73).
—————————————————————————

    In the price category, the Commission is also proposing Post-priced
swap indicator (59), in connection with the proposed rules permitting a
delay for reporting PPS discussed above in section II.C.2.
8. Category: Product
    The Commission is proposing to require SDRs publicly disseminate
two data elements relating to products, and has included a placeholder
data element for the UPI.226 As discussed above, the Commission
preliminarily believes that SDRs should continue publicly disseminating
any product fields they are currently publicly disseminating until the
Commission designates a UPI according to Sec.  45.7. Current appendix A
includes a similar placeholder field for UPI.
—————————————————————————

    226 In appendix C, these data elements are: Index factor (76);
Embedded option type (77); and Unique product identifier (78).

—————————————————————————

[[Page 21544]]

9. Category: Settlement
    The Commission is proposing to require SDRs to publicly disseminate
one field related to settlement: Settlement currency (80). Current
appendix A contains a field for settlement currency.
10. Category: Transaction-Related
    The Commission is proposing to require SDRs to publicly disseminate
seven transaction-related fields.227 The transaction-related fields
in current appendix A include execution timestamp, indication of other
price affecting term, block trade indicator, execution venue, and start
and end date. The Commission is proposing one new indicator, Prime
brokerage transaction indicator, in connection with the proposed rules
for reporting mirror swaps discussed above in section II.C.4.
—————————————————————————

    227 In appendix C, these data elements are: Non-standardized
term indicator (82); Block trade election indicator (83); Effective
date (84); Expiration date (85); Execution timestamp (86); Platform
identifier (88); and Prime brokerage transaction indicator (90).
—————————————————————————

    In connection with the data element for Execution timestamp (86),
the Commission reminds reporting counterparties that execution
timestamp is the date and time that the swap was executed, not the date
and time that the swap was recorded in a computer system (e.g., a trade
capture system) or transmitted to an SDR. The Commission is concerned
that some market participants incorrectly report an execution timestamp
that indicates when a swap executed orally was recorded in market
participants’ computer systems, regardless of whether any time has
passed since swap execution. Similarly, some market participants
incorrectly report an execution timestamp that indicates when a swap
executed electronically was transmitted to an SDR, regardless of
whether any time has passed between execution and transmission.
Reporting of incorrect execution timestamps in instances such as these
violates the reporting requirements of part 43.
Request for Comment
    The Commission requests comment on all aspects of the proposed
STAPD elements in appendix C and DMO’s proposed technical standards and
validation conditions. The Commission also requests specific comment on
the following:
    (25) In the 2012 RTR Final Rule, the Commission stated that public
dissemination was not “presently required” for among other types,
swaps generated by portfolio compression exercises that would not
provide price discovery benefits to the public. Since 2012, market
participants have engaged in more complex activities, with some
similarities to compression exercises, which are generally referred to
as “risk reduction services.” The Commission understands that parties
that facilitate risk reduction services, including SEFs, have reported
under part 43 any new swaps that are created as the result of their
risk-reduction services. Should the Commission require swaps resulting
from risk reduction services be indicated using a unique identifier or
flag on the real-time public tape to indicate the price may not reflect
current market prices?

IV. Compliance Date

    Market participants raised questions about the compliance schedules
for the Commission’s proposed reporting rule amendments in response to
the Roadmap solicitations for public comment. Commenters raised various
concerns about the compliance schedule. For instance, the SDRs
requested that system updates that would result from any rule changes
happen all at once.228 Other suggested phasing in any SDR obligations
before requiring reporting counterparty changes.229 Multiple market
participants requested that all rulemakings take place simultaneously
to inform one another,230 and that DMO wait for CPMI-IOSCO to publish
the CDE fields before undertaking the rulemakings.231
—————————————————————————

    228 Joint SDR Letter at 12.
    229 Letter from Chatham Financial (Aug. 21, 2017) at 5-6;
Joint NRECA-APPA Letter at 3.
    230 Joint SDR Letter at 1; Letter from GFXD of the GFMA at 5;
Joint ISDA-SIFMA Letter at 2-3; Letter from LCH at 2.
    231 Joint ISDA-SIFMA Letter at 2-3.
—————————————————————————

    One commenter noted the dependencies between different actors in
changing systems and suggested that compliance dates take that into
account.232 Commenters cautioned against artificial deadlines,233
requested avoiding compliance dates at the end of the year during
holidays and code freezes,234 and requested that the Commission
consider deadlines for changes in foreign jurisdictions when setting
compliance dates.235
—————————————————————————

    232 Joint SDR Letter at 12.
    233 Letter from Chatham at 5.
    234 Joint SDR Letter at 12.
    235 Id.
—————————————————————————

    The Commission understands that market participants will need a
sufficient implementation period to accommodate the changes proposed in
the three NPRMs. The Commission therefore expects that the compliance
date for the rules that the Commission adopts as a result of each of
the Roadmap NPRMs would be at least one year from the date that the
last one of such final rulemakings is published in the Federal
Register.
Request for Comment
    The Commission requests comment on all aspects of a one year
compliance date.

V. 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.236 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.237 The amendments to part 43 proposed herein would have a
direct effect on the operations of DCMs, DCOs, MSPs, prime
brokers,238 reporting counterparties, SDs, SDRs, and SEFs. The
Commission has previously certified that DCMs,239 DCOs,240
MSPs,241 SDs,242 SDRs, 243 and SEFs 244 are not small entities
for purpose of the RFA.
—————————————————————————

    236 See 5 U.S.C. 601 et seq.
    237 See Policy Statement and Establishment of “Small
Entities” for Purposes of the Regulatory Flexibility Act, 47 FR
18618 (Apr. 30, 1982) (“1982 RFA Release”).
    238 The Commission understands that all prime brokers
currently acting as such in connection with swaps are SDs.
Consequently, the RFA analysis applicable to SDs applies equally to
prime brokers.
    239 See 1982 RFA Release.
    240 The Commission has previously certified that DCOs are not
small entities for purposes of the RFA. See DCO General Provisions
and Core Principles, 76 FR 69334, 69428 (Nov. 8, 2011).
    241 See SD and MSP Recordkeeping, Reporting, and Duties Rules,
77 FR 20128, 20194 (Apr. 3, 2012) (basing determination in part on
minimum capital requirements).
    242 See id.
    243 See Swap Data Repositories, 75 FR 80898, 80926 (Dec. 23,
2010) (basing determination in part on the central role of SDRs in
swaps reporting regime, and on the financial resource obligations
imposed on SDRs).
    244 See Core Principles and Other Requirements for SEFs, 78 FR
33476, 33548 (June 4, 2013).
—————————————————————————

    Various proposed amendments to part 43 would have a direct impact
on all reporting counterparties. These reporting counterparties may
include SDs, MSPs, DCOs, and non-SD/MSP/DCO counterparties. Regarding
whether non-SD/MSP/DCO reporting counterparties are small entities for
RFA purposes, the Commission notes that section 2(e) of the CEA
prohibits a person from entering into a swap unless the person is an
eligible contract participant (“ECP”), except for swaps executed on
or pursuant to the rules of

[[Page 21545]]

a DCM.245 The Commission has previously certified that ECPs are not
small entities for purposes of the RFA.246
—————————————————————————

    245 See 7 U.S.C. 2(e).
    246 See Opting Out of Segregation, 66 FR 20740, 20743 (Apr.
25, 2001). The Commission also notes that this determination was
based on the definition of ECP as provided in the Commodity Futures
Modernization Act of 2000. The Dodd-Frank Act amended the definition
of ECP by modifying the threshold for individuals to qualify as
ECPs, changing an individual who has total assets in an amount in
excess of to an individual who has amounts invested on a
discretionary basis, the aggregate of which is in excess of.
Therefore, the threshold for ECP status is currently more
restrictive than it was when the Commission certified that ECPs are
not small entities for RFA purposes, meaning that there are likely
fewer entities that could qualify as ECPs today than could qualify
when the Commission first made the determination.
—————————————————————————

    The Commission has analyzed swap data reported to each SDR 247
across all five asset classes to determine the number and identities of
non-SD/MSP/DCOs that are reporting counterparties to swaps under the
Commission’s jurisdiction. A recent Commission staff review of swap
data, including swaps executed on or pursuant to the rules of a DCM,
identified nearly 1,600 non-SD/MSP/DCO reporting counterparties. Based
on its review of publicly available data, the Commission believes that
the overwhelming majority of these non-SD/MSP/DCO reporting
counterparties are either ECPs or do not meet the definition of “small
entity’ established in the RFA. Accordingly, the Commission does not
believe the proposed rule would affect a substantial number of small
entities.
—————————————————————————

    247 The sample data sets varied across SDRs and asset classes
based on relative trade volumes. The sample represents data
available to the Commission for swaps executed over a period of one
month. These sample data sets captured 2,551,907 FX swaps, 603,864
equity swaps, 357,851 other commodity swaps, 276,052 interest rate
swaps, and 98,145 credit swaps.
—————————————————————————

    Based on the above analysis, the Commission does not believe that
this proposal will have a significant economic impact on a substantial
number of small entities. Therefore, the Chairman, on behalf of the
Commission, pursuant to 5 U.S.C. 605(b), hereby certifies that the
proposed rules will not have a significant economic impact on a
substantial number of small entities.

B. Paperwork Reduction Act

    The PRA of 1995 248 imposes certain requirements on federal
agencies, including the Commission, in connection with their conducting
or sponsoring any collection of information, as defined by the PRA.
This proposed rulemaking would result in a collection of information
within the meaning of the PRA, as discussed below. The proposed
rulemaking contains a collection of information for which the
Commission has previously received a control number from the Office of
Management and Budget (“OMB”): OMB Control Number 3038-0070 (relating
to real-time STAPD).
—————————————————————————

    248 See 44 U.S.C. 3501.
—————————————————————————

    The Commission is proposing to amend information collection 3038-
0070 to accommodate newly proposed and revised information collection
requirements for swap market participants and SDRs that require
approval from OMB under the PRA. The amendments described herein are
expected to modify the existing annual burden for complying with
certain requirements of part 43.
    The Commission therefore is submitting this proposal to the OMB for
its review in accordance with 44 U.S.C. 3507(d) and 5 CFR 1320.11.
Responses to this collection of information would be mandatory. The
Commission will protect proprietary information according to the FOIA
and 17 CFR 145, “Commission Records and Information.” In addition,
section 8(a)(1) of the CEA strictly prohibits the Commission, unless
specifically authorized by the CEA, from making public “data and
information that would separately disclose the business transactions or
market positions of any person and trade secrets or names of
customers.”249 The Commission is also required to protect certain
information contained in a government system of records according to
the Privacy Act of 1974.250
—————————————————————————

    249 7 U.S.C. 12(a)(1).
    250 5 U.S.C. 552a.
—————————————————————————

1. STAPD Reports to SDRs
    The Commission is proposing to amend Sec.  43.3, which requires
SEFs, DCMs, and reporting counterparties to report data to SDRs when
entering into new swaps, or making certain changes to swaps, for SDRs
to publicly disseminate. Existing Sec.  43.3 requires reporting
counterparties to send swap reports to SDRs as soon as technologically
practicable after execution. The Commission is proposing to amend Sec. 
43.3(a)(4) to allow reporting counterparties more time to report PPS to
SDRs. Currently, some entities report PPS using a placeholder price,
and then send a swap report later amending the price. Those entities
would experience a reduction in the number of swap reports they are
required to send pursuant to Sec.  43.3 under the proposal. The
Commission estimates 50 SD/MSP reporting counterparties would reduce
the number of PPS reports they report to SDRs by 100 reports per
respondent annually, or 5,000 reports in the aggregate for an aggregate
cost burden reduction of $24,197.
    The Commission is also proposing to amend Sec.  43.3 to establish
new requirements for reporting prime brokerage swaps in Sec. 
43.3(a)(6). The proposed rules would establish that “mirror swaps”
would not need to be publicly disseminated by SDRs. Reporting
counterparties would continue to report mirror swaps to SDRs pursuant
to part 45, but the amendment to Sec.  43.3 would reduce the number of
reports SDRs would be required to publicly disseminate according to
Sec.  43.4. The amendment to the requirement for SDRs in Sec.  43.4 is
discussed in the next section below.
    The Commission is also proposing to create a new requirement in
Sec.  43.3(a)(5) for DCOs to report STAPD for clearing swaps that are
PRSTs. The proposed change would increase the burden for no more than
14 DCOs that would need to report PRSTs, but would not affect the
burden for the majority of 1,732 reporting counterparties required to
report data ASATP after execution. As a result, the Commission is not
proposing to amend the estimate for Sec.  43.3 based on this change.
    Existing Sec.  43.3(h) requires timestamping by multiple entities.
Existing Sec.  43.4(h)(1) requires registered entities, SDs, and MSPs
to timestamp real-time swap reports with the time they receive the data
from counterparties, as applicable, and the time at which they transmit
the report to an SDR. Registered entities, SDs, and MSPs then send
these timestamps to the SDR. Existing Sec.  43.3(h)(2) requires SDRs to
timestamp the swap reports they receive from SEFs, DCMs, and reporting
parties, and then timestamp the report with the time they publicly
disseminate it. SDRs then place these timestamps on the reports they
publicly disseminate. Existing Sec.  43.3(h)(3) requires SDs and MSPs
have to timestamp all off-facility swaps they report to SDRs. SDs and
MSPs then report these timestamps to SDRs.251
—————————————————————————

    251 Current Sec.  43.3(h)(4) requires all entities have
recordkeeping requirements with respect to these timestamps. The
Commission is proposing to eliminate the recordkeeping requirements
in Sec.  43.3(h)(4). This would result in the removal of the
recordkeeping burden from collection 3038-0070, which is currently
5,854 hours in the aggregate.
—————————————————————————

    Removing Sec.  43.3(h)(1) would reduce the amount of time SDs,
MSPs, and registered entities spend reporting swap reports to SDRs, but
would not amend the number of reports they send. Removing Sec. 
43.3(h)(2) would reduce the

[[Page 21546]]

amount of time SDRs spend publicly disseminating swap reports, but
would not amend the number of reports they send. Removing Sec. 
43.3(h)(3) would reduce the amount of time SDs and MSPs spend reporting
off-facility swaps to SDRs, but would not reduce the amount of reports
they send. Finally, removing Sec.  43.3(h)(4) would remove the
recordkeeping burden for these entities. As shown in Appendix A, this
would remove the current recordkeeping burden of 5,854 hours from the
collection.
2. STAPD Reports Disseminated to the Public by SDRs
    As discussed above, existing Sec.  43.3 requires reporting
counterparties to send swap reports to SDRs as soon as technologically
practicable after execution. The Commission is proposing to amend Sec. 
43.3 to establish new requirements for reporting prime brokerage swaps
in Sec.  43.3(a)(6). The proposed rules would establish that “mirror
swaps” would not need to be publicly disseminated by SDRs. Reporting
counterparties would continue to report mirror swaps to SDRs pursuant
to part 45, but the amendment to Sec.  43.3 would reduce the number of
reports SDRs would be required to publicly disseminate according to
Sec.  43.4. The Commission estimates that the amendments would reduce
the number of mirror swaps SDRs would need to publicly disseminate by
100 reports per each SDR, or 300 reports in the aggregate, which would
reduce the cost burden by $1,451 in the aggregate.
    The estimated updated reporting burden total for real-time public
reporting would be as follows:
    Estimated number of respondents: 1,732.
    Estimated number of reports per respondent: 20,747.
    Average number of hours per report: .07.
    Estimated gross annual reporting burden: 1,206,508.
Request for Comment
    The Commission invites the public and other Federal agencies to
comment on any aspect of the proposed information collection
requirements discussed above. The Commission will consider public
comments on this proposed collection of information in:
    1. Evaluating whether the proposed collection of information is
necessary for the proper performance of the functions of the
Commission, including whether the information will have a practical
use;
    2. evaluating the accuracy of the estimated burden of the proposed
collection of information, including the degree to which the
methodology and the assumptions that the Commission employed were
valid;
    3. enhancing the quality, utility, and clarity of the information
proposed to be collected; and
    4. reducing the burden of the proposed information collection
requirements on registered entities, including through the use of
appropriate automated, electronic, mechanical, or other technological
information collection techniques, e.g., permitting electronic
submission of responses.
    Copies of the submission from the Commission to OMB are available
from the CFTC Clearance Officer, 1155 21st Street NW, Washington, DC
20581, (202) 418-5160 or from http://RegInfo.gov. Organizations and
individuals desiring to submit comments on the proposed information
collection requirements should send those comments to:
     The Office of Information and Regulatory Affairs, Office
of Management and Budget, Room 10235, New Executive Office Building,
Washington, DC 20503, Attn: Desk Officer of the Commodity Futures
Trading Commission;
     (202) 395-6566 (fax); or
     [email protected] (email).
    Please provide the Commission with a copy of submitted comments so
that all comments can be summarized and addressed in the final
rulemaking, and please refer to the ADDRESSES section of this
rulemaking for instructions on submitting comments to the Commission.
OMB is required to make a decision concerning the proposed information
collection requirements between 30 and 60 days after publication of
this Release in the Federal Register. Therefore, a comment to OMB is
best assured of receiving full consideration if OMB receives it within
30 calendar days of publication of this Release. Nothing in the
foregoing affects the deadline enumerated above for public comment to
the Commission on the proposed rules.

C. Cost-Benefit Considerations

1. Statutory and Regulatory Background
    Section 15(a) 252 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. 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
participants and the public; (2) efficiency, competitiveness, and
financial integrity of markets; (3) price discovery; (4) sound risk
management practices; and (5) other public interest considerations. The
Commission considers the costs and benefits resulting from its
discretionary determinations with respect to the section 15(a) factors.
—————————————————————————

    252 7 U.S.C. 19(a).
—————————————————————————

    In this release, the Commission is proposing both substantive and
non-substantive revisions and additions to existing regulations in part
43. Together, these proposed revisions and additions are intended to
improve real-time public reporting for reporting counterparties, SEFs,
DCMs, SDRs, and market participants that use real-time public data. The
non-substantive amendments discussed above in this release do not have
cost-benefit impact and are not discussed in this section.
    Many of the proposed rule changes will likely affect a wide variety
of proprietary reporting systems developed by SDRs and reporting
entities. In many cases, SDRs and other industry participants are in
the best position to estimate computer programming costs of changing
the reporting requirements. Hence, while the Commission can provide
broad ranges of estimates of the programming costs associated with the
proposed rule changes, the Commission looks forward to receiving
comments that will help refine those numbers. Regarding changes which
require technical updates to reporting systems, where significant, CFTC
staff estimated the hourly wages market participants will likely pay
software developers to implement each change to be between $47 and $100
per hour.253 Relevant amendments below will list a low-to-high range
of potential cost as determined by the number of developer hours
estimated by technical subject

[[Page 21547]]

matter experts (“SMEs”) in the Commission’s Office of Data and
Technology.
—————————————————————————

    253 Hourly wage rates came from the Software Developers and
Programmers category of the May 2018 National Occupational
Employment and Wage Estimates Report produced by the U.S. Bureau of
Labor Statistics, available at https://www.bls.gov/oes/current/oes_nat.htm. The 25th percentile was used for the low range and the
90th percentile was used for the upper range ($36.07 and $76.78,
respectively). Each number was multiplied by an adjustment factor of
1.3 for overhead and benefits (rounded to the nearest whole dollar)
which is in line with adjustment factors the CFTC has used for
similar purposes in other final rules adopted under the Dodd-Frank
Act. See, e.g., 77 FR at 2173 (using an adjustment factor of 1.3 for
overhead and other benefits). These estimates are intended to
capture and reflect U.S. developer hourly rates market participants
are likely to pay when complying with the proposed changes. We
recognize that individual entities may, based on their
circumstances, incur costs substantially greater or less than the
estimated averages and encourage commenters to share relevant cost
information if it differs from the numbers reported here.
—————————————————————————

    Quantifying other costs and benefits, such as those resulting from
changes in price transparency from a rule change, are inherently harder
to measure. Such effects will be discussed qualitatively when
quantitative measures are difficult to obtain. In addition,
quantification of effects relative to current market practice may not
be fully representative of future activity if participants adjust their
trading behavior in response to rule updates. The Commission therefore
specifically requests comment on the costs associated with this
proposed rulemaking to help the Commission quantify such costs in the
final rulemaking.
    The Commission notes that the discussion in this section is based
on the understanding that swap markets often extend across geographical
regions. Many swap transactions involving U.S. firms occur across
international borders; some Commission registrants are even
headquartered outside of the United States, with the most active
participants often conducting operations both within and outside the
United States. Where the Commission does not specifically refer to
matters of location, the discussion of costs and benefits refers to the
proposed rules’ effects on all swaps activity, 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).254
—————————————————————————

    254 See 7 U.S.C. 2(i). CEA section 2(i) limits the
applicability of the CEA provisions enacted by the Dodd-Frank Act,
and Commission regulations promulgated under those provisions, to
activities within the U.S., unless the activities have a direct and
significant connection with activities in, or effect on, commerce of
the U.S.; or contravene such rules or regulations as the Commission
may prescribe or promulgate as are necessary or appropriate to
prevent the evasion of any provision of the CEA enacted by the Dodd-
Frank Act. Application of section 2(i)(1) to the existing part 43
regulations with respect to SDs/MSPs and non-SD/MSP counterparties
is discussed in the Commission’s Interpretive Guidance and Policy
Statement Regarding Compliance With Certain Swap Regulations, 78 FR
45292 (July 26, 2013).
—————————————————————————

2. Considerations of the Costs and Benefits of the Commission’s Action
a. Sec.  43.3–Method and Timing for Real-Time Public Reporting 255
—————————————————————————

    255 The proposed amendments to Sec. Sec.  43.1 and 43.2 do not
have any cost-benefit impact.
—————————————————————————

i. Sec.  43.3(a)(4)–Post-Priced Swaps
    The Commission is proposing Sec.  43.3(a)(4) to establish
requirements for reporting PPSs, which the Commission proposes to
define as off-facility swaps for which the price has not been
determined at the time of execution. The Commission understands that
PPSs can arise in a variety of settings. One possibility is for the
price of the swap to be tied to a reference price that is not yet
determined at the time of the trade; examples of this could include the
daily settlement price of a stock index or crude oil futures or a
benchmark such as the Argus WTI Midland price assessment.256 In this
case, the PPS would only have a defined price once the reference price
is determined. A second possibility is for the price of a PPS to be
determined only after the dealing counterparty is able to hedge its
exposure to the PPS. In this case, the price of the PPS would only be
fixed after the SD has completed its hedge.
—————————————————————————

    256 This is similar to “trade at settlement” trades in
futures markets which trade at prices that represent the settlement
price or a spread to the settlement price (e.g., a TAS plus one
tick); once the settlement price is defined, the trade is then
marked with the corresponding trade price. The Commission believes
that this type of post-priced swap is especially common for equity
swaps, where traders often need to match the settlement price of a
given index.
—————————————————————————

    The Commission is not able to clearly identify which swaps would be
classified as PPSs under the new rules.257 This makes an accurate
estimate of how many individual swaps or counterparties the proposed
rule change would impact difficult to obtain. Under the updated list of
STAPD elements in appendix C, reporting parties would be required to
report that a swap is a PPS to allow the Commission and the public to
get a clearer view of PPS activity.258
—————————————————————————

    257 There are a few alternatives to identify the set of swaps
that would be impacted by proposed Sec.  43.3(a)(4). First, it might
be possible to identify PPSs using part 43 data by searching the
data to determine how many swaps are reported with a missing price
with a reporting time close to execution time. However, the
Commission understands that not all reporting parties report their
PPSs close in time to the execution of the PPS; instead, these
counterparties wait until a price is determined. A second option
might be to assume swaps with a price but a large difference between
reporting time and execution time are PPSs; however, this
methodology might include swaps with other non-price varying terms
such as quantity. Finally, a more involved check would combine parts
43 and 45 data to check for differences in the reported price. Since
all of these options are potentially over- or under-inclusive, the
Commission is not attempting to identify for this discussion which
swaps in the current data would be classified as PPSs.
    258 The proposed STAPD element for “post-priced swap
indicator” is discussed above in section III.
—————————————————————————

    As discussed above in section II.C.2., proposed Sec.  43.3(a)(4)(i)
would permit reporting counterparties to delay reporting that are
identified as PPSs to SDRs until the earlier of: (i) The price being
determined; and (ii) 11:59:59 p.m. eastern time on the execution date.
For Variable Terms Swaps for which the price is known at execution but
some other term is left for future determination (e.g., quantity),
reporting parties remain obligated to report the swap ASATP after
execution, even absent the as-of-yet undetermined terms.
    Baseline: The current rule requires reporting parties to report all
swaps ASATP after execution; this baseline does not contain an
exception for Variable Terms Swaps, a category of swaps which includes
PPSs. However, based on discussions with market participants, many PPSs
and other Variable Terms Swaps are not currently reported until all
terms have been determined and those that are reported are difficult to
identify. The Commission believes that may be due in some part to
market participants’ lack of awareness that the ASATP standard applies
to all Variable Terms Swaps, or interprets execution in a different way
than the Commission.
    Benefits: This rule would establish a bright-line standard for when
a PPS and other Variable Terms Swaps needs to be reported for public
dissemination, in lieu of the reporting variation that, as described
above, appears to be current practice. By explicitly describing
reporting obligations for PPSs, as well as the other Variable Terms
Swaps, the rule would create consistency in reporting, reduce
uncertainty about obligations, and create a more level playing field
for reporting entities. This would make the real-time public data more
informative to traders.
    Another benefit of allowing delayed reporting of PPSs is that it
would permit parties to hedge the positions they acquire in a more
cost-effective way. For example, if a client asks an SD to take the
long side of a large swap, the SD may be able to hedge that position
with less price impact if other traders are unaware of the SD’s hedging
need. This ability to hedge while mitigating price impact can often
translate to better pricing for the client. Thus, the Commission
anticipates proposed Sec.  43.3(a)(4) would decrease SDs’ hedging
costs, especially for large or non-standardized trades, improve
customer pricing, and increase those clients’ willingness to take
positions.
    Costs: Delayed reporting of PPSs may reduce the amount of
information available to market participants as a whole and, in that
sense, frustrate the objective of price transparency. In particular,
other market participants would have a less-precise estimate of
intraday trading volume in real-time, which can introduce an
information asymmetry. Another cost is that proposed Sec.  43.3(a)(4)
might encourage

[[Page 21548]]

traders to trade more PPSs, and fewer swaps for which the price is
known at execution,259 further reducing transparency as fewer trades
are reported ASATP after execution.
—————————————————————————

    259 For instance, because proposed Sec.  43.3(a)(4) permits
delaying reporting, it could create an incentive for an SDs’ PPS
counterparties to seek to enter into swaps that they know will take
some time for the SD to hedge (e.g., swaps in larger size than they
ordinarily would seek to execute) so that such counterparties can
receive the benefit of the delayed reporting permitted by proposed
Sec.  43.3(a)(4).
—————————————————————————

    The Commission is proposing regulation Sec.  43.3(a)(4) to specify
the requirements for how PPSs are to be reported. Notwithstanding the
potential incremental costs identified above, the Commission
preliminarily believes this change is warranted in light of the
anticipated benefits.
Request for Comment
    The Commission requests comment on its consideration of the costs
and benefits of proposed Sec.  43.3(a)(4), including regarding issues
and questions specifically identified below. Please provide data,
statistics, or other supporting information for positions asserted.
    (26) Are there additional costs or benefits that the Commission
should consider? If so, please identify and, where quantifiable,
provide data or other information to assist the Commission in
quantifying them.
    (27) Are there alternatives that would generate greater benefits
and/or lower costs?
    (28) What percentage of PPSs have their prices determined by
midnight on the date of execution (by asset class and overall)? What
percentage of Variable Terms Swaps have their prices determined by
midnight on the date of execution (by asset class and overall)? Do
market participants have trouble reporting, and do SDRs have difficulty
disseminating, PPS trades, because the placeholder terms of the swaps
(including, but not limited to, placeholder values such as zero or
blank fields) are inconsistent with SDRs’ allowable values?
    (29) Do market participants have an estimate for the number of
swaps that may shift to PPS if the Commission grants PPS a reporting
delay?
ii. Sec.  43.3(a)(5)–Clearing Swaps
    The Commission is proposing Sec.  43.3(a)(5) to add DCOs to the
reporting counterparty hierarchy for clearing swaps that are publicly
reportable. DCOs are not typically the entities that are required to
report information under part 43, since swaps associated with the
clearing process (e.g., novations) have already been reported in some
form; for example, SEFs, DCMs, and reporting counterparties report the
original, market-facing swap to SDRs for public dissemination and then
send that swap to the DCO for clearing. This is inconsistent with the
part 45 reporting hierarchy that the Commission is concerned introduces
some confusion. Proposed Sec.  43.3(a)(5) describes the limited,
specific cases when a DCO would be required to submit a swap for public
dissemination (e.g., when executing swaps to hedge the risk resulting
from a default of a clearing member). While the number of such cases is
small, the reporting responsibility in those cases is left unspecified
under current rules.
    Baseline: The rules currently do not expressly require DCOs to
submit any swap records to an SDR for public dissemination.
    Benefits: Proposed Sec.  43.3(a)(5) will require DCOs to report
swaps for public dissemination if the DCO is a counterparty to the
initial swap, and the swap falls within the definition of a PRST. In
cases where these swaps are not currently being reported under part 43,
perhaps due to ambiguity over the reporting hierarchy, this rule change
is likely to increase market transparency. Related, more clearly
defining the reporting responsibilities for DCOs would improve
reporting consistency and reporting validation.
    Costs: The Commission expects that proposed Sec.  43.3(a)(5) would
impose minor additional costs on DCOs because DCOs would now be the
reporting party for a certain category of PRSTs. As a preliminary
matter, the Commission believes that the proposed amendment will affect
a small number of swaps. Further, while the Commission currently lacks
information to estimate the direct cost incurred here by the DCOs, it
expects the incremental per-swap reporting cost to be very small
because DCOs have already incurred most of the fixed set-up costs of
reporting. In addition, two DCOs report to affiliated SDRs, which
should mitigate the cost of reporting PRSTs. For DCOs that are not
affiliated with SDRs, the cost may be higher.
    The Commission is proposing Sec.  43.3(a)(5) to add DCOs to the
required reporting hierarchy for clearing swaps. Notwithstanding the
anticipated incremental costs identified above, the Commission
preliminarily believes this change is warranted in light of the
anticipated benefits.
Request for Comment
    The Commission requests comment on its consideration of the costs
and benefits of proposed Sec.  43.3(a)(5), including regarding issues
and questions specifically identified below. Please provide data,
statistics, or other supporting information for positions asserted.
    (30) Are there additional costs or benefits that the Commission
should consider? If so, please identify and, where quantifiable,
provide data or other information to assist the Commission in
quantifying them.
    (31) Are there alternatives that would generate greater benefits
and/or lower costs?
    (32) Are there additional situations in which a DCO would be the
reporting counterparty to a PRST that the Commission has not
considered? Please specify any scenarios, along with the frequency with
which they occur. Would these scenarios result in additional costs for
DCOs if the Commission were to require DCOs to be the reporting
counterparties?
    (33) What are the costs of requiring DCOs to report clearing swaps
that are PRSTs? Please specify all expected one-time and ongoing
compliance costs. What are the reporting costs faced by the parties
that are reporting these trades under the current regulations?
iii. Sec.  43.3(a)(6)–Mirror Swaps
    The Commission is proposing Sec.  43.3(a)(6) to establish
requirements for reporting a certain subset of prime brokerage swaps.
These prime brokerage swaps result from an agency agreement between a
prime broker and a customer, pursuant to which a prime broker agrees to
serve as a swap counterparty to the customer on terms negotiated by the
customer with third parties, often referred to as executing brokers (or
executing dealers). This arrangement is possible, provided that the
terms of the swap fall within acceptable parameters set forth in the
agency agreement.
    To illustrate proposed Sec.  43.3(a)(6) and consider its costs and
benefits, the Commission will focus on what it understands to be the
simplest type of prime brokerage swap.260 In that structure, once the
customer negotiates with an executing broker the terms of a

[[Page 21549]]

swap that fits within the parameters set forth in the agency agreement
(the “pricing event”), two swaps are created: a swap between the
executing broker and the prime broker (the “trigger swap”) and a swap
with offsetting economic terms between the prime broker and the
customer (the “mirror swap”).261
—————————————————————————

    260 The Commission understands that there are many different
prime brokerage swap transaction structures. However, the Commission
has limited the discussion in this Cost-Benefit Considerations
section to one representative type because it is impractical to
consider the costs and benefits of each structure in a set of an
unlimited number of transaction structures. The cost-benefit
considerations discussion may therefore fail to account for some
costs associated with all covered prime-brokerage transactions. The
Commission requests comment below on the costs the Commission may
need to account for as a result of prime brokerage swap transaction
structures other than the one considered for this analysis.
    261 This mirror swap includes an adjustment resulting from the
prime brokerage servicing fees.
—————————————————————————

    Because the prime broker is a counterparty to both a trigger swap
and a mirror swap, it has two offsetting exposures that should leave it
market risk neutral. The prime broker does, however, take on
counterparty credit risk from both the client and the executing broker.
    The current part 43 rules and, in particular, the definition in
Sec.  43.2 of PRST, do not expressly address mirror swaps or trigger
swaps. As a result, the Commission is concerned that this reporting is
inconsistent today. In particular, the Commission is concerned that
mirror swaps are currently under-reported because market participants–
acting on the belief that reporting mirror swap terms duplicative of
those already reported for the corresponding trigger swap would distort
price discovery,262 and informed by CFTC Letter No. 12-53, discussed
above in section II.C.4.263–inconsistently report them. Because
there is no indicator for which swaps represent trigger or mirror swaps
in the public reporting requirements, the Commission cannot identify
how common these swaps may be. More generally, potential current non-
reporting of mirror swaps makes it difficult to quantify how many swap
trades and open positions result from prime brokerage activity.264
These current issues introduce difficulties in using part 43
information for real-time analysis or longer historical studies of
swaps market activity.
—————————————————————————

    262 This would be the case if all the primary economic terms
are the same for, for instance, a trigger swap and a single mirror
swap. By reporting both the mirror and the trigger swap, market
participants may assume that the volume of price-forming trade
activity is higher than it actually is.
    263 As discussed above in section II.C.4., CFTC Letter No. 12-
53 provided no-action relief for reporting counterparties from the
obligation to report mirror swaps to SDRs.
    264 The STAPD elements in appendix C would include a new data
element “Prime brokerage transaction identifier” and would require
the reporting party to include the USI or UTI of the trigger swap in
the “prior USI” or “prior UTI” fields of each mirror swap.
—————————————————————————

    Pursuant to proposed Sec.  43.3(a)(6)(i), an SDR would not need to
publicly disseminate a mirror swap, but the swap would still be
reported to an SDR pursuant to part 45; in contrast, the trigger swap
would both publicly disseminated by an SDR pursuant to part 43 and
reported to an SDR pursuant to part 45. This would result in different
reporting regimes for mirror swaps than for other swaps used to hedge
exposure.
    Baseline: The current rules do not specifically address mirror
swaps or prime brokerage transactions. Pursuant to the current
regulations, real-time public reporting is required for both trigger
swaps and mirror swaps. To the extent some reporting counterparties are
not in compliance, cost and benefits relative to the status quo may be
different than when measured against the regulatory baseline. This
different cost/benefit profile is considered as well.
    Benefits: Proposed Sec.  43.3(a)(6) would help market participants
by explicitly providing that mirror swaps are not publicly reportable,
provided that the related trigger swaps are reported pursuant to parts
43 and 45. The changes would reduce the current burden on regulatory-
compliant prime brokers and other parties to report mirror swaps, an
incremental benefit that market participants who currently do not
report these swaps would not realize.
    The Commission preliminarily believes that proposed Sec. 
43.3(a)(6) also would benefit market participants who monitor the
public tape (likely some of the most active participants) by preventing
duplicative mirror swaps that reflect the same economic terms as
trigger swaps.265 Inclusion of such duplicative records can create a
false impression of market volume at a particular price.
—————————————————————————

    265 In the case of partial reverse give-ups, the mirror swaps
may reflect different notional amounts than the trigger swaps.
However, as discussed above, the Commission is limiting the
discussion in this section to the plain vanilla, trigger swap-mirror
swap structure illustrated above, which does not involve partial
reverse give-ups.
—————————————————————————

    Costs: The Commission recognizes that, in the plain vanilla,
trigger swap-mirror swap structure described above, the prime broker
establishes two open positions: one between it and the executing broker
and one with offsetting economic terms facing the client. This subjects
the prime broker to counterparty risk from both counterparties but not
to market risk.266 By omitting mirror swaps from the public tape, the
proposed rule change would increase the number of swaps that affect the
credit risk position of market participants but are not required to be
publicly reported pursuant to part 43, thus frustrating the objective
of price transparency.267
—————————————————————————

    266 Although the execution of the trigger swap results in a
change in the market risk position between the prime broker and the
executing broker, and the execution of the mirror swap results in a
change in the market risk position between the prime broker and its
customer, the prime broker does not have any net market exposure
(because its market position is flat). However, because the market
risk position between the prime broker and each of its
counterparties changed, the trigger swap and mirror swap both are
currently PRSTs.
    267 For additional information regarding swaps that affect the
credit risk position of market participants but are not required to
be publicly reported, see: Paragraph (2) of the definition of a PRST
in Sec.  43.2 gives two examples of executed swaps that do not fall
within the definition of a publicly reportable swap: (i) Internal
swaps between 100% subsidiaries of the same parent entity; and (ii)
swaps resulting from portfolio compression exercises. Paragraph (3)
of the definition of a PRST in Sec.  43.2 states that those examples
represent swaps that are not at arm’s length and thus are not
[PRSTs], notwithstanding that they do result in a corresponding
change in the market risk position between two parties.
—————————————————————————

    While the Commission’s analysis has focused on plain vanilla mirror
swaps in this section, it notes that some mirror swaps do not contain
the same economic terms as the trigger swap. There may be mirror swaps
in which there are multiple trades that comprise the mirror side for a
single trigger swap. In these cases, the public will not learn about
the multiple mirror swaps which have an aggregate notional amount that
is equal to the trigger swap. This, as with other examples, has the
potential to reduce the level of transparency for a specific subset of
trade activity, though the trade activity is in part duplicative of
other swaps visible to the market.
    Furthermore, eliminating reporting for mirror swaps could
incentivize the use of more complex mirror swaps to avoid public
reporting, increasing the possibility of more complicated, risky swaps
being created. The Commission expects such risk to be minimal, however,
given that all swaps associated with prime brokerage transactions will
still be reported to SDRs pursuant to part 45.
    The Commission is proposing Sec.  43.3(a)(6) to establish
requirements for reporting prime brokerage swaps. Notwithstanding the
anticipated incremental costs, the Commission preliminarily believes
this change is warranted in light of the anticipated benefits.
Request for Comment
    The Commission requests comment on its consideration of the costs
and benefits of proposed Sec.  43.3(a)(6), including regarding issues
and questions specifically identified below. Please provide data,
statistics, or other supporting information for positions asserted.
    (34) Are there additional costs or benefits that the Commission
should

[[Page 21550]]

consider? If so, please identify and, where quantifiable, provide data
or other information to assist the Commission in quantifying them.
    (35) Are there alternatives that would generate greater benefits
and/or lower costs?
    (36) Can the double-reporting concerns be addressed by the
alternative of adding an additional reporting field to indicate if a
swap is a trigger or a mirror? If so, what are costs and benefits of
this alternative approach relative to what is being proposed?
    (37) How common are mirror swaps? What percentage are “plain
vanilla” as characterized above as compared to more complex scenarios?
What would the cost-benefit differences be between plain vanilla and
non-plain vanilla mirror swaps?
iv. Sec.  43.3(c)–Availability of Swap Transaction and Pricing Data to
the Public
    Current Sec.  43.3(d)(1) and (2) (which would be relocated to Sec. 
43.3(c)(1) and (2)) specify the format in which SDRs must make STAPD
available to the public; in addition, current rules require that the
disseminated data must be made “freely available and readily
accessible” to the public. Substantively, the Commission is proposing
to amend these requirements by specifying that SDRs shall make such
data available for at least one year after dissemination, and provide
instructions on how to download, save, and search the data. While
current Sec.  43.3(d) is silent on how long SDRs must maintain and
provide the public access to swap data and does not require SDRs to
provide instructions on how to download, save, and search the data, for
baseline purposes of this cost-benefit consideration the Commission, as
noted above in section II.C.7., understands a one-year time frame is
current practice for at least a majority of SDRs. To the extent the
baseline might be less than one year by an SDR, proposed Sec. 
43.3(c)(1) would increase the transparency of swap data to the public.
Finally, in practice, the cost of the change is expected to be
negligible, because SDRs are already making the public reports
available for more than one year.
    The Commission requests comment on its consideration of the costs
and benefits of proposed Sec.  43.3(c). Please provide data,
statistics, or other supporting information for positions asserted.
v. Sec.  43.3(d)–Data Reported to SDRs
    The Commission is proposing Sec.  43.3(d), which would require
reporting counterparties, SEFs, and DCMs, when reporting STAPD to an
SDR, to: (i) Use the technical standards as instructed by the
Commission; (ii) satisfy SDR validation procedures; and (iii) use the
facilities, methods, or data standards provided or required by the SDR.
    The standardization of STAPD reported to and publicly disseminated
by SDRs has improved over recent years at each SDR. However, the
Commission believes market participants would now benefit from having
publicly disseminated STAPD standardized across SDRs. To do so, the
Commission is proposing to further specify the STAPD elements to be
reported to and publicly disseminated at SDRs. While SDRs are already
accepting and publicly disseminating most of the information in
appendix C, the Commission believes standardization could be improved
by updated, more specific definitions.
    The Commission proposed SDR data validation requirements in the
2019 part 49 NPRM. Proposed Sec.  43.3(d) would require reporting
entities to satisfy the SDR data validation procedures. Since proposed
Sec.  43.3(d)(2) is closely related to proposed Sec.  43.3(f),
discussed below, the Commission views its discussion of the cost and
benefits of Sec.  43.3(f) equally applicable here and incorporates it
by reference.
    Baseline: Currently, appendix A to part 43, entitled “Data Fields
for Public Dissemination,” describes the set of data fields that
reporting counterparties are required to complete and provides guidance
for such completion. For each data field, there is a corresponding
description, example, and, where applicable, an enumerated list of
allowable values. Currently, SDRs are not required to apply any data
validation procedures on the reports sent to them. In addition, the
Commission understands that at least some SDRs have flexible
application programming interfaces (“APIs”) that allow reporting
counterparties to report data for part 43 purposes in many ways, making
standardization difficult, especially across SDRs.268
—————————————————————————

    268 The Commission believes use of these flexible APIs has
been encouraged by the current lack of specificity for reporting
data elements.
—————————————————————————

    Benefits: The Commission expects both reporting entities and SDRs
to benefit from further specified data elements and technical standards
in how STAPD needs to be reported. These standards should, over time,
make reporting easier and more accurate, which may reduce the time
between when a trade is executed and when that trade is publicly
reported. Standards may also allow reporting entities who currently
report to multiple SDRs (traditionally the more active participants) to
use similar reporting systems for all relevant SDRs. This would likely
lower reporting costs, compared to the current environment in which
SDRs have non-standardized requirements. Requiring all SDRs to have the
same standards would also make it less costly for all participants to
respond to changing market conditions (which might require new
specifications), since the same changes would apply for all
interactions between reporting entities and SDRs.
    Most significantly, market participants are likely to benefit from
the increased standardization of information, because of the added
assurance that information publicly reported by one SDR is fully
consistent with swap information published by another. This increased
consistency will afford market participants a more easily-accessible,
accurate view of activity across all Commission regulated swap markets.
The Commission expects the general public would also benefit when the
information is combined across SDRs to produce reports related to
general swaps market activity.
    Along with the expected benefits that will arise from the
standardization and uniformity of existing information reported in
real-time, the Commission expects additional benefits related to the
new STAPD elements proposed in appendix C. For example, there is a new
data element allowing users to identify PPSs or if the swap transaction
is considered a bespoke swap. This additional information will allow
for additional options in processing and studying the market
information.
    Costs: The Commission expects that reporting entities and SDRs
would incur some initial costs to incorporate any new technical
standards into their reporting infrastructure (e.g., programming
costs). This NPRM is proposed in parallel with the part 45 NPRM and
relates to a subset of the information collected under part 45. This
means the proposed changes to parts 43 and 45 would largely require
technological changes that could merge two different data streams into
one. For example, SDRs will have to make adjustments to their
extraction, transformation, and loading (ETL) process in order to
accept feeds that comply with new technical standards and validation
conditions.
    Because many of the changes SDRs would make to comply with part 43
will likely also allow it to comply with part 45, the Commission
anticipates significantly lower aggregate costs relative to the costs
for parts 43 and 45 separately. For this reason, the costs

[[Page 21551]]

described below may most accurately represent the full technological
cost of satisfying the requirements for both proposed rules.
    Based on conversations with CFTC staff experienced in designing
data reporting, ingestion, and validation systems, Commission staff
estimates the cost per SDR to be in a range of $141,000 to
$500,000.269 This staff cost estimate is based on a number of
assumptions and covers the set of tasks required for the SDR to design,
test, and implement a data system based on the proposed list of swap
data elements in appendix C and the guidebook.270 These numbers
assume that each SDR will spend approximately 3,000-5,000 hours to
establish ETL into a relational database on such a data stream.271
—————————————————————————

    269 To generate the included estimates, a bottom-up estimation
method was used based on internal CFTC expertise. In brief, and as
seen in the estimates, the Commission anticipates that the task for
the SDR’s will be significantly more complex than it is for
reporters. On several occasions, the CFTC has developed an ETL data
stream similar to the anticipated parts 43 and 45 data streams.
These data sets consist of 100-200 fields, similar to the number of
fields in proposed appendix 1. This past Commission experience has
been used to derive the included estimates.
    270 These assumptions include: (1) At a minimum, the SDRs will
be required to establish a data extraction transformation and
loading (ETL) process. This implies that either the SDR is using a
sophisticated ETL tool, or will be implementing a data staging
process from which the transformation can be implemented. (2) It is
assumed that the SDR would require the implementation of a new
database or other data storage vehicle from which their business
processes can be executed. (3) While the proposed record structure
is straight forward, the implementation of a database representing
the different asset classes may be complex. (4) It is assumed that
the SDR would need to implement a data validation regime typical of
data sets of this size and magnitude. (5) It is reasonable to expect
that the cost to operate the stream would be lower due to the
standardization of incoming data, and the opportunity to
automatically validate the data may make it less labor intensive.
    271 The lower estimate of $141,000 represents 3,000 working
hours at the $47 rate. The higher estimate of $500,000 represents
5,000 working hours at the $100 rate.
—————————————————————————

    For reporting entities, the Commission estimates the cost per
reporting entity to be in a range of $23,500 to $72,500.272 This cost
estimate is based on a number of assumptions and covers a number of
tasks required by the reporting entities to design, test, and implement
an updated data system based on the proposed swap data elements,
technical standards, and validation conditions.273 These tasks
include defining requirements, developing an extraction query,
developing of an interim extraction format (e.g., CSV), developing
validations, developing formatting conversions, developing a framework
to execute tasks on a repeatable basis, and finally, integration and
testing. Staff estimates that it would take a reporting entity 200 to
325 hours to implement the extraction. Including validations and
formatting conversions would add another 300 to 400 hours, resulting in
an estimated total of 500 to 725 hours per reporting entity.274
—————————————————————————

    272 To generate the included estimates, a bottom-up estimation
method was used based on internal CFTC expertise. On several
occasions, the CFTC has created data sets that are transmitted to
outside organizations. These data sets consist of 100-200 fields,
similar to the number of fields in the proposed appendix 1. This
past experience has been used to derive the included estimates.
    273 These assumptions include: (1) The data that will be
provided to the SDRs from this group of reporters largely exists in
their environment. The back end data is currently available; (2) the
data transmission connection from the firms that provide the data to
the SDR currently exists. The assumption for the purposes of this
estimate is that reporting firms do not need to set up
infrastructure components such as FTP servers, routers, switches, or
other hardware; it is already in place; (3) implementing the
requirement does not cause reporting firms to create back end
systems to collect their data in preparation for submission. It is
assumed that firms that submit this information have the data
available on a query-able environment today, (4) reporting firms are
provided with clear direction and guidance regarding form and manner
of submission. A lack of clear guidance will significantly increase
costs for each reporter; and (5) there is no cost to disable
reporting streams that will be made for obsolete by the proposed
change in part 43.
    274 The lower estimate of $23,500 represents 500 working hours
at the $47 rate. The higher estimate of $72,500 represent 725
working hours at the $100 rate.
—————————————————————————

    The Commission is proposing Sec.  43.3(d) to address how data is
reported to SDRs. Notwithstanding the anticipated incremental costs,
the Commission preliminarily believes this change is warranted in light
of the anticipated benefits.
Request for Comment
    The Commission requests comment on its consideration of the costs
and benefits of proposed Sec.  43.3(d), including regarding issues and
questions specifically identified below. Please provide data,
statistics, or other supporting information for positions asserted.
    (38) Are there additional costs or benefits that the Commission
should consider? If so, please identify and, where quantifiable,
provide data or other information to assist the Commission in
quantifying them.
    (39) Are there alternatives that would generate greater benefits
and/or lower costs?
vi. Sec.  43.3(f)–Data Validation Acceptance Message
    The Commission is proposing Sec.  43.3(f) to establish requirements
for SDRs to validate real-time public data and send SEFs, DCMs, and
reporting counterparties data validation acceptance or rejection
messages.
    The proposed validation requirements are designed to ensure
collected information is accurate. The data validation process would
require close communication between the reporting entity and the SDR
and would cover data reported pursuant to both parts 43 and 45. To
date, the Commission has not required the use of validations by the SDR
and therefore has not provided any guidance on either the content or
format of the messages associated with these validations.
    While this change would require SDRs and reporting entities to
update their systems, the Commission expects that, for the majority of
swaps, validations would greatly increase the standardization of
reporting requirements, so reporting entities could ensure that the
updated systems would consistently pass the validation tests.
    Baseline: SDRs are not required to validate data sent by reporting
entities, a condition that exposes the public data tape to distortions
through the inclusion of inaccurate or missing data. While there are no
current requirements to validate data, we can observe activity that is
related to market participants cancelling and correcting publicly
disseminated trade information.275 Based on observing a non-trivial
share of records linked to this cancel and correct action, along with
conversations with SDRs regarding their experience with reporting
errors, the Commission expects this proposed rule change to help ensure
accurate data is reported for public dissemination.
—————————————————————————

    275 For example, based on a three week study in January 2020,
CFTC staff found 11% of IRS records linked to a “Cancel” action
type and 8% of records linked to a “Correct” action type. For CDS,
staff found 7% and 6% of records linked to a “Cancel” and
“Correct” action type, respectively. These percentages are much
larger for commodity swaps and also appear to have a higher share
related to uncleared swaps.
—————————————————————————

    Benefits: The Commission expects that the proposed changes to Sec. 
43.3(f) will result in benefits through improved quality of data sent
to the SDR and disseminated to the public. Improved quality of real-
time data helps market participants in their trading decisions. It also
enables better market oversight by self-regulatory organizations.
Finally, more accurate and complete data helps researchers learn about
swaps markets, which in turn can inform future regulatory
decisions.276
—————————————————————————

    276 The Commission is aware of at least two publicly-available
studies that discuss problems with the current part 43 data The
first study found that about 10% of CDS traded in their data set had
missing or zero prices. Y.C. Loon, and Z. (Ken) Zhong, “Does Dodd-
Frank affect OTC transaction costs and liquidity? Evidence from
real-time trade reports,” Journal of Financial Economics (2016),
available at http://dx.doi.org/10.1016/j.jfineco.2016.01.01. The
second study reported a number of fields that were routinely null or
missing, making it difficult to analyze swap market volumes. See
Financial Stability Report, Office of Financial Research (Dec. 15,
2015) at 84-85, available at https://financialresearch.gov/financial-stability-reports/files/OFR_2015-Financial-Stability-Report_12-15-2015.pdf.

—————————————————————————

[[Page 21552]]

    Furthermore, the Commission expects benefits to result from
improved communication between SDRs and reporting entities due to this
data validation requirement. Finally, since the Commission is also
proposing similar data validation requirements for part 45 swap data,
along with the currently proposed changes to part 49, the Commission
expects reporting parties will benefit from having harmonized
regulatory requirements.
    Costs: The Commission expects that the proposed rule change would
create costs for SEFs, DCMs, and reporting counterparties, as well as
SDRs, as they would be required to manage validation messages related
to STAPD meant to be released for public consumption ASATP following
execution. The Commission expects these costs to be limited to the
initial development of automated systems to deal with acceptance or
rejection messages.
    Costs may differ between SDRs and reporting parties. With respect
to SDRs, the Commission expects the costs of this rule change to be
higher for SDRs with a larger share of uncleared swaps. These swaps
tend to be less standardized and therefore have a higher degree of
reporting complexity. The Commission also expects costs to increase
with the number of distinct reporting entities as the SDR will be
required to set up lines of communication with each entity. For SEFs,
DCMs, and reporting counterparties, the Commission expects costs to be
higher for reporting parties not able or willing to build automated
systems, as they would need to manually determine why a rejection
message exists and then manually resubmit the corrected information.
However, the Commission expects that these costs, for both the SDR and
reporting entities, would be mitigated by the introduction of technical
standards, as standardized reporting by all reporting entities should
reduce the frequency of errors in reporting.
    The Commission is proposing Sec.  43.3(f) to establish requirements
for SDRs to validate real-time public data. Notwithstanding the
anticipated incremental costs, the Commission preliminarily believes
this change is warranted in light of the anticipated benefits.
Request for Comment
    The Commission requests comment on its consideration of the costs
and benefits of proposed Sec.  43.3(f), including regarding issues and
questions specifically identified below. Please provide data,
statistics, or other supporting information for positions asserted.
    (40) Are there additional costs or benefits that the Commission
should consider? If so, please identify and, where quantifiable,
provide data or other information to assist the Commission in
quantifying them.
    (41) Are there alternatives that would generate greater benefits
and/or lower costs?
    (42) What would the costs be (both initial and on-going) for
establishing and maintaining automated validation systems? What
percentage of reporting entities would establish and maintain automated
systems to manage validations? Please provide information on the basis
for those estimates.
b. Sec.  43.4–Swap Transaction and Pricing Data To Be Publicly
Disseminated in Real-Time
i. Sec.  43.4(f)–Process To Determine Appropriate Rounded Notional or
Principal Amounts
    The Commission is proposing to revise Sec.  43.4(f) to amend the
rules for rounding actual notional or principal amounts of a swap
before disseminating such swap data. Amended Sec.  43.4(f)(8) would
require SDRs to round such that the revealed amount is more precise.
For example, trades with notional principal amount less than 100
billion but equal to or greater than one billion, we currently require
rounding to nearest billion, and the new requirement is for rounding to
the nearest 100 million. Similarly, amended Sec.  43.4(f)(9) would
require SDRs to round to the nearest 10 billion (the current
requirement is to the nearest 50 billion) notional for principal
amounts greater than 100 billion before disseminating such swap data.
    The reason the Commission requires SDRs to disseminate rounded
notional or principal amounts of swaps is to conceal the exact notional
of swap transactions to preserve the anonymity of specific large
trades. Such concealment may be beneficial, since disseminating the
exact notional of a swap could allow the public to discern the identity
of the parties. For example, a very specific notional amount may be
attributable to a specific counterparty, as may a very large trade,
given that large trades are rare for most instruments.
    Baseline: For both changes, the baseline is the current rule
regarding appropriate rounding (e.g., to the nearest $1 billion if the
swap is between $1 billion and $100 billion). Under this baseline,
notional amounts falling between $1 billion and $100 billion will be
transformed into 100 different notional amounts. This reflects a rather
imprecise grid of observed trade sizes.
    Benefits: The main benefit of the rule changes is a more precise
depiction of actual trade amounts. Precision would improve price
discovery, giving market participants a better picture of the
relationship between pricing and size for large trades that have
occurred.
    Costs: The main cost of this rule change is a reduction in the
degree of anonymity of specific trades, which may make it more likely
that the public can identify the counterparties to specific swaps. The
proposed rounding changes may also make it more difficult for traders
to hedge positions they acquire in large trades, because the publicly
disseminated data would more accurately reveal trade size.
    The Commission is proposing Sec.  43.4(f) to amend the rules for
rounding actual notional or principal amounts of a swap.
Notwithstanding the anticipated incremental costs, the Commission
preliminarily believes this change is warranted in light of the
anticipated benefits following from increased transparency and the
minimal increase in cost to market participant.
Request for Comment
    The Commission requests comment on its consideration of the costs
and benefits of proposed Sec.  43.4(f), including regarding issues and
questions specifically identified below. Please provide data,
statistics, or other supporting information for positions asserted.
    (43) Are there additional costs or benefits that the Commission
should consider? If so, please identify and, where quantifiable,
provide data or other information to assist the Commission in
quantifying them.
    (44) Are there alternatives that would generate greater benefits
and/or lower costs?
    (45) Would benefits be greater or costs reduced if the ranges
covered by rounding and the round-off amounts were currency-specific
(i.e., different for different currencies) and/or commodity-specific?
If so, please explain and provide supporting data or other information.

[[Page 21553]]

    (46) What are the costs and benefits to alternative mechanisms to
choose the currency-specific rounding amounts? For example, should all
amounts be in USD equivalents, and then apply the same rounding as USD?
ii. Sec.  43.4(g)–Process To Determine Cap Sizes
    The Commission is proposing to amend Sec.  43.4(g) to change the
process for determining cap sizes. Proposed Sec.  43.4(g)(2) would link
the cap determination to a subset of newly defined swap categories in
proposed Sec.  43.6 and establish the use of the 75-percent calculation
described in proposed Sec.  43.6(c)(2). Proposed Sec. Sec.  43.4(g)(3)-
(8) would define new cap sizes for any swap not falling into a swap
category defined in proposed Sec.  43.4(g)(2). Proposed Sec. Sec. 
43.4(g)(9)-(10) would focus on how the Commission would publish any cap
size revision and determine when it becomes effective.
    Cap sizes effectively results in a permanent truncation of notional
values released to the public and are meant to apply to the largest
trades within a defined swap category. This truncation necessarily
results in a less transparent market, but is meant to protect sensitive
information and mitigate the potential negative impact of real-time
public reporting on market liquidity.277 The adjustment to how cap
sizes are determined is paired in this rule with changes to the
methodology of determining block sizes. Both block and cap rules lead
to certain information about swap activity being held back from public
dissemination. In the case of caps, information on the actual notional
size of an extremely large trade is permanently replaced with the cap
value in the public tape. In the case of blocks, information on the
terms of a large swap is temporarily delayed from dissemination.278
—————————————————————————

    277 See Procedures to Establish Appropriate Minimum Block
Sizes for Large Notional Off-Facility Swaps and Block Trades, 78 FR
32866, 32907.
    278 Of course, in the case when a swap satisfies both the cap
and the block threshold, both are true.
—————————————————————————

    Due to their permanence, caps could have a more significant effect
on information dissemination compared to blocks, which allow for only a
delay in reporting. Current Sec.  43.4(h) defines current cap sizes by
asset class and delineates them in USD notional amounts. For example,
there currently are three fixed cap sizes for IRSs in Sec. 
43.4(h)(1)(i) based on tenor: Caps of 250 million USD for swaps with a
tenor of zero to two years; 100 million USD for swaps with a tenor of
two to ten years; and 75 million USD for swaps with a tenor greater
than ten years. The remaining asset classes currently have a single
fixed cap size: 100 Million USD for CDSs; 250 million USD for equity
swaps and foreign exchange; and 25 million USD for other commodity
swaps.279
—————————————————————————

    279 See Sec. Sec.  43.5(h)(1)(ii)-(v).
—————————————————————————

    As discussed, the Commission is proposing new swap categories and
the use of a higher percentage to calculate AMBSs.280 The proposed
process to determine cap sizes would use the proposed new swap
categories and a similar method as is currently used to define AMBSs,
but with a 75-percent notional amount calculation instead of a 67-
percent notional amount calculation. Therefore, the proposed rule
change better aligns the block and cap determination since they would
now be based on the same set of underlying trades. However, use of the
75-percent notional amount calculation method instead of the 67-percent
notional amount calculation method would ensure caps would always be a
smaller subset of trades.
—————————————————————————

    280 See the discussion about proposed changes to Sec.  43.6
below in section V.B.4. for a more complete discussion along with
the cost/benefit consideration of new swap categories.
—————————————————————————

    The Commission reviewed the current cap sizes and found significant
differences in the percentage of trades that are eligible for cap
treatment, both within and across the main asset classes. This reflects
the fact that within asset classes, the vast majority of swaps have the
same cap size across all trade tenor groups.
    Determining the effect of the change in cap determination
methodology requires some assumptions. For example, an assumption that
the determination change does not affect the distribution of trade
sizes is critical to quantifying that effect. Under the assumption that
the distribution of trade sizes is invariant to defined limits, the
Commission calculated some rough estimates of the effect of the limit
changes, based on trading from late 2019.281
—————————————————————————

    281 A sample of 20 weeks was selected from 8/2/2019 to 12/27/
2019 for CDS and IRS markets. This is based on information collected
to create the CFTC’s Weekly Swaps Report. While the information is
based on part 45 data, the vast majority of the trades selected are
reportable swaps under part 43.
—————————————————————————

    Overall, the Commission finds the effect to be a modest decrease in
the number of trades eligible for cap treatment. Nearly 90% of trades
were smaller than minimum cap size under the old methodology, and will
remain so under the new methodology. Commission staff found
approximately 2% of trades were larger than minimum cap size under the
old methodology, and would be larger than minimum cap (and hence
minimum block) size under the new methodology. Roughly 7% are cap
eligible under the current methodology, but will no longer be under the
new methodology. A little more than 1% of trades were large than
minimum cap size under the old methodology, and will be larger than
minimum block (but not cap) size under the new methodology.
    The Commission expects somewhat larger effects in the index CDS
class. For example, for CDS indices based on investment grade indexes,
22% of trades are eligible for cap treatment under the current
methodology, while under the new cap determination methodology this
would be reduced to 3% of trades.
    Baseline: Current practice, based on the initial cap sizes defined
in Sec.  43.4(h)(1), forms the baseline for this cost and benefits
discussion.282 As discussed above, the current cap size regime is
over-inclusive, diminishing market transparency.
—————————————————————————

    282 Since the Commission has not to date established post-
initial cap sizes pursuant to Sec. Sec.  43.4(h)(2) and 43.6(f)(1),
it is using the initial cap sizes as the baseline.
—————————————————————————

    Benefits: The Commission expects a number of benefits to arise from
the proposed rule change given the improved alignment with the AMBS and
the movement toward a cap size that is based on market activity.
Similar to the benefits noted in the block level discussion below, the
movement toward better defined swap categories would ensure cap sizes
are determined from a set of similar swaps. Proposed changes to the cap
size method would better reflect the underlying market and are expected
to benefit market transparency, as there would exist a clear separation
between the block and cap size. This is most apparent in the interest
rate asset class. The proposed rule change would ensure that cap
eligibility would be reserved for only the trades with the largest
notional amounts.
    Costs: The Commission expects that the proposed rule change would
impose costs on SDRs, as they would be required to adjust their systems
to determine when trades within each new swap category would meet the
requirements for cap treatment. The Commission expects such costs to be
minimal given the SDRs already have systems established to identify
when swaps are eligible for block and/or cap treatment.
    Both the costs and benefits of increasing or decreasing cap sizes
result from the increased or decreased, respectively, anonymity they
afford. To

[[Page 21554]]

the extent that the revised cap sizes reduce anonymity for an asset
class, those effects are mitigated by delays in reporting. Of
particular relevance is that all trades with capped notional would be
block eligible. Hence, the time delay in Sec.  43.5 would reduce both
the positive and negative effects of the changes in anonymity
associated with changes in cap sizes.
    The Commission is proposing Sec.  43.4(g) to change the process for
determining cap sizes. Notwithstanding the anticipated incremental
costs, the Commission preliminarily believes this change is warranted
in light of the anticipated benefits.
Request for Comment
    The Commission requests comment on its consideration of the costs
and benefits of proposed Sec.  43.4(g), including regarding issues and
questions specifically identified below. Please provide data,
statistics, or other supporting information for positions asserted.
    (47) Are there additional costs or benefits that the Commission
should consider? If so, please identify and, where quantifiable,
provide data or other information to assist the Commission in
quantifying them.
    (48) Are there alternatives that would generate greater benefits
and/or lower costs?
    (49) Would benefits be greater or costs reduced if the 75-percent
notional amount calculation method was replaced with an alternative
method to identifying the cap threshold? Should there be a different
method applied to caps and blocks since they are designed to accomplish
different objectives? If so, please explain and provide supporting data
or other information.
    (50) For the other commodity swap category (for which swaps are
often measured in physical units), swaps have a block size equal to
zero, and there is a fixed cap size denominated in USD notional. For
such swaps, what are the costs to SDRs to convert the notional amount
into USD to determine whether the trade meets the cap threshold?
c. Sec.  43.5–Time Delays for Public Dissemination of Swap Transaction
and Pricing Data
    The Commission is proposing Sec.  43.5(c) to increase the delay for
the public dissemination of block trades to 48 hours for all block
transactions. This time delay would be a significant change from the
current rules, which set the length of the delay based on transaction
and counterparty characteristics.283 For example, one part of the
current rule defines the length of delay conditional on whether the
swap is executed on a SEF. Another conditions the length of delay on
whether the swap is subject to the mandatory clearing requirement.
Finally, the current rule allows for additional time if neither
counterparty is a SD/MSP.
—————————————————————————

    283 See 17 CFR 43.5.
—————————————————————————

    Baseline: Under the current Sec.  43.5, multiple time delays are in
effect. As discussed in section II.E. above, these time delays range
from 15 minutes for block trades executed on a SEF to 24 business hours
for LNOFs swaps not subject to mandatory clearing and where both sides
of the trade are not SDs/MSPs.
    Benefits: The Commission anticipates the primary effect of proposed
Sec.  43.5(c) would be to provide additional time to intermediaries to
hedge the exposure resulting from accommodating large trades. One
benefit of the additional hedging time provided to intermediaries is
the potential for lower price volatility than if the trade information
were released in real time.284 The lower hedging costs may benefit
end-users wishing to make large trades, to the extent reduced hedging
costs are passed to them. To the extent that price volatility unrelated
to the fundamental supply and demand of the instrument is mitigated,
price discovery might be enhanced by a delay. On the other hand, if a
trade is fundamentally informative, a delay in publication would allow
some participants to trade at off-market prices during the period of
the delay, which is a potential cost to the change.
—————————————————————————

    284 There is substantial literature (see, e.g., Hendrik
Bessembinder and Kumar Vankatarman (2010) “Bid-Ask Spread”
Encyclopedia of Quantitative Finance for a discussion) on the
temporary impact of large traders. The time delay could allow the
intermediary to “spread out the trade” to avoid price volatility
induced by such large trades.
—————————————————————————

    Costs: Proposed Sec.  43.5(c) would extend the delay for reporting
swap transactions with notional amounts above the minimum block size.
Therefore, the Commission anticipates costs associated with a reduction
in the market transparency for a specific set of swaps. The Commission
expects that these costs would be reduced by the additional rule
changes to the swap categories and AMBSs. For example, the Commission
expects fewer trades to get block status as a result of proposed rule
changes in Sec.  43.8, leading to improved transparency for trades
between the old and new threshold sizes. This mitigation is discussed
at length in the preamble.
    The Commission is proposing Sec.  43.5(c) to increase the delay for
public dissemination of block trade information. Notwithstanding the
anticipated incremental costs, the Commission preliminarily believes
this change is warranted in light of the anticipated benefits.
Request for Comment
    The Commission requests comment on its consideration of the costs
and benefits of proposed Sec.  43.5(c), including regarding issues and
questions specifically identified below. Please provide data,
statistics, or other supporting information for positions asserted.
    (51) Are there additional costs or benefits that the Commission
should consider? If so, please identify and, where quantifiable,
provide data or other information to assist the Commission in
quantifying them.
    (52) Are there alternatives that would generate greater benefits
and/or lower costs?
    (53) Should the Commission expect the distribution of costs and/or
benefits to significantly vary across swap categories? If so, please
provide specific examples and a discussion of the differences.
    (54) What is the hedging cost savings from delaying the revelation
of large trades? Could similar savings be realized in any swap category
if the delay was less than 48 hours?
    (55) What factors make it more or less likely that intermediaries
will pass hedging cost savings resulting from delaying the revelation
of large trades to their clients?
    (56) What costs (e.g., reduced liquidity, bad pricing, wide
spreads) are being incurred under the status quo regime? Please provide
detailed information regarding the basis of those estimates.
d. Sec.  43.6–Block Trades
    The Commission is proposing a number of revisions to Sec.  43.6.
The most economically significant revisions of these relate to block
trades; revising the set of swap categories in Sec.  43.6(b) and
amending to the process for determining the AMBS in Sec.  43.6(e). The
remaining changes proposed in Sec.  43.6 are not substantive and are
clarifying changes, so the Commission has not described the costs and
benefits of such proposed changes.285
—————————————————————————

    285 For example, Sec.  43.6(c) discusses the proposed method
for determining the AMBS, but the only change from the current rule
text is related to the new definition for a “trimmed data set.”
The Commission does not believe that this change warrants a
discussion of the costs and benefits.

—————————————————————————

[[Page 21555]]

    In general, changes in minimum block sizes, cap sizes, and
reporting delays have broadly similar effects. Lower minimum block and
cap sizes and longer reporting delays reduce transparency, and may
increase liquidity.286 In this sense, the costs and benefits of the
changes described below would depend on the direction of the change
(e.g., a higher minimum block would increase transparency and may
reduce liquidity).
—————————————————————————

    286 For example, trading a block allows for a temporary
suspension of information made publicly available. This can prevent
traders from “front-running” a swap dealer attempt to hedge a
large exposure it acquired by trading with a customer. By lowering
the SD’s cost of hedging, the delay in reporting can result in
greater SD willingness to offer liquidity to customers.
—————————————————————————

    As detailed below, the revisions would lead to changes that would
result in assigned block sizes that better reflect trading patterns in
individual swap categories. Specifically, the categories of swaps used
in the minimum block size determination have been revised to better
ensure that each category is more homogenous in terms of typical trade
sizes. For example, under the current rule, rate swaps are placed into
three groups based on currency (super-major, major, and non-major), and
each group is divided into nine subgroups based on tenor (with the
shortest tenor bucket representing swaps of less than 46 days and the
longest tenor bucket representing swaps of greater than 30 years).
    The proposed rule, in contrast, would define 15 currency-specific
groups, each with the same nine tenor subgroups. This more granular
bucketing allows for more targeted block levels; for instance, this
allows block levels for the most active USD IRS products to differ from
levels for the still active, but slightly less common JPY or GBP IRS
products, where trade sizes are lower. All currencies not within the
list of 15 would have a block size of zero–essentially allowing this
small subset of IRS to receive full block treatment.287
—————————————————————————

    287 The background to the proposal to set the block size of
certain subsets of swaps in the IRS, CDS, foreign exchange, and
other commodity asset classes is discussed in sections II.F.1.a, b,
d. and e, respectively, above.
—————————————————————————

    For CDSs, the new swap categories would no longer be based on
observed spreads with multiple tenor groups, but would be based on
well-defined products (e.g., CDXIG, CMBX, iTraxx) for a single tenor
range between four to six years (designed to pick up the most actively
traded five year on-the-run CDS product). All other CDS products which
do not fall into these defined product groups, or defined product
tenor, would have a new block size of zero.
    Swap categories in the FX asset class would include a list of 22
currencies exchanged for USD along with the set of 180 swap categories
comprised of each unique combination of exchanges of these 22
currencies.288 This represents a significant difference from the
current set of 84 swap categories comprised of 22 currencies exchanged
for one of the super-major currencies (EUR, GBP, JPY, or USD).289
Finally, there is a significant change to swap categories related to
“Other Commodity” as the new proposed categories represent the
underlying commodity instead of references to specific futures
contracts and exchanges.
—————————————————————————

    288 In this last set, the AMBS is based on the AMBS of the
associated currencies exchanged for the USD.
    289 While there are 84 current swap categories for FX, 40 of
these have a block size of zero.
—————————————————————————

    Revised Sec.  43.6(e) contains amendments to the process for
determining the AMBS for each new swap category defined in Sec. 
43.6(c). For each swap category, the 67-percent notional amount
calculation based on one year of transactions would be performed for a
subset of swap categories. The minimum size for a subset of swaps in
the FX asset class that have no reference to USD would be based on a
method to identify the AMBS based on two swap categories, with each
side paired with USD. Finally, a subset of swap categories would have a
block size of zero.
    The swap category changes combined with the new 67-percent notional
amount calculation would significantly change the number of trades
eligible for block status; we discuss the costs and benefits to these
changes below. The Commission reviewed the current block sizes and
found significant differences in the percentage of trades that are
eligible for block treatment, both within and across the main asset
classes. This reflects the fact that within asset classes, the vast
majority of swaps have the same block size across all trade tenor
groups.
    One further implication of the proposed amendments to the process
for determining the AMBS in Sec.  43.6(e) relates to trading rules for
made available for trading (“MAT”) instruments. The Commission
requires that instruments that have been MAT be traded on SEFs or DCMs
using specific trading protocols (i.e., order book or request for
quote), unless the trade is greater than the AMBS for such
instruments.290 Hence, changes in the AMBS impact whether individual
trades must be executed on SEFs or DCMs, or whether they can be
executed bilaterally.291 The Commission considered the costs and
benefits of requiring mandatory DCM/SEF trading for certain instruments
in the 2018 SEF NPRM, and adopts and incorporates that previous
consideration in this release by reference.292 Here, the Commission
simply notes that changes in the AMBS may affect whether certain swaps
have to be executed on a SEF or DCM, as noted above.
—————————————————————————

    290 There are some exceptions to the mandatory trading on SEFs
for MAT instruments, such as trades that involve non-U.S. persons.
    291 The definition of “block trade” is discussed above in
section II.B.2.
    292 See 83 FR 61946, 62140 Swap Execution Facilities and Trade
Execution Requirement. As noted there, the benefits of requiring SEF
trading include greater transparency and enhanced oversight. The
costs include reduced flexibility for traders.
—————————————————————————

    The proposed amendments to Sec.  43.6(e) would result in a block
size of zero for many of the swaps not in the most liquid swap
categories. This would result in 100% of many types of swaps (e.g.,
off-the-run CDSs and certain major and non-major currencies in the IRS
and FX asset classes) being eligible for block treatment.
    Baseline: The baseline for proposed Sec.  43.6(e) is the current
text Sec. Sec.  43.6(e) and (f) and the current process for determining
if a trade is eligible for block treatment. As discussed in section
II.F.2, the Commission has not established post-initial AMBSs. As a
result, the baseline is the AMBSs for current swap categories
calculated using the 50-percent notional amount calculation method
according to current Sec.  43.6(e). The Commission believes that too
many swaps are currently receiving block treatment and the swap
categories can be improved.
    Benefits: The motivation for special rules for “large” trades is
that large trades often require intermediaries to take large positions
(at least temporarily). Importantly, the costs to the intermediaries to
subsequently hedge the trade are reduced by allowing the intermediaries
some period to hedge, prior to the initial trade becoming public
knowledge. A trade is large in this sense when it is substantial
relative to typical trade size and daily volume in that instrument. For
this reason, policy toward block size determination should take an
instrument’s market characteristics into account.
    The Commission expects that the change in swap categories would
define block sizes with respect to categories that are more granular
than the current swap categories, which would then better reflect
current trading patterns for each type of swap. For example, USD

[[Page 21556]]

IRSs currently represent most of the actual trades in the IRS Super-
Major category, so that the current AMBS for JPY IRS swaps (also in the
Super-Major category) is based largely on USD trades. The new rules
would allow for an AMBS that better reflects the size distribution of
JPY rate swaps, and in this case would allow for a smaller block
threshold for these swaps relative to the more active USD category. The
move from spread-based to product-based swap categories for CDSs is
expected to achieve something similar, in that the liquidity (and thus
trade distribution) is often much more homogenous within a product
group rather than within a spread category. This change would also
provide the additional benefit of foreclosing the possibility that an
individual product may not change block thresholds as market spreads
adjust over time.
    The Commission expects that the proposed 67-percent notional amount
calculations would enhance transparency in the market by decreasing the
number of trades eligible for block treatment and therefore result in
delayed reporting. The increased percentile (from 50 to 67) would
result in a smaller set of swaps eligible for block treatment and
therefore would increase real-time market reporting, leading to
increased accuracy in the real-time tape. However, because the average
size of block trades would generally increase under the proposed rules,
the Commission proposes to pair this change with an extension to the
reporting delay (in some cases from 15 minutes to 48 hours). The
Commission believes this longer delay is more appropriate given the
larger notional size; because the primary reason for the delay is to
ensure that the dealing counterparty is able to hedge out the risk
taken in the trade, a larger average trade size would imply a greater
needed time for trade hedging.
    Costs: The Commission anticipates costs associated with this rule
change as market participants respond to the new swap categories and
increased percentile calculation. For example, focusing on USD interest
rate swaps, the proposed rule change would, by increasing the block
threshold, decrease the set of swaps eligible for block status. If end-
users continue to trade swaps within this notional range, dealers may
find it more difficult to hedge their exposure because ASATP reporting
would be required. If dealers face increased difficulties to hedge
client demands, then the dealers will increase the costs to the clients
or, potentially, stop trading in this notional range which can
contribute to a decrease in liquidity. As discussed above, this in turn
may increase price volatility, and potentially increase the bid-ask
spread facing end-users.
    The Commission expects these costs to vary by asset class and the
activity level of the reporting entity, though the more granular
bucketing of block categories is aimed to ensure that cost variations
across asset classes are mitigated. Costs may also differ by reporting
entity depending on the type of cost. For instance, the Commission
expects SDs and end-users specializing in a single swap category to
face smaller operational costs relative to dealers who operate across
multiple swap categories, given they would only have to adjust their
operational systems (where necessary) for specific swap categories.
However, if transaction/hedging costs are affected by the changes in
the block threshold, hedging may be easier (and thus costs lower) for
dealers active in a number of markets, who therefore have a wider set
of potential hedging instruments. Finally, depending on how trade
prices are determined, the costs attributed to the dealer above may
actually be passed on to the end-user/client in the form of increased
spreads.
    The Commission is proposing Sec.  43.6(e) to adjust the process for
determining the AMBS. Notwithstanding the anticipated incremental
costs, the Commission preliminarily believes this change is warranted
in light of the anticipated benefits.
Request for Comment
    The Commission requests comment on its consideration of the costs
and benefits of proposed Sec.  43.6(e), including regarding issues and
questions specifically identified below. Please provide data,
statistics, or other supporting information for positions asserted.
    (57) Are there additional costs or benefits that the Commission
should consider? If so, please identify and, where quantifiable,
provide data or other information to assist the Commission in
quantifying them.
    (58) Are there alternatives that would generate greater benefits
and/or lower costs?
    (59) What is the increased cost due to earlier revelation of trades
that will no longer be subject to block treatment?
    (60) From an economic perspective, are there additional swap
categories that should be considered that would significantly change
the cost and benefits?
    (61) Would benefits increase or costs decrease if the sample used
to calculate AMBS excluded some parts of the year that might have
uncharacteristic trading patterns (e.g., if the sample of CDS trades
excluded dates when CDS indexes roll (which happens twice a year for
the major indexes))? Are there any similar events for other asset
classes? Please provide detailed information regarding the estimated
impact on resulting benefits and costs.
    (62) Would benefits increase or costs decrease if the Commission
adopted a flexible method to evaluate AMBS and adjust accordingly to
reflect changes in trading patterns? Please provide information
regarding the basis of those estimates.
3. Section 15(a) Factors
    Section 15(a) of the CEA requires the Commission to consider the
costs and benefits of the proposed amendments to part 43 with respect
to the following factors: Protection of market participants and the
public; efficiency, competitiveness, and financial integrity of
markets; price discovery; sound risk management practices; and other
public interest considerations.
    As discussed above, the proposed amendments to part 43 include
changes that reflect what the Commission has learned about the
technical aspects of reporting, as well as changes that permit longer
delays or more opacity in reporting under some circumstances. The
Commission expects that this, along with the data validation
requirements in proposed Sec.  43.3(f), would increase the reliability
of part 43 data.
    A discussion of these proposed amendments in light of section 15(a)
factors reflecting all of the proposed changes is set out immediately
below.
a. Protection of Market Participants and the Public
    The Commission preliminarily believes that reporting requirements
designed to enhance transparency empower market participants by
informing them, in real-time, about the price of a broad set of swap
products. This real-time information helps protect these participants
from transacting at prices significantly different than the prevailing
market. In addition, the Commission preliminarily believes that
enhanced transparency allows for better monitoring of the quantity, and
size, of market transactions leading to improved protection of market
participants and the public. As discussed above, some of the changes
increase transparency, such as general increases in block sizes and
improvements in reported data, while other changes reduce transparency,
such as delayed block reporting. However, the changes proposed herein
which potentially reduce transparency may

[[Page 21557]]

reduce hedging costs for large trades, protecting those participants
who tend to execute uniquely large swaps.
b. Efficiency, Competitiveness, and Financial Integrity of Markets
    Real-time reporting of transactions affects the efficiency of
markets by quickly providing new information to all market participants
in a standardized manner. This real-time information, which is publicly
accessible, allows prices to rapidly and efficiently adjust to the
prevailing trading conditions. To the extent that these proposed rules
reduce the cost of information gathering and processing, market
efficiency should be improved. Increasing the threshold size of block
trades may have an ambiguous effect on market efficiency. It may
improve market efficiency by countering potential front-running may
lead to larger bid/ask spreads. However, it may harm market efficiency
in that market participants will learn about some trades later because
of this proposed rule. In the aggregate, the Commission preliminarily
believes the proposed rule will weigh in favor of market efficiency.
    Improvements to real-time reporting may also enhance competition as
parties may learn about the prices and venues where potential
counterparties are executing their transactions. As such, swaps markets
may become more competitive since parties will have access to the
prices that most participants are transacting at and will be able to
use this information during their negotiations.
    The rule changes, through their effects on transparency, can affect
the financial integrity of markets because market participants can
verify that they are transacting at or near prevailing market prices.
In addition to transparency, the proposed changes to part 43 might
affect financial integrity in other ways. In particular, the Commission
preliminarily believes that more accurate STAPD would lead to greater
understanding of liquidity and market depth for market participants
executing swap transactions. Amendments that result in improved part 43
STAPD being made available to the public would expand the ability of
market participants to monitor real-time activity by other participants
and to respond appropriately.
c. Price Discovery
    Section 2(a)(13) of the CEA requires that STAPD be made publicly
available. The CEA and the Commission’s existing regulations in part 43
implementing CEA section 2(a)(13) also require STAPD to be made
available to the public in real-time. As with the swap data reported
for use by regulators pursuant to section 4r of the CEA and the
Commission’s part 45 regulations implementing CEA section 4r, the
Commission believes that inaccurate and incomplete STAPD hinders the
use of the STAPD, which harms transparency and price discovery. At
least two publicly available studies discuss past problems with the
current part 43 data. The Commission preliminarily expects that market
participants would be better able to analyze STAPD as a result of the
proposed amendments, because the proposed amendments would make STAPD
more accurate and complete. The Commission expects price discovery to
be improved with proposed changes to clearing swaps and avoiding
duplicative reporting of mirror swaps.
    On the other hand, some aspects of the proposed rules may dampen
price discovery relative to the status quo baseline. Specifically, if
proposed Sec.  43.4(a)(4) encouraged more PPSs, then the proposal may
also reduce price discovery because fewer trades would have prices that
are known at the time of execution.293 Further, longer block trade
real-time reporting delays pursuant to proposed Sec.  43.5(c) could
harm price discovery because the public would lengthen the time before
which block trade prices are publicly available than is currently the
case; this would be counter-balanced by the fact that longer delays
could promote the execution of swaps that counterparties otherwise
would not execute under the current shorter real-time reporting delays.
—————————————————————————

    293 On the other hand, as noted above, removing mirror swaps
from the public data could remove redundancy thereby promoting the
accuracy of the data.
—————————————————————————

    The Commission does not know exactly how market participants will
adapt and evolve due to the proposed rule changes. However, the
Commission preliminarily believes that the proposed rule will improve
price discovery in aggregate.
d. Sound Risk Management Practices
    The Commission preliminarily expects that allowing reporting
parties a greater ability to delay reporting would, in some
circumstances, enable more effective hedging. In particular, SDs may
have greater ability to manage the risk they take on when accommodating
customer trades. This in turn may allow such customers access to better
terms for hedging their risk, especially if they want to hedge a large
amount of risk.
e. Other Public Interest Considerations
    More accurate part 43 data would be helpful to researchers who
might use it to improve the public’s understanding of how swap markets
function with respect to market participants, other financial markets,
and the overall economy. Further, better and more accurate data would
likely improve the Commission’s regulatory oversight and enforcement
capabilities. The Commission requests comment on all aspects of the
analysis of these five factors. In addition, the Commission requests
specific comment on the following:
    (63) Are there other effects on these five factors that are likely
to result from the proposed rule changes? Please provide quantification
if possible, along with information regarding the basis of that
quantification.

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 does not anticipate that the proposed amendments to
part 43 would result in anti-competitive behavior. However, the
Commission encourages comments from the public on any aspect of the
proposal that may have the potential to be inconsistent with the anti-
trust laws or anti-competitive in nature.

List of Subjects in 17 CFR Part 43

    Real-time public swap reporting.

    For the reasons stated in the preamble, the Commodity Futures
Trading Commission proposes to amend 17 CFR part 43 as set forth below:

PART 43–REAL-TIME PUBLIC REPORTING

0
1. The authority citation for part 43 continues to read as follows:

    Authority: 7 U.S.C. 2(a), 12a(5), and 24a, as amended by the
Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L.
111-203, 124 Stat. 1376 (Jul. 21, 2010), unless otherwise noted.

0
2. Amend Sec.  43.1 by removing paragraphs (b) and (d), redesignating
paragraph (c) as (b), and revising newly redesignated paragraph (b).
    The revision reads as follows:

Sec.  43.1  Purpose, scope, and rules of construction.

* * * * *

[[Page 21558]]

    (b) Rules of construction. The examples in this part are not
exclusive. Compliance with a particular example or application of a
sample clause, to the extent applicable, shall constitute compliance
with the particular portion of the rule to which the example relates.
0
3. Revise Sec.  43.2 to read as follows:

Sec.  43.2  Definitions.

    (a) Definitions. As used in this part:
    Appropriate minimum block size means the minimum notional or
principal amount for a category of swaps that qualifies a swap within
such category as a block trade.
    As soon as technologically practicable means as soon as possible,
taking into consideration the prevalence, implementation, and use of
technology by comparable market participants.
    Asset class means a broad category of commodities including,
without limitation, any “excluded commodity” as defined in section
1a(19) of the Act, with common characteristics underlying a swap. The
asset classes include interest rate, foreign exchange, credit, equity,
other commodity, and such other asset classes as may be determined by
the Commission.
    Block trade means:
    (1) With respect to an off-facility swap, a publicly reportable
swap that has a notional or principal amount at or above the
appropriate minimum block size applicable to such swap; and
    (2) With respect to a swap that is not an off-facility swap, a
publicly reportable swap that:
    (i) Involves a swap that is listed on a swap execution facility or
designated contract market;
    (ii) Is executed on the trading system or platform, that is not an
order book as defined in Sec.  37.3(a)(3) of this chapter, of a swap
execution facility or occurs away from a swap execution facility’s or
designated contract market’s trading system or platform and is executed
pursuant to the swap execution facility’s or designated contract
market’s rules and procedures;
    (iii) Has a notional or principal amount at or above the
appropriate minimum block size applicable to such swap; and
    (iv) Is reported subject to the rules and procedures of the swap
execution facility or designated contract market and the rules
described in this part, including the appropriate time delay
requirements set forth in Sec.  43.5.
    Cap size means, for each swap category, the maximum notional or
principal amount of a publicly reportable swap transaction that is
publicly disseminated.
    Economically related means a direct or indirect reference to the
same commodity at the same delivery location or locations, or with the
same or a substantially similar cash market price series.
    Embedded option means any right, but not an obligation, provided to
one party of a swap by the other party to the swap that provides the
party holding the option with the ability to change any one or more of
the economic terms of the swap.
    Execution means an agreement by the parties, by any method, to the
terms of a swap that legally binds the parties to such swap terms under
applicable law.
    Execution date means the date, determined by reference to eastern
time, on which swap execution has occurred.
    Mirror swap means a swap:
    (1) To which a prime broker is a counterparty or both
counterparties are prime brokers;
    (2) That is executed contemporaneously with a corresponding trigger
swap;
    (3) That has identical terms and pricing as the contemporaneously
executed trigger swap (except that a mirror swap, but not the
corresponding trigger swap, may include any associated prime brokerage
service fees agreed to by the parties and except as provided in the
final sentence of this “mirror swap” definition);
    (4) With respect to which the sole price forming event is the
occurrence of the contemporaneously executed trigger swap; and
    (5) The execution of which is contingent on, or is triggered by,
the execution of the contemporaneously executed trigger swap. The
notional amount of a mirror swap may differ from the notional amount of
the corresponding trigger swap, including, but not limited to, in the
case of a mirror swap that is part of a partial reverse give-up;
provided, however, that in such cases,
    (i) The aggregate notional amount of all such mirror swaps to which
the prime broker that is a counterparty to the trigger swap is also a
counterparty shall be equal to the notional amount of the corresponding
trigger swap and
    (ii) The market risk and contractual cash flows of all such mirror
swaps to which a prime broker that is not a counterparty to the
corresponding trigger swap is a party will offset each other (and the
aggregate notional amount of all such mirror swaps on one side of the
market and with cash flows in one direction shall be equal to the
aggregate notional amount of all such mirror swaps on the other side of
the market and with cash flows in the opposite direction), resulting in
such prime broker having a flat market risk position.
    Novation means the process by which a party to a swap legally
transfers all or part of its rights, liabilities, duties, and
obligations under the swap to a new legal party other than the
counterparty to the swap under applicable law.
    Off-facility swap means any swap transaction that is not executed
on or pursuant to the rules of a swap execution facility or designated
contract market.
    Other commodity means any commodity that is not categorized in the
interest rate, credit, foreign exchange, equity, or other asset classes
as may be determined by the Commission.
    Physical commodity swap means a swap in the other commodity asset
class that is based on a tangible commodity.
    Post-priced swap means an off-facility swap for which the price has
not been determined at the time of execution.
    Pricing event means the completion of the negotiation of the
material economic terms and pricing of a trigger swap.
    Prime broker means, with respect to a mirror swap and its related
trigger swap, a swap dealer acting in the capacity of a prime broker
with respect to such swaps.
    Prime brokerage agency arrangement means an arrangement pursuant to
which a prime broker authorizes one of its clients, acting as agent for
such prime broker, to cause the execution of a trigger swap.
    Prime brokerage agent means a client of a prime broker who causes
the execution of a trigger swap acting pursuant to a prime brokerage
agency arrangement.
    Public dissemination and publicly disseminate means to make freely
available and readily accessible to the public swap transaction and
pricing data in a non-discriminatory manner, through the internet or
other electronic data feed that is widely published. Such public
dissemination shall be made in a consistent, usable, and machine-
readable electronic format that allows the data to be downloaded,
saved, and analyzed.
    Publicly reportable swap transaction means:
    (1) Unless otherwise provided in this part–
    (i) Any executed swap that is an arm’s-length transaction between
two parties that results in a corresponding change in the market risk
position between the two parties; or
    (ii) Any termination, assignment, novation, exchange, transfer,
amendment, conveyance, or extinguishing of rights or obligations of

[[Page 21559]]

a swap that changes the pricing of the swap.
    (2) Examples of executed swaps that do not fall within the
definition of publicly reportable swap may include:
    (i) Internal swaps between one-hundred percent owned subsidiaries
of the same parent entity; and
    (ii) Portfolio compression exercises.
    (3) These examples represent swaps that are not at arm’s length and
thus are not publicly reportable swap transactions, notwithstanding
that they do result in a corresponding change in the market risk
position between two parties.
    Reference price means a floating price series (including
derivatives contract prices and cash market prices or price indices)
used by the parties to a swap or swaption to determine payments made,
exchanged, or accrued under the terms of a swap contract.
    Reporting counterparty means the party to a swap with the duty to
report a publicly reportable swap transaction in accordance with this
part and section 2(a)(13)(F) of the Act.
    Swap execution facility means a trading system or platform that is
a swap execution facility as defined in CEA section 1a(50) and in Sec. 
1.3 of this chapter and that is registered with the Commission pursuant
to CEA section 5h and part 37 of this chapter.
    Swap transaction and pricing data means all data elements for a
swap in appendix C of this part required to be reported or publicly
disseminated pursuant to this part.
    Swaps with composite reference prices means swaps based on
reference prices that are composed of more than one reference price
from more than one swap category.
    Trigger swap means a swap:
    (1) That is executed pursuant to one or more prime brokerage agency
arrangements;
    (2) To which a prime broker is a counterparty or both
counterparties are prime brokers;
    (3) That serves as the contingency for, or triggers, the execution
of one or more corresponding mirror swaps; and
    (4) That is a publicly reportable swap transaction that is required
to be reported to a swap data repository pursuant to this part and part
45 of this chapter.
    Trimmed data set means a data set that has had extraordinarily
large notional transactions removed by transforming the data into a
logarithm with a base of 10, computing the mean, and excluding
transactions that are beyond two standard deviations above the mean for
the other commodity asset class and three standard deviations above the
mean for all other asset classes.
    (b) Other defined terms. Terms not defined in this part have the
meanings assigned to the terms in Sec.  1.3 of this chapter.
0
4. Amend Sec.  43.3 by revising paragraphs (a) through (d), removing
paragraph (h), redesignating paragraph (i) as paragraph (g), and
revising paragraph (f) and newly redesignated paragraph (g).
    The revisions read as follows:

Sec.  43.3  Method and timing for real-time public reporting.

    (a) Responsibilities of parties to a swap to report swap
transaction and pricing data in real-time–(1) In general. A reporting
counterparty, swap execution facility, or designated contract market,
as determined by this section, shall report any publicly reportable
swap transaction to a swap data repository as soon as technologically
practicable after execution, subject to paragraphs (a)(2) through (6)
of this section. Such reporting shall be done in the manner set forth
in paragraph (d) of this section.
    (2) 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 report swap transaction and pricing data to a swap data
repository as soon as technologically practicable after execution.
    (3) Off-facility swaps. Except as otherwise provided in paragraphs
(a)(4) through (6) of this section, a reporting counterparty shall
report all publicly reportable swap transactions that are off-facility
swaps to a swap data repository for the appropriate asset class in
accordance with the rules set forth in this part as soon as
technologically practicable after execution. Unless otherwise agreed to
by the parties prior to execution, the following shall be the reporting
counterparty for a publicly reportable swap transaction that is an off-
facility swap:
    (i) If only one party is a swap dealer or major swap participant,
then the swap dealer or major swap participant shall be the reporting
counterparty;
    (ii) If one party is a swap dealer and the other party is a major
swap participant, then the swap dealer shall be the reporting
counterparty;
    (iii) If both parties are swap dealers, then prior to execution of
a publicly reportable swap transaction that is an off-facility swap,
the swap dealers shall designate which party shall be the reporting
counterparty;
    (iv) If both parties are major swap participants, then prior to
execution of a publicly reportable swap transaction that is an off-
facility swap, the major swap participants shall designate which party
shall be the reporting counterparty; and
    (v) If neither party is a swap dealer or a major swap participant,
then prior to execution of a publicly reportable swap transaction that
is an off-facility swap, the parties shall designate which party shall
be the reporting counterparty.
    (4) Post-priced swaps–(i) Post-priced swaps reporting delays. The
reporting counterparty may delay reporting a post-priced swap to a swap
data repository until the earlier of the price being determined and
11:59:59 p.m. eastern time on the execution date. If the price of a
publicly reportable swap transaction that is a post-priced swap is not
determined by 11:59:59 p.m. eastern time on the execution date, the
reporting counterparty shall report to a swap data repository by
11:59:59 p.m. eastern time on the execution date all swap transaction
and pricing data for such post-priced swap other than the price and any
other then-undetermined swap transaction and pricing data and shall
report each such item of previously undetermined swap transaction and
pricing data as soon as technologically practicable after such item is
determined.
    (ii) Other economic terms. The post-priced swap reporting delay set
forth in paragraph (a)(4)(i) of this section does not apply to publicly
reportable swap transactions with respect to which the price is known
at execution but one or more other economic or other terms are not yet
known at the time of execution.
    (5) Clearing swaps. Notwithstanding the provisions of paragraphs
(a)(1) through (3) of this section, if a clearing swap, as defined in
Sec.  45.1(a) of this chapter, is a publicly reportable swap
transaction, the derivatives clearing organization that is a party to
such swap shall be the reporting counterparty and shall fulfill all
reporting counterparty obligations for such swap as soon as
technologically practicable after execution.
    (6) Mirror swaps. (i) A mirror swap is not a publicly reportable
swap transaction. Execution of a trigger swap, for purposes of
determining when execution occurs under paragraphs (a)(1) through (3)
of this section, shall be deemed to occur at the time of the pricing
event for such trigger swap.
    (ii) If, with respect to a given set of swaps, it is unclear which
are mirror swaps and which is the related trigger

[[Page 21560]]

swap (including, but not limited to, situations where there is more
than one prime broker counterparty within such set of swaps and
situations where the pricing event for each set of swaps occurs between
prime brokerage agents of a common prime broker), the prime brokers
shall determine which swap is the trigger swap and which are mirror
swaps. With respect to a trigger swap to which a prime broker is a
party, the counterparty that falls within the highest level of the
reporting counterparty determination hierarchy set forth in paragraph
(a)(3) of this section is the reporting counterparty; if both
counterparties fall within the same level of that hierarchy, they shall
determine who is the reporting counterparty for such trigger swap
pursuant to paragraph (a)(3)(iii), (iv), or (v) of this section, as
applicable. Notwithstanding the foregoing, if the counterparty to a
trigger swap that is not a prime broker is a swap dealer, then that
counterparty shall be the reporting counterparty for the trigger swap.
    (iii) If, with respect to a given set of swaps, it is clear which
are mirror swaps and which is the related trigger swap, the reporting
counterparty for the trigger swap shall be determined pursuant to
paragraph (a)(3) of this section.
    (iv) Trigger swaps described in paragraphs (a)(6)(ii) and (iii) of
this section shall be reported pursuant to the requirements set out in
paragraphs (a)(2) or (3) of this section, as applicable, except that
the provisions of paragraph (a)(6)(ii) of this section, rather than the
provisions of paragraph (a)(3) of this section, shall govern the
determination of the reporting counterparty for purposes of the trigger
swaps described in paragraph (a)(6)(ii) of this section.
    (7) Third-party facilitation of data reporting. Any person required
by this part to report swap transaction and pricing data, while
remaining fully responsible for reporting as required by this part, may
contract with a third-party service provider to facilitate reporting.
    (b) Public dissemination of swap transaction and pricing data by
swap data repositories in real-time–(1) In general. A swap data
repository shall publicly disseminate swap transaction and pricing data
as soon as technologically practicable after such data is received from
a swap execution facility, designated contract market, or reporting
counterparty, unless such swap transaction and pricing data is subject
to a time delay described in Sec.  43.5, in which case the swap
transaction and pricing data shall be publicly disseminated in the
manner described in Sec.  43.5.
    (2) Compliance with 17 CFR part 49. Any swap data repository that
accepts and publicly disseminates swap transaction and pricing data in
real-time shall comply with part 49 of this chapter.
    (3) Prohibitions on disclosure of data. (i) If there is a swap data
repository for an asset class, a swap execution facility or designated
contract market shall not disclose swap transaction and pricing data
relating to publicly reportable swap transactions in such asset class,
prior to the public dissemination of such data by a swap data
repository unless:
    (A) Such disclosure is made no earlier than the transmittal of such
data to a swap data repository for public dissemination;
    (B) Such disclosure is only made to market participants on such
swap execution facility or designated contract market;
    (C) Market participants are provided advance notice of such
disclosure; and
    (D) Any such disclosure by the swap execution facility or
designated contract market is non-discriminatory.
    (ii) If there is a swap data repository for an asset class, a swap
dealer or major swap participant shall not disclose swap transaction
and pricing data relating to publicly reportable swap transactions in
such asset class, prior to the public dissemination of such data by a
swap data repository unless:
    (A) Such disclosure is made no earlier than the transmittal of such
data to a swap data repository for public dissemination;
    (B) Such disclosure is only made to the customer base of such swap
dealer or major swap participant, including parties who maintain
accounts with or have been swap counterparties with such swap dealer or
major swap participant;
    (C) Swap counterparties are provided advance notice of such
disclosure; and
    (D) Any such disclosure by the swap dealer or major swap
participant is non-discriminatory.
    (4) Acceptance and public dissemination of all swaps in an asset
class. Any swap data repository that accepts and publicly disseminates
swap transaction and pricing data in real-time for swaps in its
selected asset class shall accept and publicly disseminate swap
transaction and pricing data in real-time for all publicly reportable
swap transactions within such asset class, unless otherwise prescribed
by the Commission.
    (5) Annual independent review. Any swap data repository that
accepts and publicly disseminates swap transaction and pricing data in
real-time shall perform, on an annual basis, an independent review in
accordance with established audit procedures and standards of the swap
data repository’s operations, security, and other system controls for
the purpose of ensuring compliance with the requirements in this part.
    (c) Availability of swap transaction and pricing data to the
public. (1) Swap data repositories shall make swap transaction and
pricing data available on their websites for a period of time that is
at least one year after the initial public dissemination of such data
and shall make instructions freely available on their websites on how
to download, save, and search such data.
    (2) Swap transaction and pricing data that is publicly disseminated
pursuant to this part shall be made available free of charge.
    (d) Data reported to swap data repositories. (1) In reporting swap
transaction and pricing data to a swap data repository, each reporting
counterparty, swap execution facility, or designated contract market
shall report the swap transaction and pricing data elements in appendix
C of this part in the form and manner provided in the technical
specifications published by the Commission pursuant to Sec.  43.7.
    (2) In reporting swap transaction and pricing data to a swap data
repository, each reporting counterparty, swap execution facility, or
designated contract market making such report shall satisfy the data
validation procedures of the swap data repository.
    (3) In reporting swap transaction and pricing data to a swap data
repository, each reporting counterparty, swap execution facility, or
designated contract market shall use the facilities, methods, or data
standards provided or required by the swap data repository to which the
entity or reporting counterparty reports the data.
* * * * *
    (f) Data Validation Acceptance Message. (1) A swap data repository
shall validate each swap transaction and pricing data report submitted
to the swap data repository and notify the reporting counterparty, swap
execution facility, or designated contract market submitting the report
whether the report satisfied the data validation procedures of the swap
data repository as soon as technologically practicable after accepting
the swap transaction and pricing data report. A swap data repository
may satisfy the requirements of this paragraph by transmitting data
validation acceptance messages as required by Sec.  49.10 of this
chapter.

[[Page 21561]]

    (2) If a swap transaction and pricing data report submitted to a
swap data repository does not satisfy the data validation procedures of
the swap data repository, the reporting counterparty, swap execution
facility, or designated contract market required to submit the report
has not satisfied its obligation to report swap transaction and pricing
data in the manner provided by paragraph (d) of this section. The
reporting counterparty, swap execution facility, or designated contract
market has not satisfied its obligation until it submits the swap
transaction and pricing data report in the manner provided by paragraph
(d) of this section, which includes the requirement to satisfy the data
validation procedures of the swap data repository.
    (g) Fees. Any fee or charge assessed on a reporting counterparty,
swap execution facility, or designated contract market by a swap data
repository that accepts and publicly disseminates swap transaction and
pricing data in real-time for the collection of such data shall be
equitable and non-discriminatory. If such swap data repository allows a
fee discount based on the volume of data reported to it for public
dissemination, then such discount shall be made available to all
reporting counterparties, swap execution facilities, and designated
contract markets in an equitable and non-discriminatory manner.
0
5. Revise Sec.  43.4 to read as follows:

Sec.  43.4  Swap transaction and pricing data to be publicly
disseminated in real-time.

    (a) Public dissemination of data fields. Any swap data repository
that accepts and publicly disseminates swap transaction and pricing
data in real-time shall publicly disseminate the information for the
swap transaction and pricing data elements in appendix C of this part
in the form and manner provided in the technical specifications
published by the Commission pursuant to Sec.  43.7.
    (b) Additional swap information. A swap data repository that
accepts and publicly disseminates swap transaction and pricing data in
real-time may require reporting counterparties, swap execution
facilities, and designated contract markets to report to such swap data
repository information necessary to compare the swap transaction and
pricing data that was publicly disseminated in real-time to the data
reported to a swap data repository pursuant to section 2(a)(13)(G) of
the Act or to confirm that parties to a swap have reported in a timely
manner pursuant to Sec.  43.3. Such additional information shall not be
publicly disseminated by the swap data repository.
    (c) Anonymity of the parties to a publicly reportable swap
transaction–(1) In general. Swap transaction and pricing data that is
publicly disseminated in real-time shall not disclose the identities of
the parties to the swap or otherwise facilitate the identification of a
party to a swap. A swap data repository that accepts and publicly
disseminates swap transaction and pricing data in real-time shall not
publicly disseminate such data in a manner that discloses or otherwise
facilitates the identification of a party to a swap.
    (2) Actual product description reported to swap data repository.
Reporting counterparties, swap execution facilities, and designated
contract markets shall provide a swap data repository with swap
transaction and pricing data that includes an actual description of the
underlying asset(s). This requirement is separate from the requirement
that a reporting counterparty, swap execution facility, or designated
contract market shall report swap data to a swap data repository
pursuant to section 2(a)(13)(G) of the Act and the Commission’s
regulations.
    (3) Public dissemination of the actual description of underlying
asset(s). Notwithstanding the anonymity protection for certain swaps in
the other commodity asset class in paragraph (c)(4) of this section, a
swap data repository shall publicly disseminate the actual underlying
asset(s) of all publicly reportable swap transactions in the interest
rate, credit, equity, and foreign exchange asset classes.
    (4) Public dissemination of the underlying asset(s) for certain
swaps in the other commodity asset class. A swap data repository shall
publicly disseminate swap transaction and pricing data for publicly
reportable swap transactions in the other commodity asset class by
limiting the geographic detail of the underlying asset(s). The
identification of any specific delivery point or pricing point
associated with the underlying asset of such other commodity swap shall
be publicly disseminated pursuant to appendix B of this part.
    (d) Reporting of notional or principal amounts to a swap data
repository–(1) Off-facility swaps. The reporting counterparty shall
report the actual notional or principal amount of any publicly
reportable swap transaction that is an off-facility swap to a swap data
repository that accepts and publicly disseminates such data pursuant to
this part.
    (2) Swaps executed on or pursuant to the rules of a swap execution
facility or designated contract market. (i) A swap execution facility
or designated contract market shall report the actual notional or
principal amount for all swaps executed on or pursuant to the rules of
such swap execution facility or designated contract market to a swap
data repository that accepts and publicly disseminates such data
pursuant to this part.
    (ii) The actual notional or principal amount for any block trade
executed on or pursuant to the rules of a designated contract market
shall be reported to the designated contract market pursuant to the
rules of the designated contract market.
    (e) Public dissemination of notional or principal amounts. The
notional or principal amount of a publicly reportable swap transaction
shall be publicly disseminated by a swap data repository subject to
rounding as set forth in paragraph (f) of this section, and the cap
size as set forth in paragraph (g) of this section.
    (f) Process to determine appropriate rounded notional or principal
amounts. (1) If the notional or principal amount is less than one
thousand, round to nearest five, but in no case shall a publicly
disseminated notional or principal amount be less than five;
    (2) If the notional or principal amount is less than 10 thousand
but equal to or greater than one thousand, round to nearest one
hundred;
    (3) If the notional or principal amount is less than 100 thousand
but equal to or greater than 10 thousand, round to nearest one
thousand;
    (4) If the notional or principal amount is less than one million
but equal to or greater than 100 thousand, round to nearest 10
thousand;
    (5) If the notional or principal amount is less than 100 million
but equal to or greater than one million, round to the nearest one
million;
    (6) If the notional or principal amount is less than 500 million
but equal to or greater than 100 million, round to the nearest 10
million;
    (7) If the notional or principal amount is less than one billion
but equal to or greater than 500 million, round to the nearest 50
million;
    (8) If the notional or principal amount is less than 100 billion
but equal to or greater than one billion, round to the nearest 100
million;
    (9) If the notional or principal amount is equal to or greater than
100 billion, round to the nearest 10 billion.
    (g) Process to determine cap sizes. (1) The Commission shall
establish, by swap categories, the cap sizes as

[[Page 21562]]

described in paragraphs (g)(2) through (8) of this section.
    (2) The Commission shall determine the cap sizes for the swap
categories described in Sec.  43.6(b)(1)(i), (b)(2)(i) through (vii),
(b)(4)(i), and (b)(5)(i) by utilizing reliable data, as determined by
the Commission, from at least a one-year window of swap data
corresponding to each relevant swap category, and by applying the
methodology described in Sec.  43.6(c)(2).
    (3) The Commission shall determine the cap size for a swap category
in the foreign exchange asset class described in Sec.  43.6(b)(4)(ii)
as the lower of the notional amount of either currency’s cap size for
the swap category described in Sec.  43.6(b)(4)(i).
    (4) All swaps or instruments in the swap category described in
Sec.  43.6(b)(1)(ii) shall have a cap size of USD 100 million.
    (5) All swaps or instruments in the swap category described in
Sec.  43.6(b)(2)(viii) shall have a cap size of USD 400 million.
    (6) All swaps or instruments in the swap category described in
Sec.  43.6(b)(3) shall have a cap size of USD 250 million.
    (7) All swaps or instruments in the swap category described in
Sec.  43.6(b)(4)(iii) shall have a cap size of USD 150 million.
    (8) All swaps or instruments in the swap category described in
Sec.  43.6(b)(5)(ii) shall have a cap size of USD 100 million.
    (9) Commission publication of cap sizes: The Commission shall
publish any cap sizes determined pursuant to paragraph (g) of this
section from time to time on its website at https://www.cftc.gov.
    (10) Compliance date of cap sizes: Any cap sizes adopted by the
Commission in a final rule amending this part shall require compliance
as of the effective date of any such amendments to this part.
Thereafter, unless otherwise indicated on the Commission’s website, any
revised cap size published by the Commission shall require compliance
as of the first day of the second month following the date of
publication of the revised cap size.
0
6. Revise Sec.  43.5 to read as follows:

Sec.  43.5  Time delays for public dissemination of swap transaction
and pricing data.

    (a) In general. The time delay for the real-time public
dissemination of a block trade begins upon execution, as defined in
Sec.  43.2(a). It is the responsibility of the swap data repository
that accepts and publicly disseminates swap transaction and pricing
data in real-time to ensure that the swap transaction and pricing data
for block trades is publicly disseminated pursuant to this part upon
the expiration of the appropriate time delay described in paragraph (c)
of this section.
    (b) Public dissemination of publicly reportable swap transactions
subject to a time delay. A swap data repository shall publicly
disseminate swap transaction and pricing data that is subject to a time
delay precisely upon the expiration of the time delay period described
in paragraph (c) of this section.
    (c) Time delay. If a swap data repository receives notice of a
block trade election under Sec.  43.6(f)(1)(ii) or (f)(2), the block
trade that is the subject of such notice shall receive a time delay in
the public dissemination of swap transaction and pricing data equal to
48 hours after execution of such publicly reportable swap transaction.
0
7. Revise Sec.  43.6 to read as follows:

Sec.  43.6  Block trades.

    (a) Commission determination. The Commission shall establish the
appropriate minimum block size for publicly reportable swap
transactions based on the swap categories set forth in paragraph (b) of
this section in accordance with the provisions set forth in paragraph
(c), (d), (e), or (g) of this section, as applicable, at such times the
Commission determines necessary.
    (b) Swap categories. Swap categories shall be established for all
swaps, by asset class, in the following manner:
    (1) Interest rate asset class. Swaps in the interest rate asset
class shall be grouped into swap categories as follows:
    (i) Based on a unique combination of:
    (A) A currency of one of the following countries or union:
    (1) Australia,
    (2) Brazil,
    (3) Canada,
    (4) Chile,
    (5) Czech Republic,
    (6) The European Union,
    (7) Great Britain,
    (8) India,
    (9) Japan,
    (10) Mexico,
    (11) New Zealand,
    (12) South Africa,
    (13) South Korea,
    (14) Sweden, or
    (15) The United States; and
    (B) One of the following tenors:
    (1) Zero to 46 days;
    (2) Greater than 46 to 107 days;
    (3) Greater than 107 to 198 days;
    (4) Greater than 198 to 381 days;
    (5) Greater than 381 to 746 days;
    (6) Greater than 746 to 1,842 days;
    (7) Greater than 1,842 to 3,668 days;
    (8) Greater than 3,668 to 10,973 days; or
    (9) Greater than 10,973 days and above.
    (ii) Other interest rate swaps not covered in the paragraph
(b)(1)(i) of this section.
    (2) Credit asset class. Swaps in the credit asset class shall be
grouped into swap categories as follows:
    (i) Based on the CDXHY product type and a tenor greater than 1,477
days and less than or equal to 2,207 days;
    (ii) Based on the iTraxx Europe product type and a tenor greater
than 1,477 days and less than or equal to 2,207 days;
    (iii) Based on the iTraxx Crossover product type and a tenor
greater than 1,477 days and less than or equal to 2,207 days;
    (iv) Based on the iTraxx Senior Financials product type and a tenor
greater than 1,477 days and less than or equal to 2,207 days;
    (v) Based on the CDXIG product type and a tenor greater than 1,477
days and less than or equal to 2,207 days;
    (vi) Based on the CDXEmergingMarkets product type and a tenor
greater than 1,477 days and less than or equal to 2,207 days;
    (vii) Based on the CDMBX product type; and
    (viii) Other credit swaps not covered in paragraphs (b)(2)(i)-(vii)
of this section.
    (3) Equity asset class. There shall be one swap category consisting
of all swaps in the equity asset class.
    (4) Foreign exchange asset class. Swaps in the foreign exchange
asset class shall be grouped into swap categories as follows:
    (i) By the unique currency combinations of the United States
currency paired with a currency of one of the following countries or
union: Argentina, Australia, Brazil, Canada, Chile, China, Colombia,
the European Union, Great Britain, India, Indonesia, Japan, Malaysia,
Mexico, New Zealand, Peru, Philippines, Russia, South Korea, or Taiwan.
    (ii) By the unique currency pair consisting of two separate
currencies from the following countries or union: Argentina, Australia,
Brazil, Canada, Chile, China, Colombia, the European Union, Great
Britain, India, Indonesia, Japan, Malaysia, Mexico, New Zealand, Peru,
Philippines, Russia, South Korea, and Taiwan.
    (iii) Other swap categories in the foreign exchange asset class not
covered in paragraph (b)(4)(i) or (ii) of this section.
    (5) Other commodity asset class. Swaps in the other commodity asset

[[Page 21563]]

class shall be grouped into swap categories as follows:
    (i) For swaps that have a physical commodity underlier listed in
appendix A of this part, by the relevant physical commodity underlier;
or
    (ii) Other commodity swaps that are not covered in paragraph
(b)(5)(i) of this section.
    (c) Methodologies to determine appropriate minimum block sizes and
cap sizes. In determining appropriate minimum block sizes and cap sizes
for publicly reportable swap transactions, the Commission shall utilize
the following statistical calculations–
    (1) 67-percent notional amount calculation. The Commission shall
use the following procedure in determining the 67-percent notional
amount calculation:
    (i) For each relevant swap category, select all reliable SDR data
for at least a one-year period;
    (ii) Convert the notional amount to the same currency or units and
use a trimmed data set;
    (iii) Determine the sum of the notional amounts of swaps in the
trimmed data set;
    (iv) Multiply the sum of the notional amount by 67 percent;
    (v) Rank order the observations by notional amount from least to
greatest;
    (vi) Calculate the cumulative sum of the observations until the
cumulative sum is equal to or greater than the 67-percent notional
amount calculated in paragraph (c)(1)(iv) of this section;
    (vii) Select the notional amount associated with that observation;
    (viii) Round the notional amount of that observation up to two
significant digits, or if the notional amount associated with that
observation is already significant to only two digits, increase that
notional amount to the next highest rounding point of two significant
digits; and
    (ix) Set the appropriate minimum block size at the amount
calculated in paragraph (c)(1)(viii) of this section.
    (2) 75-percent notional amount calculation. The Commission shall
use the procedure set out in Sec.  43.6(c)(1) with 75-percent in place
of 67-percent.
    (d) No appropriate minimum block sizes for swaps in the equity
asset class. Publicly reportable swap transactions in the equity asset
class shall not be treated as block trades.
    (e) Process to determine appropriate minimum block sizes. (1) The
Commission shall establish, by swap categories, the appropriate minimum
block sizes as described in paragraphs (e)(2) through (5) of this
section.
    (2) The Commission shall determine the appropriate minimum block
sizes for the swap categories described in paragraphs (b)(1)(i),
(b)(2)(i) through (vii), (b)(4)(i), and (b)(5)(i) of this section by
applying the methodology described in paragraph (c)(1) of this section.
    (3) The parties to a swap in the foreign exchange asset class
described in paragraph (b)(4)(ii) of this section may elect to receive
block treatment if the notional amount of either currency in the
exchange is greater than the minimum block size for a swap in the
foreign exchange asset class between the respective currency, in the
same amount, and U.S. dollars described in paragraph (b)(4)(i) of this
section.
    (4) All swaps or instruments in the swap category described in
paragraphs (b)(1)(ii), (b)(2)(viii), (b)(4)(iii), and (b)(5)(ii) of
this section shall have a block size of zero and be eligible to be
treated as a block trade.
    (5) Commission publication of appropriate minimum block sizes. The
Commission shall publish the appropriate minimum block sizes determined
pursuant to paragraph (e)(1) of this section on its website at https://www.cftc.gov.
    (f) Required notification–(1) Block trades on the trading system
or platform, that is not an order book as defined in Sec.  37.3(a)(3)
of a swap execution facility, or pursuant to the rules of a swap
execution facility or designated contract market. (i) The parties to a
publicly reportable swap transaction that is executed on the trading
system or platform, that is not an order book as defined in Sec. 
37.3(a)(3) of this chapter of a swap execution facility, or pursuant to
the rules of a swap execution facility or designated contract market
and that has a notional amount at or above the appropriate minimum
block size may elect to have the publicly reportable swap transaction
treated as a block trade. If the parties make such an election, the
reporting counterparty shall notify the swap execution facility or
designated contract market, as applicable, of the parties’ election.
    (ii) The swap execution facility or designated contract market, as
applicable, shall notify the swap data repository of such a block trade
election when reporting the swap transaction and pricing data to such
swap data repository in accordance with this part.
    (iii) The swap execution facility or designated contract market, as
applicable, shall not disclose swap transaction and pricing data
relating to a block trade subject to the block trade election prior to
the expiration of the applicable delay set forth in Sec.  43.5(c).
    (2) Block trade off-facility swap election. The parties to a
publicly reportable swap transaction that is an off-facility swap and
that has a notional amount at or above the appropriate minimum block
size may elect to have the publicly reportable swap transaction treated
as a block trade. If the parties make such an election, the reporting
counterparty for such publicly reportable swap transaction shall notify
the applicable swap data repository of the reporting counterparty’s
election when reporting the swap transaction and pricing data in
accordance with this part.
    (g) Special provisions relating to appropriate minimum block sizes
and cap sizes. The following special rules shall apply to the
determination of appropriate minimum block sizes and cap sizes–
    (1) Swaps with optionality. The notional amount of a swap with
optionality shall equal the notional amount of the component of the
swap that does not include the option component.
    (2) Swaps with composite reference prices. The parties to a swap
transaction with composite reference prices may elect to apply the
lowest appropriate minimum block size or cap size applicable to one
component reference price’s swap category of such publicly reportable
swap transaction.
    (3) Notional amounts for physical commodity swaps. Unless otherwise
specified in this part, the notional amount for a physical commodity
swap shall be based on the notional unit measure utilized in the
related futures contract or the predominant notional unit measure used
to determine notional quantities in the cash market for the relevant,
underlying physical commodity.
    (4) Currency conversion. Unless otherwise specified in this part,
when the appropriate minimum block size or cap size for a publicly
reportable swap transaction is denominated in a currency other than
U.S. dollars, parties to a swap and registered entities may use a
currency exchange rate that is widely published within the preceding
two business days from the date of execution of the swap transaction in
order to determine such qualification.
    (5) Aggregation. The aggregation of orders for different accounts
in order to satisfy the minimum block trade size or the cap size
requirement is permitted for publicly reportable swap transactions only
if each of the following conditions is satisfied:
    (i) The aggregation of orders is done by a person who:
    (A) Is a commodity trading advisor registered pursuant to section
4n of the Act, or exempt from such registration

[[Page 21564]]

under the Act, or a principal thereof, and who has discretionary
trading authority or directs client accounts;
    (B) Is an investment adviser who has discretionary trading
authority or directs client accounts and satisfies the criteria of
Sec.  4.7(a)(2)(v) of this chapter; or
    (C) Is a foreign person who performs a similar role or function as
the persons described in paragraph (g)(5)(i)(A) or (B) of this section
and is subject as such to foreign regulation;
    (ii) The aggregated transaction is reported pursuant to this part
and part 45 of this chapter as a block trade, subject to the cap size
thresholds; and
    (iii) The aggregated orders are executed as one swap transaction.
    (h) Eligible block trade parties. (1) Parties to a block trade
shall be “eligible contract participants,” as defined in section
1a(18) of the Act and the Commission’s regulations. However, a
designated contract market may allow:
    (i) A commodity trading advisor registered pursuant to section 4n
of the Act, or exempt from registration under the Act, or a principal
thereof, and who has discretionary trading authority or directs client
accounts,
    (ii) An investment adviser who has discretionary trading authority
or directs client accounts and satisfies the criteria of Sec. 
4.7(a)(2)(v) of this chapter, or
    (iii) A foreign person who performs a similar role or function as
the persons described in paragraph (h)(1)(i) or (ii) of this section
and is subject as such to foreign regulation, to transact block trades
for customers who are not eligible contract participants.
    (2) A person transacting a block trade on behalf of a customer
shall receive prior written instruction or consent from the customer to
do so. Such instruction or consent may be provided in the power of
attorney or similar document by which the customer provides the person
with discretionary trading authority or the authority to direct the
trading in its account.
0
8. Amend Sec.  43.7 by revising paragraphs (a)(1) through (3) and
adding paragraph (a)(4) to read as follows:

Sec.  43.7  Delegation of authority.

    (a) * * *
    (1) To publish the technical specifications providing the form and
manner for reporting and publicly disseminating the swap transaction
and pricing data elements in appendix C of this part as described in
Sec. Sec.  43.3(d)(1) and 43.4(a);
    (2) To determine cap sizes as described in Sec.  43.4(g);
    (3) To determine whether swaps fall within specific swap categories
as described in Sec.  43.6(b); and
    (4) To determine and publish appropriate minimum block sizes as
described in Sec.  43.6(e).
* * * * *
0
9. Revise appendix A to part 43 to read as follows:

Appendix A to Part 43–Other Commodity Swap Categories

Commodity: Metals

Aluminum
Copper
Gold
Lead
Nickel
Silver
Virtual
Zinc

Commodity: Energy

Electricity
Fuel Oil
Gasoline–RBOB
Heating Oil
Natural Gas
Oil

Commodity: Agricultural

Corn
Soybean
Coffee
Wheat
Cocoa
Sugar
Cotton
Soymeal
Soybean oil
Cattle
Hogs

0
10. Revise appendix B to part 43 to read as follows:

Appendix B to Part 43–Other Commodity Geographic Identification for
Public Dissemination Pursuant to Sec.  43.4(d)(4)

    Swap data repositories are required by Sec.  43.4(d)(4) to
publicly disseminate any specific delivery point or pricing point
associated with publicly reportable swap transactions in the “other
commodity” asset class pursuant to Tables B1 and B2 in this
appendix. If the underlying asset of a publicly reportable swap
transaction described in Sec.  43.4(d)(4) has a delivery or pricing
point that is located in the United States, such information shall
be publicly disseminated pursuant to the regions described in Table
B1 in this appendix. If the underlying asset of a publicly
reportable swap transaction described in Sec.  43.4(d)(4) has a
delivery or pricing point that is not located in the United States,
such information shall be publicly disseminated pursuant to the
countries or sub-regions, or if no country or sub-region, by the
other commodity region, described in Table B2 in this appendix.

Table B1. U.S. Delivery or Pricing Points

Other Commodity Group

Region

Natural Gas and Related Products

Midwest
Northeast
Gulf
Southeast
Western
Other–U.S.

Petroleum and Products

New England (PADD 1A)
Central Atlantic (PADD 1B)
Lower Atlantic (PADD 1C)
Midwest (PADD 2)
Gulf Coast (PADD 3)
Rocky Mountains (PADD 4)
West Coast (PADD 5)
Other–U.S.

Electricity and Sources

Florida Reliability Coordinating Council (FRCC)
Midwest Reliability Organization (MRO)
Northeast Power Coordinating Council (NPCC)
Reliability First Corporation (RFC)
SERC Reliability Corporation (SERC)
Southwest Power Pool, RE (SPP)
Texas Regional Entity (TRE)
Western Electricity Coordinating Council (WECC)
Other–U.S.

All Remaining Other Commodities (Publicly disseminate the region.
If pricing or delivery point is not region-specific, indicate
“U.S.”)

Region 1–(Includes Connecticut, Maine, Massachusetts, New
Hampshire, Rhode Island, Vermont)
Region 2–(Includes New Jersey, New York)
Region 3–(Includes Delaware, District of Columbia, Maryland,
Pennsylvania, Virginia, West Virginia)
Region 4–(Includes Alabama, Florida, Georgia, Kentucky,
Mississippi, North Carolina, South Carolina, Tennessee)
Region 5–(Includes Illinois, Indiana, Michigan, Minnesota, Ohio,
Wisconsin)
Region 6–(Includes Arkansas, Louisiana, New Mexico, Oklahoma,
Texas)
Region 7–(Includes Iowa, Kansas, Missouri, Nebraska)
Region 8–(Includes Colorado, Montana, North Dakota, South Dakota,
Utah, Wyoming)
Region 9–(Includes Arizona, California, Hawaii, Nevada)
Region 10–(Includes Alaska, Idaho, Oregon, Washington)

Table B2. Non-U.S. Delivery or Pricing Points

Other Commodity Regions

Country or Sub-Region

North America (Other than U.S.)

Canada
Mexico

Central America

South America

Brazil
Other South America

Europe

Western Europe
Northern Europe

[[Page 21565]]

Southern Europe
Eastern Europe (excluding Russia)

Russia

Africa

Northern Africa
Western Africa
Eastern Africa
Central Africa
Southern Africa

Asia-Pacific

Northern Asia (excluding Russia)
Central Asia
Eastern Asia
Western Asia
Southeast Asia
Australia/New Zealand/Pacific Islands

0
11. Revise appendix C to part 43 to read as follows.
BILLING CODE 6351-01-P

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BILLING CODE 6351-01-C
0
12. Remove appendices D, E, and F.

    Issued in Washington, DC, on February 27, 2020, by the
Commission.
Robert Sidman,
Deputy Secretary of the Commission.

    Note:  The following appendices will not appear in the Code of
Federal Regulations.

Appendices to Real-Time Public Reporting Requirements–Commission
Voting Summary and Commissioners’ Statements

Appendix 1–Commission Voting Summary

    On this matter, Chairman Tarbert and Commissioners Quintenz,
Behnam, Stump, and Berkovitz voted in the affirmative. No
Commissioner voted in the negative.

Appendix 2–Statement of Chairman Heath P. Tarbert

    Data is the lifeblood of our markets. Yet for too long, market
participants have been burdened with confusing and costly swap data
reporting rules that do little to advance the Commission’s
regulatory functions. In the decade-long effort to refine our swap
data rules, we have at times lost sight of Sir Isaac Newton’s
wisdom: “Truth is ever to be found in simplicity, and not in the
multiplicity and confusion of things.”

Overview

    Simplicity should be a central goal of our swap data reporting
rules. After all, making rules simple and clear facilitates
compliance, price discovery, and risk monitoring. While principles-
based regulation can offer numerous advantages, there are areas
where a rules-based approach is preferable because of the level of
clarity, standardization, and harmonization it provides. Swap data
reporting is one such area.1
—————————————————————————

    1 See Heath P. Tarbert, Rules for Principles and Principles
for Rules: Tools for Crafting Sound Financial Regulation, Harv. Bus.
L. Rev. (forthcoming 2020) (“A principles-based regime is often a
poor choice where standard forms and disclosures are heavily used,
as principles do not offer the needed precision.”).
—————————————————————————

    As it stands, swap data repositories (SDRs) and market
participants have been left to wade through parts 43 and 45 of our
rules on their own. We have essentially asked them to decide what to
report to the CFTC, instead of being clear about what we want. The
result is a proliferation of reportable data fields designed to
ensure compliance with our rules–but which exceed what market
participants can readily provide and what the agency can
realistically use. These fields can run hundreds deep, imposing
costly burdens on market participants. Yet for all its sprawling
complexity, the current data reporting system omits, of all things,
uncleared margin information–thereby

[[Page 21574]]

creating a black box of potential systemic risk.2
—————————————————————————

    2 Requiring margin in the uncleared swaps markets ensures that
counterparties have the necessary collateral to offset losses,
preventing financial contagion. With respect to non-cleared,
bilateral swaps, in which there is no central clearinghouse, parties
bear the risk of counterparty default. In turn, the CFTC must have
visibility into uncleared margin data to monitor systemic risk
accurately and to act quickly if cracks begin appear in the system.
—————————————————————————

    And that just describes CFTC reporting. As it stands today, a
market participant with a swap reportable to the CFTC might also
have to report the same swap to the SEC, the European Securities and
Markets Authority (ESMA), and perhaps other regulators as well. The
global nature of our derivatives markets has led to the preparation
and submission of multiple swap data reports, creating a byzantine
maze of disparate data fields and reporting timetables. Market
participants should not incur the costs and burdens of reporting a
grab-bag of dissimilar data for the very same swap. That approach
helps neither the market nor the CFTC: Conflicting data reporting
requirements make regulatory coordination more difficult, preventing
a panoramic view of risk.
    Today we take the first step toward changing this. I am pleased
to support the proposed amendments to parts 43 and 45 of the CFTC’s
rules governing swap data reporting.3 The proposals simplify the
swap data reporting process to ensure that market participants are
not burdened with unclear or duplicative reporting obligations that
do little to reduce market risk or facilitate price discovery. If
the amendments are adopted, we will no longer collect data that does
not advance our oversight of the swaps markets.
—————————————————————————

    3 We are also re-opening the comment period for part 49, which
relates to SDR registration and governance.
—————————————————————————

    In fact, the part 45 proposal includes a technical specification
that identifies 116 standardized data fields that will help replace
the many hundreds of fields now in use by SDRs. We are also
proposing to harmonize our swap data reporting requirements with
those of the SEC and ESMA. Harmonization would remove the burdens of
duplicative reporting while painting a more complete picture of
market risk. At the same time, the proposed changes to Part 43 would
enhance public transparency as well as provide relief for end users
who rely on our markets to hedge their risks. Our swaps markets are
integrated and global; it is time for our reporting regime to catch
up.

Simplified Reporting

    Today’s proposals advance my first strategic goal for our
agency: Strengthening the resilience and integrity of our
derivatives markets while fostering their vibrancy.4 Simplified
reporting is critical to the CFTC’s ability to monitor systemic
risk. While SDRs now require hundreds of data fields in an effort to
comply with parts 43 and 45 of our rules, uncleared margin has been
noticeably absent. If finalized, part 45 will require the reporting
of uncleared margin data for the first time. This will significantly
expand our visibility into potential systemic risk in the swaps
markets.
—————————————————————————

    4 See Remarks of CFTC Chairman Heath P. Tarbert to the 35th
Annual FIA Expo 2019 (Oct. 30, 2019), available at https://www.cftc.gov/PressRoom/SpeechesTestimony/opatarbert2 (announcing the
core value of “clarity” and defining it as “providing
transparency to market participants about our rules and
processes”).
—————————————————————————

    A related problem we address today involves inconsistent data.
SDRs currently validate swap transaction data in conflicting ways,
causing market participants to report disparate data elements to
different SDRs. Today’s proposals include guidance to help SDRs
standardize their validation of swap data reports, shoring up the
resilience and integrity of our markets.
    Simplifying the reporting process will also enhance the
regulatory experience for market participants at home and abroad,
which is another strategic goal for the agency.5 We have heard
from those who use our markets that the complexity of our existing
reporting rules creates confusion, leading to reporting errors.6
This situation neither serves the markets nor advances the agency’s
regulatory purpose. Indeed, data errors can frustrate transparency
and price discovery.
—————————————————————————

    5 See id. (identifying the CFTC’s strategic goals).
    6 The problem is compounded by the allowance for “catch-all”
voluntary reporting, which creates incentives for market
participants to flood the CFTC with any data that might possibly be
required. Paradoxically, this kitchen-sink approach can so muddy the
water as to undermine a fundamental purpose of data reporting: To
create a transparent picture of market risk.
—————————————————————————

    Our proposals today reflect a hard look at the data we are
requesting and the data we really need. The proposals provide the
guidance needed to collapse hundreds of reportable data fields into
a standardized set of 116 that truly advance our regulatory
objectives. If adopted, this would reduce burdens on market
participants and provide technical guidance to ensure they are no
longer guessing at what we require. Clear rules are easier to
follow, and market participants will no longer be subject to
reporting obligations that raise the costs of compliance without
improving the resilience and integrity of our derivatives markets.
Just as we are reducing requirements where they are not needed, we
are also enhancing them where they are. This is the balanced
approach sound regulation demands.

Regulatory Harmonization

    Today’s proposals also improve the regulatory experience by
harmonizing swap data reporting where it is sensible to do so.7
There is no good reason for a swap dealer or other market
participant to report hundreds of differing data fields to multiple
jurisdictions for the very same swap transaction. This situation
imposes high costs with very little benefit.
—————————————————————————

    7 Harmonizing regulation is an important consideration in
addressing our increasingly global markets. See Opening Statement of
Chairman Heath P. Tarbert Before the Open Commission Meeting on
October 16, 2019, available at https://www.cftc.gov/PressRoom/SpeechesTestimony/heathstatement101619 (“The global nature of
today’s derivatives markets requires that regulators work
cooperatively to ensure the success of the G20 reforms, foster
economic growth, and promote financial stability.”).
—————————————————————————

    While we should not harmonize for the sake of harmonizing,8 we
can reap real efficiencies by carefully building consistent data
reporting frameworks. The proposals would harmonize our swap data
reporting timelines with the SEC by moving to a “T+1” system for
swap dealers, major swap participants, and derivatives clearing
organizations. We would also remove duplicative confirmation data
and lift the requirement that end users provide valuation data.
—————————————————————————

    8 Id. (“To be sure, as my colleagues have said on several
occasions, we should not harmonize with the SEC merely for the sake
of harmonization. I agree that we should harmonize only if it is
sensible.”).
—————————————————————————

    Harmonization also helps the CFTC realize our vision of being
the global standard for sound derivatives regulation.9 We have
long been a leader in international swap data harmonization efforts,
including by co-chairing the Committee on Payments and
Infrastructures and the International Organization of Securities
Commissioners (CPMI-IOSCO) working group on critical data elements
(CDE) in swap reporting.10 The purpose of the working group is to
standardize CDE fields to facilitate consistent data reporting
across borders. Our proposals today would bring this and related
harmonization efforts to fruition by incorporating many of the CDE
fields and a limited number of CFTC-specific fields into new part 45
technical specifications. Incorporating the CDE fields would
sensibly harmonize our reporting system with that of ESMA. As a
result, the proposals would advance the CFTC’s important role in
bringing global regulators together to form a better data reporting
system.
—————————————————————————

    9 See CFTC Vision Statement, available at https://www.cftc.gov/About/Mission/index.htm.
    10 The CFTC also co-chaired the Financial Stability Board’s
working group on UTI and UPI governance.
—————————————————————————

    The proposals also would harmonize swap data reporting in
several other important respects. First, we propose adopting a
Unique Transaction Identifier (UTI) requirement in place of the
existing Unique Swap Identifier (USI) system, as provided for in the
CPMI-IOSCO Technical Guidance.11 Adopting a UTI system would
provide for consistent monitoring of swaps across borders, improving
data sharing and risk surveillance. The proposals would also remove
the requirement that market participants report duplicative creation
and confirmation data, and would adopt reporting timetables that are
consistent with those of ESMA and other regulators.12 These are
reasonable efforts that will improve the reporting process, while

[[Page 21575]]

shoring up the CFTC’s position as a leader on harmonization.
—————————————————————————

    11 The CPMI-IOSCO harmonization group has requested that
regulators implement UTI by December 31, 2020. I believe it is
important for the CFTC to meet this deadline, which has long been
public and reflects input from our staff. The remainder of our
proposals today are subject to a 1-year implementation period.
    12 Today’s proposals move to a “T+1” reporting deadline for
swap dealers, major swap participants, and derivatives clearing
organizations and to a “T+2” system for other market participants.
—————————————————————————

Enhanced Public Transparency

    I am also pleased to support our proposals today because they
enhance clarity, one of the four core values of our agency.13
Streamlining the part 45 technical specification is intended, in
part, to reduce unclear and confusing data reporting fields that do
not advance our regulatory objectives. But clarity demands more: We
must also ensure we are providing transparent, high-quality data to
the public.14
—————————————————————————

    13 See CFTC Core Values, available at https://www.cftc.gov/About/Mission/index.htm.
    14 One of the issues we are looking at closely is whether a
48-hour delay for block trade reporting is appropriate. We are
hopeful that market participants will provide comment letters and
feedback concerning the treatment of block trade delays.
—————————————————————————

    Part 43 embodies our public reporting system for swap data,
which provides high-quality information in real time. Providing
transparent, timely swap data to the public is critically important
to the price discovery process necessary for our markets to thrive
and grow. Enhanced public transparency also ensures that market
participants and end users can make informed trading and hedging
decisions.
    The CFTC’s current system for public reporting is considered the
global standard. Even so, it can be improved. Although post-priced
swaps are subject to unique pricing factors that affect the “public
tape,” 15 they are nonetheless reported after execution just like
any other swap. It is of little value for the public to see swaps
reported without an accurate price, or any price at all. To remedy
this data quality issue and improve price discovery, we are
proposing that post-priced swaps now be reported to the public tape
after pricing occurs.
—————————————————————————

    15 Many post-priced swaps are priced based on the equity
markets, and do not have a known price until the equity markets
close.
—————————————————————————

    The current reporting system for prime broker swaps has led to
data that distorts the picture of what is actually happening in the
market. Currently, part 43 requires that offsetting swaps executed
with prime brokers–in addition to the initial swap reflecting the
actual terms of the trade between counterparties–be reported on the
public tape. Reporting these duplicative swaps can hinder price
discovery by displaying pricing data that includes fees and other
costs unrelated to the actual terms of the parties’ swap. Cluttering
the public tape with duplicative swaps is at best unhelpful, and at
worst confusing. To the public, it could appear as though there are
twice as many negotiated, arms-length swaps as there actually are.
Today’s proposals would solve this problem by requiring that only
the initial “trigger” swaps be publicly reported.

Relief for End Users

    Finally, the proposals would help make our derivatives markets
work for all Americans, another of the CFTC’s strategic goals.16
While swaps are viewed by many Americans as esoteric products, they
can nonetheless fulfill an important risk-management function for
end users like farmers, ranchers, and manufacturers. End users often
lack the reporting infrastructure of big banks, and may be unable to
report data as quickly as swap dealers and financial institutions.
Indeed, demanding that they do so can impair data quality,
frustrating our regulatory objectives.
—————————————————————————

    16 See FIA Expo Remarks, supra note 5.
—————————————————————————

    If finalized, today’s proposals will no longer require end users
to report swap valuation data. It would also give them a “T+2”
timeframe for reporting the data we do require. The proposals would
therefore remove unnecessary reporting burdens from end users
relying on our swaps markets to hedge their risks. In addition, by
providing sufficient time for end users to ensure their reporting is
accurate, the proposals would also improve the quality of data we
receive.

Conclusion

    It is time for the Commission to reform our swap data reporting
rules. Sir Isaac Newton realized long ago that simplicity can often
lead to truth. It does not take an apple striking us on the head to
realize that simplifying our swap data reporting rules to achieve
clarity, standardization, and harmonization will inevitably make for
sounder regulation.

Appendix 3–Concurring Statement of Commissioner Rostin Behnam

    I respectfully concur in the Commission’s proposal to amend
certain real-time public reporting requirements. I support the
Commission’s ongoing review of its swap reporting rules; however, I
think it is very important that we not lose sight of why we have
these rules in the first place. Prior to the 2008 financial crisis,
swaps were largely exempt from regulation and traded exclusively
over-the-counter.1 Lack of transparency in the over-the-counter
swaps market contributed to the financial crisis because both
regulators and market participants lacked the visibility necessary
to identify and assess swaps market exposures and counterparty
relationships and counterparty credit risk.2 In the aftermath of
the financial crisis, Congress enacted the Dodd-Frank Wall Street
Reform and Consumer Protection Act in 2010 (Dodd-Frank Act).3 The
Dodd-Frank Act largely incorporated the international financial
reform initiatives for over-the-counter derivatives laid out at the
2009 G20 Pittsburgh Summit, which sought to improve transparency,
mitigate systemic risk, and protect against market abuse.4 With
respect to data reporting, the policy initiative developed by the
G20 focused on establishing a consistent and standardized global
data set across jurisdictions in order to support regulatory efforts
to timely identify systemic risk. The critical need and importance
of this policy goal given the consequences of the financial crisis
cannot be understated.
—————————————————————————

    1 See Commodity Futures Modernization Act of 2000, Public Law
106-554, 114 Stat. 2763 (2000).
    2 See The Financial Crisis Inquiry Commission, The Financial
Crisis Inquiry Report: Final Report of the National Commission on
the Causes of the Financial and Economic Crisis in the United States
(Official Government Edition), at 299, 352, 363-364, 386, 621 n. 56
(2011), available at https://www.gpo.gov/fdsys/pkg/GPO-FCIC/pdf/GPO-FCIC.pdf.
    3 See Dodd-Frank Wall Street Reform and Consumer Protection
Act, Public Law 111-203, 124 Stat. 1376 (2010).
    4 G20, Leaders’ Statement, The Pittsburgh Summit (Sept. 24-25,
2009) at 9, available at https://www.treasury.gov/resource-center/international/g7-g20/Documents/pittsburgh_summit_leaders_statement_250909.pdf.
—————————————————————————

    Among many critically important statutory changes, which have
shed light on the over-the-counter derivatives markets, Title VII of
the Dodd-Frank Act amended the Commodity Exchange Act and added a
new term to the Act: “real-time public reporting.” 5 The Act
defines that term to mean reporting “data relating to swap
transaction, including price and volume, as soon as technologically
practicable after the time at which the swap transaction has been
executed.” 6
—————————————————————————

    5 7 U.S.C. 2(a)(13)(A).
    6 Id.
—————————————————————————

    As we consider amending these rules, I think it is important
that we keep in mind the Dodd-Frank Act’s emphasis on transparency,
and what transpired to necessitate that emphasis. While most of
today’s proposal encourages and supports the transparency required
by the Act, I am concerned about the proposed amendments that would
significantly extend the time delays for public dissemination of
block trades. Currently, the time delay for public dissemination of
block trades executed pursuant to the rules of a SEF or DCM is 15
minutes.7 Today’s proposal would extend the time delay to 48 hours
for all block trades. I look forward to hearing from commenters as
to whether this significant reduction in real-time transparency is
justified, and whether there are potential risks to market structure
efficiency that may reward some participants at the expense of
others.
—————————————————————————

    7 17 CFR 43.5(d)(2).
—————————————————————————

Appendix 4–Statement of Commissioner Dan M. Berkovitz

Introduction

    I am voting to issue for public comment the proposed rulemaking
that would amend certain rules requiring real-time public reporting
of swap trades. The proposal is intended to enhance the existing
real-time public reporting framework adopted in 2012. Although I am
voting to issue the proposal for public comment, I do not support
the provision in the proposal that would permit a 48-hour delay in
the reporting of block trades. A 48-hour delay for all block trades
is too long.
    One of the primary goals of the Dodd-Frank Act is to bring
transparency to opaque swap markets. In Commodity Exchange Act
section 2(a)(13), Congress required the Commission to adopt real-
time public reporting regulations. Congress stated that “[t]he
purpose of this section is to authorize the Commission to make swap
transaction and pricing data available to the public in such form
and at such times as the Commission determines appropriate to
enhance price

[[Page 21576]]

discovery.” 1 Many of the provisions in the proposal will further
that statutory purpose by improving the usability of the real-time
public reporting occurring under the 2012 regulations.
—————————————————————————

    1 CEA section 2(13)(B) (emphasis added).
—————————————————————————

    The provisions permitting a delay of 48 hours in the reporting
of block trades, however, could impede rather than foster price
discovery. It also could undermine market integrity by providing
counterparties to large swaps with an unfair information advantage.
While an appropriate block trade reporting delay is mandated by
statute to allow effective hedging of the position, the delay should
be appropriately limited. I address this concern in greater detail
below.

Intended Benefits of the Proposal

    To effectively use real-time data for price discovery, market
participants need to be able to compare data reported by the
different swap data repositories and assess the validity of the
data. Significantly, the proposal would require standardized data
reporting using technical specifications and instructions that
establish the form and manner in which the data must be reported.
This approach promotes uniformity in the data across swap data
repositories and reporting parties and thereby facilitates
aggregation and validation.
    Similarly, the proposal addresses several technical questions
that arose during implementation of the 2012 rules that obscured
effective price discovery. The issue of whether to report so-called
“mirror swaps” executed under prime broker arrangements is
addressed by eliminating duplicate reporting of the mirror swap
after the “trigger” swap is reported. Duplicate reporting can
create a false signal of swap trading volume and potentially obscure
price discovery by giving the price reported for a single prime
brokerage swap twice as much weight relative to other non-prime
brokerage swaps. Similarly, issues involving pricing of certain
types of swaps which, by their terms, are priced at a time after the
swaps are executed would allow for more accurate price discovery–
i.e. the price that is based on market conditions at the time the
price is set.

Block Trade Reporting

    The proposal also addresses the issue of block trade reporting.
In this area, while the proposal would make a number of
improvements, it also raises issues for which public input would be
helpful. Congress directed the Commission to establish “the
appropriate time delay for reporting large notional swap
transactions (block trades) to the public.” 2 The proposal
maintains the current framework for block trade reporting, but
proposes a number of substantive changes to how the block size is
set and when the trades must be reported.
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    2 CEA section 2(13)(E)(iii).
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    Some of these changes are practical, data driven modifications.
The proposal would change the categories of swaps for which
different block trade sizes are established so that the block sizing
applies to swap products that are comparable in how notional amounts
and prices are set. This change was based on both comments received
during implementation and on swap data analysis. This change would,
if effective, enhance price discovery by eliminating the
underreporting of categories of swap products that typically trade
at notional levels in excess of the block size simply because they
are, for example, in a different currency or trade in different
quantities than is typical for the rest of the category to which
they are compared. As I have said before, when available, data
should be used by the Commission to establish regulations that serve
the public policy goals set by Congress.
    The proposal also would eliminate several block trade delay
periods in the existing rule as short as 15 minutes and replace them
with a single 48-hour delay period. This simplified approach to
block trade reporting delays could harm price discovery and do so in
a manner that is not supported by the need for a delay in block
trade reporting. Under the proposal, fully one-third of all trades
within a category could be block trades subject to reporting delays.
Such a large carve-out from real-time reporting would harm price
discovery and provide an unfair information advantage to swap
dealers and other large counterparties.
    The need for a 48-hour delay is not apparent. It is my
understanding that for many block trades, the dealer seeking to
hedge the block position will do so as soon as possible after the
trade (if not before) and in most cases within the same trading
session. The logic of this is obvious–waiting overnight to
establish a hedge could destroy the profit and loss calculated when
the block was executed as market prices move further away from the
prices at the time the trade was executed. On the other hand, some
small number of block trades, those of very large size or with
complex features, may take 48 hours or more to hedge. The Commission
should calibrate the delay periods accordingly.
    I thank the CFTC staff for working with my office to add
questions addressing this issue. The questions relating to proposed
section 43.5 ask commenters to address whether these issues are of
concern and whether the rule would benefit from having two delay
periods, one shorter for “smaller” block trades and another for
the largest block trades. I look forward to reviewing comments on
this and other issues.

Conclusion

    I commend all of the staff at the CFTC who worked on the
reporting rules over the years. Getting swap reporting right is a
difficult, but important function for the Commission. Improving
price discovery through real-time public reporting serves a core
CFTC mission. This proposal offers a number of pragmatic solutions
to known issues with the current rule. These improvements, however,
should not–and need not–come at the expense of market transparency
and a level playing field.

[FR Doc. 2020-04405 Filed 4-16-20; 8:45 am]
BILLING CODE 6351-01-P