Federal Register, Volume 85 Issue 75 (Friday, April 17, 2020) 
[Federal Register Volume 85, Number 75 (Friday, April 17, 2020)]
[Proposed Rules]
[Pages 21578-21658]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-04407]

 

[[Page 21577]]

Vol. 85

Friday,

No. 75

April 17, 2020

Part III

 

 

 Commodity Futures Trading Commission

 

 

———————————————————————–

 

 

17 CFR Parts 45, 46, and 49

 

 

Swap Data Recordkeeping and Reporting Requirements; Proposed Rule

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

[[Page 21578]]

———————————————————————–

COMMODITY FUTURES TRADING COMMISSION

17 CFR Parts 45, 46, and 49

RIN 3038-AE31

Swap Data Recordkeeping and Reporting Requirements

AGENCY: Commodity Futures Trading Commission.

ACTION: Notice of proposed rulemaking.

———————————————————————–

SUMMARY: The Commodity Futures Trading Commission (“Commission” or
“CFTC”) is proposing revisions to the Commission regulations that set
forth the swap data recordkeeping and reporting 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 proposing revisions that, among other things, streamline
the requirements for reporting new swaps, define and adopt swap data
elements that harmonize with international technical guidance, and
reduce reporting burdens for reporting counterparties that are not SDs
or MSPs.

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

ADDRESSES: You may submit comments, identified by RIN 3038-AE31, by any
of the following methods:
     CFTC Comments Portal: https://comments.cftc.gov. Select
the “Submit Comments” link for this rulemaking and follow the
instructions on the Public Comment Form.
     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: Follow the same instructions as for
Mail, above. Please submit your comments using only one of these
methods. Submissions through the CFTC Comments Portal are encouraged.
    All comments must be submitted in English, or if not, accompanied
by an English translation. Comments will be posted as received to
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
—————————————————————————

    1 17 CFR 145.9. Commission regulations referred to herein are
found at 17 CFR chapter I.
—————————————————————————

    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 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: Meghan Tente, Acting Associate
Director, (202) 418-5785, cftc.gov”>[email protected]; Richard Mo, Special Counsel,
(202) 418-7637, cftc.gov”>[email protected]; Thomas Guerin, Special Counsel, (202)
734-4194, cftc.gov”>[email protected], Division of Market Oversight, Commodity
Futures Trading Commission, Three Lafayette Centre, 1155 21st Street
NW, Washington, DC 20581; Kristin Liegel, Surveillance Analyst, (312)
596-0671, cftc.gov”>[email protected], Division of Market Oversight, Commodity
Futures Trading Commission, 525 West Monroe Street, Suite 1100,
Chicago, Illinois 60661; Nancy Doyle, Senior Special Counsel, (202)
418-5136, cftc.gov”>[email protected], Office of International Affairs; Gloria
Clement, Senior Special Counsel, (202) 418-5122, cftc.gov”>[email protected];
John Coughlan, Research Economist, (202) 418-5944, cftc.gov”>[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 Swap Data
Recordkeeping and Reporting
    C. International Swap Data Reporting Developments
II. Proposed Amendments to Part 45
    A. Sec.  45.1–Definitions
    B. Sec.  45.2–Swap Recordkeeping
    C. Sec.  45.3–Swap Data Reporting: Creation Data
    D. Sec.  45.4–Swap Data Reporting: Continuation Data
    E. Sec.  45.5–Unique Transaction Identifiers
    F. Sec.  45.6–Legal Entity Identifiers
    G. Sec.  45.8–Determination of Which Counterparty Shall Report
    H. Sec.  45.10–Reporting to a Single SDR
    I. Sec.  45.11–Data Reporting for Swaps in a Swap Asset Class
Not Accepted by Any SDR
    J. Sec.  45.12–Voluntary Supplemental Reporting
    K. Sec.  45.13–Required Data Standards
    L. Sec.  45.15–Delegation of Authority
III. Proposed Amendments to Part 46
    A. Sec.  46.1–Definitions
    B. Sec.  46.3–Data Reporting for Pre-Enactment Swaps and
Transition Swaps
    C. Sec.  46.10–Required Data Standards
    D. Sec.  46.11–Reporting of Errors and Omissions in Previously
Reported Data
IV. Proposed Amendments to Part 49
    A. Sec.  49.2–Definitions
    B. Sec.  49.4–Withdrawal From Registration
    C. Sec.  49.10–Acceptance and Validation of Data
V. Swap Data Elements Reported to Swap Data Repositories
    A. General
    B. Swap Data Elements To Be Reported to Swap Data Repositories
VI. Compliance Date
VII. 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 swap data reporting regulations were first adopted
in 2012 and are located in part 45 of the Commission’s regulations.2
The regulations require swap counterparties, SEFs, and DCMs to report
swap data to SDRs. In 2016, the Commission amended part 45 to clarify
the reporting obligations for DCOs and swap counterparties with respect
to cleared swaps.3 In addition, throughout this time, the Commission
has undertaken several efforts to identify, and made recommendations to
resolve, swap reporting challenges faced by market participants.4
—————————————————————————

    2 Swap Data Recordkeeping and Reporting Requirements, 77 FR
2136 (Jan. 13, 2012).
    3 Amendments to Swap Data Recordkeeping and Reporting
Requirements for Cleared Swaps, 81 FR 41736 (June 27, 2016).
    4 See, e.g., Review of Swap Data Recordkeeping and Reporting
Requirements, Request for Comment, 79 FR 16689 (Mar. 26, 2014);
Press Release, CFTC Staff Issues Request for Comment on Draft
Technical Specifications for Certain Swap Data Elements (Dec. 22,
2015), available at https://www.cftc.gov/PressRoom/PressReleases/pr7298-15; Press Release, CFTC Requests Public Input on Simplifying
Rules (May 3, 2017), available at https://www.cftc.gov/PressRoom/PressReleases/pr7555-17.
—————————————————————————

    The Division of Market Oversight (“Division” or “DMO”) is
currently completing an update of the swap reporting rules. On July 10,
2017, the Division announced its Roadmap to Achieve High Quality Swaps
Data (“Roadmap”), consisting of a comprehensive review to: (i) Ensure
that

[[Page 21579]]

the CFTC receives accurate, complete, and high quality data on swaps
transactions for its regulatory oversight role; and (ii) streamline
reporting, reduce messages that must be reported, and right-size the
number of data elements that are reported to meet the agency’s priority
use-cases for swap data.5
—————————————————————————

    5 See CFTC Letter 17-33, Division of Market Oversight
Announces Review of Swap Reporting Rules in Parts 43, 45, and 49 of
Commission Regulations (July 10, 2017), available at https://www.cftc.gov/idc/groups/public/@lrlettergeneral/documents/letter/17-33.pdf; Roadmap to Achieve High Quality Swap Data, available at
https://www.cftc.gov/idc/groups/public/@newsroom/documents/file/dmo_swapdataplan071017.pdf.
—————————————————————————

    The Commission received extensive feedback that addressed many swap
reporting topics in response to DMO’s Roadmap.6 Informed by that
feedback, the Commission is taking a stepwise approach to amend its
rules through separate notices of proposed rulemaking (“NPRMs”) as
part of the Roadmap review. First, in May 2019, the Commission
published an NPRM to streamline and clarify the Commission’s SDR
regulations in parts 23, 43, 45, and 49 (the “2019 Part 49 NPRM”).7
Among other things, the 2019 Part 49 NPRM proposed modifications to the
existing requirements for SDRs to confirm the accuracy of swap data
with swap counterparties, and proposed requiring reporting
counterparties to verify the accuracy of swap data with SDRs.
—————————————————————————

    6 Comment letters are available at https://comments.cftc.gov/PublicComments/CommentList.aspx?id=1824. The Commission will discuss
comment letters in the relevant sections throughout this release.
    7 See Certain Swap Data Repository and Data Reporting
Requirements, 84 FR 21044 (May 13, 2019).
—————————————————————————

    Now, in this release, the Commission is proposing revisions to the
part 45 reporting regulations related to the following topics:
Simplifying the requirements for reporting swaps; requiring SDRs to
validate swap reports; permitting the transfer of swap data between
SDRs; alleviating reporting burdens for non-SD/MSP reporting
counterparties; and harmonizing the swap data elements counterparties
report to SDRs with international technical guidance. The Commission
will discuss each of these proposed changes in this release.
    In addition, the Commission is proposing amendments to certain part
46 regulations for reporting pre-enactment swaps and transition swaps,
primarily to conform to changes the Commission is proposing to part
45.8 The Commission is also proposing amendments to certain
regulations in part 49 that were not addressed in the 2019 Part 49
NPRM.9 Most of the amendments the Commission is proposing to part 49
concern new requirements for SDRs, including proposed requirements to
validate SDR data.10
—————————————————————————

    8 See generally 17 CFR part 46.
    9 See generally 17 CFR part 49.
    10 The new requirements proposed for SDRs to validate swap
data in Sec.  49.10 are discussed in section IV.C.3 below. The
Commission has proposed to define the term “SDR data” in the 2019
Part 49 NPRM. As proposed, “SDR data” would mean the specific data
elements and information required to be reported to an SDR or
disseminated by an SDR, pursuant to two or more of parts 43, 45, 46,
and/or 49, as applicable. See 2019 Part 49 NPRM at 21047, 21101.
—————————————————————————

    The Commission appreciates the time commenters have taken to
explain aspects of the reporting requirements that they believe the
Commission could make more efficient. As discussed throughout this
release, the Commission believes that the revisions proposed herein
address many of these recommendations, as well as several major
domestic and international swap reporting developments that have
occurred since the Commission originally adopted part 45.

B. Statutory and Regulatory Framework for Swap Data Recordkeeping and
Reporting

    Pursuant to section 2(a)(13)(G) of the Commodity Exchange Act
(“CEA”), all swaps, whether cleared or uncleared, must be reported to
SDRs.11 SDRs collect and maintain data related to swap transactions,
keeping such data electronically available for regulators or the
public.12 CEA section 21(b) directs the Commission to prescribe
standards for swap data recordkeeping and reporting, which are to apply
to both registered entities and counterparties involved with swaps, and
be comparable to standards for clearing organizations in connection
with clearing of swaps.13 CEA sections 4r(a)(2)(A) and 2(h)(5)
provide for the reporting of pre-enactment and transition swaps.14
—————————————————————————

    11 7 U.S.C. 2(a)(13)(g).
    12 The term “swap data repository” 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. See 7 U.S.C. 1a(48).
Regulations governing core principles and registration requirements
for, and duties of, SDRs are in part 49 of the Commission’s
regulations. See generally 17 CFR part 49.
    13 See 7 U.S.C. 24a(b).
    14 See 7 U.S.C. 6r(a)(2)(A) and 7 U.S.C. 2(h)(5); see also 17
CFR 46.1 (defining “pre-enactment swap” as any swap entered into
prior to enactment of the Dodd-Frank Act of 2010 (July 21, 2010),
the terms of which have not expired as of the date of enactment of
that Act, and “transition swap” as any swap entered into on or
after the enactment of the Dodd-Frank Act of 2010 (July 21, 2010)
and prior to the applicable compliance date on which a registered
entity or swap counterparty subject to the jurisdiction of the
Commission is required to commence full compliance with all
provisions of part 46.
—————————————————————————

    In 2011, the Commission adopted the part 49 regulations setting
forth the specific duties that SDRs are required to comply with to
register as an SDR.15 In 2012, the Commission adopted the part 45
regulations to implement standards for swap data reporting and
recordkeeping 16 and the part 46 regulations to implement standards
for pre-enactment and transition swap recordkeeping and reporting.17
In 2016, the Commission amended part 45 to clarify the reporting
obligations for cleared swaps.18
—————————————————————————

    15 See generally Swap Data Repositories: Registration
Standards, Duties and Core Principles, 76 FR 54538 (Sept. 1, 2011).
    16 See generally Swap Data Recordkeeping and Reporting
Requirements, 77 FR 2136 (Jan. 13, 2012).
    17 See generally Swap Data Recordkeeping and Reporting
Requirements: Pre-Enactment and Transition Swaps, 77 FR 35200 (June
12, 2012).
    18 See generally Amendments to Swap Data Recordkeeping and
Reporting Requirements for Cleared Swaps, 81 FR 41736 (June 27,
2016).
—————————————————————————

    The Commission will discuss relevant sections of the current parts
45, 46, and 49 regulations throughout this release.

C. International Swap Data Reporting Developments

    In response to the financial crisis in 2009, the G20 leaders agreed
that all over-the-counter (“OTC”) derivatives should be reported to
trade repositories (“TRs”) 19 to further the goals of improving
transparency, mitigating systemic risk, and preventing market abuse.
Since November 2014, regulators across major derivatives jurisdictions,
including the CFTC, have come together through the Committee on
Payments and Market Infrastructures (“CPMI”) and the International
Organization of Securities Commissions (“IOSCO”) working group for
the harmonization of key OTC derivatives data elements (“Harmonisation
Group”) to develop global guidance regarding the definition, format,
and usage of key OTC derivatives data elements reported to TRs,
including the Unique Transaction Identifier (“UTI”), the Unique
Product Identifier (“UPI”), and critical data elements other than UTI
and UPI (“CDE”).
—————————————————————————

    19 See https://www.treasury.gov/resource-center/international/g7-g20/Documents/pittsburgh_summit_leaders_statement_250909.pdf. In
the U.S., trade repositories are called SDRs.
—————————————————————————

    The Harmonisation Group published Guidance on the Harmonisation of
the Unique Transaction Identifier (“UTI Technical Guidance”) 20 in
February

[[Page 21580]]

2017 and Technical Guidance on the Harmonisation of the Unique Product
Identifier 21 (“UPI Technical Guidance”) in September 2017.
—————————————————————————

    20 CPMI-IOSCO, Technical Guidance, Harmonisation of the Unique
Transaction Identifier (Feb. 2017), available at https://www.iosco.org/library/pubdocs/pdf/IOSCOPD557.pdf. The CFTC’s rules
currently refer to UTIs as USIs. As discussed in section II.E below,
the Commission is proposing to harmonize its unique swap identifier
(“USI”) rules with the UTI Technical Guidance, and change USI
references to UTI.
    21 CPMI-IOSCO, Technical Guidance, Harmonisation of the Unique
Product Identifier (Sept. 2017), available at https://www.iosco.org/library/pubdocs/pdf/IOSCOPD580.pdf.
—————————————————————————

    The Commission currently requires that each swap subject to its
jurisdiction be identified by a USI.22 The UTI Technical Guidance,
intended by CPMI-IOSCO to help authorities set rules for a uniform
global UTI, provided guidance to authorities on the definition, format,
generation, and usage of UTIs. Similarly, CPMI-IOSCO intends that the
UPI Technical Guidance will result in a unique UPI code that will be
assigned to each distinct OTC derivative product. The Commission’s
rules do not specify a standardized set of swap product data elements.
The new CPMI-IOSCO UPI code will map to a set of data comprised of
reference data elements with specific values that together describe the
swap product.
—————————————————————————

    22 See 17 CFR 45.5.
—————————————————————————

    In April 2018, the Harmonisation Group published Technical Guidance
on the Harmonisation of Critical OTC Derivatives Data Elements (other
than UTI and UPI) (“CDE Technical Guidance”).23 The CDE Technical
Guidance provides technical guidance on the definition, format, and
allowable values of over 100 critical data elements, other than UTI and
UPI, reported to TRs and important for data aggregation by authorities.
The harmonized data elements in the CDE Technical Guidance cover data
elements ranging from counterparty information, payments, and valuation
and collateral to prices and quantities, package trades, and custom
baskets.24
—————————————————————————

    23 The CDE Technical Guidance was finalized following
consultative reports in September 2015, October 2016, and June 2017.
See CPMI-IOSCO, Technical Guidance, Harmonisation of Critical OTC
Derivatives Data Elements (other than UTI and UPI) (Apr. 2018),
available at https://www.iosco.org/library/pubdocs/pdf/IOSCOPD598.pdf.
    24 Id.
—————————————————————————

    The Commission has played an active role in the development and
publication of the CDE Technical Guidance as part of the CPMI-IOSCO
working group, alongside representatives from Canada, France, Germany,
Hong Kong, Japan, Singapore, and the United Kingdom, among others.
Commission staff provided feedback about the data elements, taking into
account the Commission’s experience with swap data reporting and its
use of such data in fulfilling its regulatory responsibilities.
Commission staff also participated in the solicitation of responses to
three public consultations on the CDE Technical Guidance, along with
related industry workshops and conference calls.25
—————————————————————————

    25 See CPMI-IOSCO, Technical Guidance, Harmonisation of
Critical OTC Derivatives Data Elements (other than UTI and UPI) at
9.
—————————————————————————

    Since each authority is responsible for issuing requirements for
market participants on OTC derivatives data reporting, the CDE
Technical Guidance does not determine which critical data elements are
required to be reported in a given jurisdiction. Instead, if CDE
Technical Guidance data elements are required to be reported in a given
jurisdiction, the CDE Technical Guidance provides the relevant
authorities in that jurisdiction guidance on the definition, format,
and allowable values for these data elements that would facilitate
consistent aggregation at a global level.

II. Proposed Amendments to Part 45

A. Sec.  45.1–Definitions

    Section 45.1 contains the definitions for terms used throughout the
regulations in part 45. Section 45.1 does not contain any lower
paragraph levels. The Commission is proposing to separate Sec.  45.1
into two paragraphs: Sec.  45.1(a) for definitions, and Sec.  45.1(b),
which would state that terms not defined in part 45 have the meanings
assigned to the terms in Commission regulation Sec.  1.3.26
—————————————————————————

    26 17 CFR 1.3.
—————————————————————————

    The Commission is also proposing to revise the definitions in
proposed Sec.  45.1(a). As part of these revisions, the Commission is
proposing to add new definitions, and amend or remove certain
definitions. As Sec.  45.1 is arranged alphabetically, the Commission
has grouped the discussion of its proposed changes to Sec.  45.1 into
corresponding categories (i.e., new definitions, amendments, and
removal), except as otherwise noted.
1. Proposed New Definitions
    The Commission is proposing to add a definition of “allocation”
to Sec.  45.1(a). As proposed, “allocation” would mean the process by
which an agent, having facilitated a single swap transaction on behalf
of clients, allocates a portion of the executed swap to the clients.
Section 45.3(f) currently contains regulations for reporting
allocations without defining the term. Defining “allocation” should
help market participants comply with the regulations for reporting
allocations in Sec.  45.3.
    The Commission is also proposing to add a definition of “as soon
as technologically practicable” (“ASATP”) to Sec.  45.1(a). As
proposed, “as soon as technologically practicable” would mean as soon
as possible, taking into consideration the prevalence, implementation,
and use of technology by comparable market participants. The phrase
“as soon as technologically practicable” is currently used throughout
part 45, but is not defined. The Commission is proposing to adopt the
same definition of “as soon as technologically practicable” as is
defined in Sec.  43.2 of the Commission’s regulations for the swap
transaction and pricing data.27
—————————————————————————

    27 See 17 CFR 43.2 (definition of “as soon as technologically
practicable”).
—————————————————————————

    The Commission is also proposing to add a definition of
“collateral data” to Sec.  45.1(a). As proposed, “collateral data”
would mean the data elements necessary to report information about the
money, securities, or other property posted or received by a swap
counterparty to margin, guarantee, or secure a swap, as specified in
appendix 1 to part 45. This proposed new definition is explained in a
discussion of proposed requirements for reporting counterparties to
report collateral data in section II.D.4 below.
    The Commission is proposing to add definitions for “execution”
and “execution date” to Sec.  45.1(a). 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.28 The term “execution date” would mean the date,
determined by reference to eastern time, on which swap execution has
occurred. The execution date for a clearing swap that replaces an
original swap would be the date, determined by reference to eastern
time, on which the original swap has been accepted for clearing. The
term “execution” is currently used throughout part 45 but not
defined, and the Commission is proposing new regulations that reference
“execution date.” 29
—————————————————————————

    28 The Commission notes that the proposed definition of
“execution” is functionally identical to the existing definition
of execution in part 23 of the Commission’s regulations. See 17 CFR
23.200(e) (definition of “execution”).
    29 See proposed Sec.  45.3(a) and (b), discussed in sections
II.C.2.a and II.C.2.b, respectively, below.
—————————————————————————

    The Commission is proposing to add the following three definitions
to Sec.  45.1(a): “Global Legal Entity Identifier

[[Page 21581]]

System,” “legal entity identifier” or “LEI,” and “Legal Entity
Identifier Regulatory Oversight Committee” (“LEI ROC”). As proposed,
“Global Legal Entity Identifier System” would mean the system
established and overseen by the LEI ROC for the unique identification
of legal entities and individuals. As proposed, “legal entity
identifier” or “LEI” would mean a unique code assigned to swap
counterparties and entities in accordance with the standards set by the
Global Legal Entity Identifier System. As proposed, “Legal Entity
Identifier Regulatory Oversight Committee” would mean the group
charged with the oversight of the Global Legal Entity Identifier System
that was established by the finance ministers and the central bank
governors of the Group of Twenty nations and the Financial Stability
Board, under the Charter of the Regulatory Oversight Committee for the
Global Legal Entity Identifier System dated November 5, 2012, or any
successor thereof.30 These proposed definitions are all associated
with, and further explained in the context of, the Sec.  45.6
regulations for LEI, discussed in section II.F below.
—————————————————————————

    30 https://www.leiroc.org/publications/gls/roc_20190130-1.pdf.
—————————————————————————

    The Commission is proposing to add a definition of “non-SD/MSP/DCO
reporting counterparty” to Sec.  45.1(a). As proposed, “non-SD/MSP/
DCO reporting counterparty” would mean a reporting counterparty that
is not an SD, MSP, or DCO. Currently, DCOs are not included in the term
“non-SD/MSP reporting counterparty.” This creates problems when, for
instance, the Commission did not intend for DCOs to follow the required
swap creation data reporting regulations in Sec.  45.3(d) for off-
facility swaps not subject to the clearing requirement with a non-SD/
MSP reporting counterparty, even though DCOs are technically reporting
counterparties that are neither SDs or MSPs. Instead, DCOs follow the
required swap creation data reporting regulations in Sec.  45.3(e) for
clearing swaps. The definition of “non-SD/MSP/DCO reporting
counterparty” should address this unintended regulatory overlap.
    The Commission is proposing to add a definition of “novation” to
Sec.  45.1(a). As proposed, “novation” would mean 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.
This proposed term is currently referenced in the definition of “life
cycle event,” as well as the Sec.  45.8(g) regulations for determining
which counterparty must report, but is not currently defined.
    The Commission is proposing to add a definition of “swap” to
Sec.  45.1(a). As proposed, “swap” would mean any swap, as defined by
Sec.  1.3, as well as any foreign exchange forward, as defined by CEA
section 1a(24), or foreign exchange swap, as defined by CEA section
1a(25).31 The term “swap” is used throughout part 45. The proposed
definition would codify the meaning of the term as it is currently used
throughout part 45.
—————————————————————————

    31 The Commission notes that while foreign exchange forwards
and foreign exchange swaps are excluded from the definition of
“swap,” such transactions are nevertheless required to be reported
to an SDR. See 7 U.S.C. 1a(47)(E)(iii) (definition of “swap”).
—————————————————————————

    The Commission is proposing to add definitions of “swap data” and
“swap transaction and pricing data” to Sec.  45.1(a). As proposed,
“swap data” would mean the specific data elements and information in
appendix 1 to part 45 required to be reported to an SDR pursuant to
part 45 or made available to the Commission pursuant to part 49, as
applicable; “swap transaction and pricing data” would mean all data
for a swap in appendix C to part 43 required to be reported or publicly
disseminated pursuant to part 43. The term “swap data” is currently
used throughout part 45. The Commission believes that having the term
“swap data” apply to part 45 data, and “swap transaction and pricing
data” apply to part 43 data would provide clarity across the reporting
regulations.32
—————————————————————————

    32 The Commission has also proposed to add functionally
identical definitions for “swap data” and “swap transaction and
pricing data” to part 49 of the Commission’s regulations as part of
the 2019 Part 49 NPRM. See 2019 Part 49 NPRM at 21102 (definitions
of “swap data” and “swap transaction and pricing data”).
—————————————————————————

    The Commission is proposing to add a definition of “swap data
validation procedures” to Sec.  45.1(a). As proposed, “swap data
validation procedures” would mean procedures established by an SDR
pursuant to proposed Sec.  49.10 to accept, validate, and process swap
data reported to an SDR pursuant to part 45. This proposed new
definition is explained in a discussion of the proposed regulations for
the validation of swap data reported to SDRs in section IV.C.3 below.
    The Commission is proposing to add a definition of “unique
transaction identifier” to Sec.  45.1(a). As proposed, “unique
transaction identifier” would mean a unique alphanumeric identifier
with a maximum of 52 characters constructed solely from the upper-case
alphabetic characters A to Z or the digits 0 to 9, inclusive in both
cases, generated for each swap pursuant to Sec.  45.5. This proposed
new definition is used in the discussion of the regulations to
transition from using USIs to UTIs. Those proposed changes are
explained in section II.E below.
2. Proposed Amendments to Existing Definitions
    The Commission is proposing non-substantive minor technical changes
to the existing definitions of “asset class,” “derivatives clearing
organization,” and “swap execution facility.” The remaining
discussion in this section addresses substantive amendments.
    The Commission is proposing to amend the definition of “business
day” in proposed Sec.  45.1(a). Currently, Sec.  45.1 defines
“business day” to mean “the twenty-four hour day, on all days except
Saturdays, Sundays, and legal holidays, in the location of the
reporting counterparty or registered entity reporting data for the
swap.” 33 The Commission is proposing to replace “the twenty-four
hour day” with “each twenty-four hour day,” and “legal holidays, in
the location of the reporting counterparty” with “Federal holidays.”
The Commission believes these changes would simplify the current
business day definition by removing the responsibility of determining
different legal holidays depending on the reporting counterparty’s
location. The proposed amended definition is used in a discussion of
proposed changes to the timing requirements for reporting swap creation
data and required swap continuation data in current and proposed
Sec. Sec.  45.3 and 45.4. Those proposed changes are explained in
sections II.C and II.D, respectively, below.
—————————————————————————

    33 17 CFR 45.1 (definition of “business day”).
—————————————————————————

    The Commission is proposing to amend the definition of “life cycle
event” in proposed Sec.  45.1(a). Currently, Sec.  45.1 defines “life
cycle event” to mean any event that would result in either a change to
a primary economic term of a swap or to any primary economic terms data
(“PET data”) previously reported to an SDR in connection with a swap.
Examples of such events include, without limitation, a counterparty
change resulting from an assignment or novation; a partial or full
termination of the swap; a change to the end date for the swap; a
change in the cash flows or rates originally reported; availability of
an LEI for a swap counterparty previously identified by name or by some
other identifier; or a corporate action affecting a security or

[[Page 21582]]

securities on which the swap is based (e.g., a merger, dividend, stock
split, or bankruptcy). The Commission is proposing to replace the
reference to PET data with required swap creation data.34 The
Commission is also proposing to replace a reference to a counterparty
being identified in swap data by “name” with other identifiers to
account for situations where counterparties are identified by other
means.
—————————————————————————

    34 The removal of the term PET data is reflected in the
discussion of the proposed changes to the required swap creation
data and required swap continuation data regulations in Sec. Sec. 
45.3 and 45.4. Those proposed changes are explained in sections II.C
and II.D, respectively, below.
—————————————————————————

    The Commission is proposing to amend the definition of “non-SD/MSP
counterparty” in proposed Sec.  45.1(a). Currently, Sec.  45.1 defines
“non-SD/MSP counterparty” to mean a swap counterparty that is neither
an SD nor an MSP. The Commission is proposing to change the defined
term to “non-SD/MSP/DCO counterparty.” 35 As amended, “non-SD/MSP/
DCO counterparty” would mean a swap counterparty that is not an SD,
MSP, or DCO. This amendment would conform to the amendments proposed to
the term “non-SD/MSP/DCO reporting counterparty” explained in section
II.A.1 above.
—————————————————————————

    35 The Commission is proposing to update all references to
“non-SD/MSP counterparty” to “non-SD/MSP/DCO counterparty”
throughout part 45. To limit repetition, the Commission will not
discuss each removal of the phrase throughout this release.
—————————————————————————

    The Commission is proposing to amend the definition of “required
swap continuation data” in proposed Sec.  45.1(a). Currently, Sec. 
45.1 defines “required swap continuation data” to mean all of the
data elements that must be reported during the existence of a swap to
ensure that all data concerning the swap in the SDR remains current and
accurate, and includes all changes to the PET terms of the swap
occurring during the existence of the swap. The definition further
specifies that for this purpose, required swap continuation data
includes: (i) All life cycle event data for the swap if the swap is
reported using the life cycle reporting method, or all state data for
the swap if the swap is reported using the snapshot reporting method;
and (ii) all valuation data for the swap.
    First, the Commission is proposing to remove the reference to
“primary economic terms of the swap.” 36 Second, the Commission is
proposing to remove the reference to snapshot reporting.37 Third, the
Commission is proposing to add a reference to the margin and collateral
data that would be required to be reported pursuant to proposed Sec. 
45.4(c)(2). As amended, the definition would mean all of the data
elements that shall be reported during the existence of a swap to
ensure that all swap data concerning the swap in the SDR remains
current and accurate, and includes all changes to the required swap
creation data occurring during the existence of the swap. For this
purpose, required swap continuation data includes: (i) All life cycle
event data for the swap; and (ii) all swap valuation, margin, and
collateral data for the swap.
—————————————————————————

    36 The removal of the term PET data is reflected in the
discussion of the proposed changes to the required swap creation
data and required swap continuation data regulations in Sec. Sec. 
45.3 and 45.4. Those proposed changed are explained in sections II.C
and II.D, respectively, below.
    37 The removal of state data reporting is reflected in the
discussion of the proposed changes to the required swap continuation
data regulations in Sec.  45.4. Those proposed changes are explained
in section II.D below.
—————————————————————————

    The Commission is proposing to amend the definition of “required
swap creation data” in Sec.  45.1(a). Currently, Sec.  45.1 defines
“required swap creation data” to mean all PET data for a swap in the
swap asset class in question, and all confirmation data for the swap.
The Commission is proposing to replace the reference to PET data and
confirmation data with a reference to the swap data elements in
appendix 1 to part 45. This proposed amended definition is explained in
a discussion of the proposal to eliminate the requirement to report
confirmation data in section II.C below.
    The Commission is proposing to amend the definition of “valuation
data” in Sec.  45.1(a). Currently, Sec.  45.1 defines “valuation
data” to mean all of the data elements necessary to fully describe the
daily mark of the transaction, pursuant to CEA section
4s(h)(3)(B)(iii),38 and Sec.  23.431 of the Commission’s regulations,
if applicable. The Commission is proposing to include a reference to
the swap data elements in appendix 1 to part 45. This proposed amended
definition is explained in a discussion of the proposal to amend the
valuation reporting requirements in Sec.  45.4 in section II.D below.
—————————————————————————

    38 7 U.S.C. 6s(h)(3)(B)(iii).
—————————————————————————

3. Proposed Removal of Definitions
    The Commission is proposing to remove the following definitions
from Sec.  45.1: “credit swap;” “designated contract market;”
“foreign exchange forward;” “foreign exchange instrument;”
“foreign exchange swap;” “interest rate swap;” “major swap
participant;” “other commodity swap;” “state data;” “swap data
repository;” and “swap dealer.” The Commission is proposing to
remove these definitions to eliminate redundancy because the terms are
already generally defined in Sec.  1.3 of the Commission’s regulations
or in CEA section 1a.39
—————————————————————————

    39 7 U.S.C. 1a.
—————————————————————————

    The Commission is also proposing to remove the following
definitions from Sec.  45.1: “confirmation;” “confirmation data;”
“electronic confirmation;” “non-electronic confirmation;” “primary
economic terms;” and “primary economic terms data.” These
definitions are being removed as part of the proposed amendments to
combine PET data and confirmation data into a single required swap
creation data report. These proposed amendments are explained in
section II.C below.
    The Commission is proposing to remove the definition of “quarterly
reporting” from Sec.  45.1. Currently, Sec.  45.4(d)(2)(ii) requires
non-SD/MSP reporting counterparties to provide quarterly reports of
valuation data. The Commission is proposing to remove this requirement
for non-SD/MSP reporting counterparties, as explained in section II.D.4
below. As a result, the definition of “quarterly reporting” in Sec. 
45.1 is no longer necessary.
    The Commission is also proposing to remove the definitions of
“electronic verification,” “non-electronic verification,” and
“verification” from Sec.  45.1. Currently, certain deadlines for
reporting required swap creation data for off-facility swaps in Sec. 
45.3 depend on whether verification occurs electronically.40 The
Commission is proposing to amend the deadlines for reporting
counterparties to report required swap creation data in Sec.  45.3. As
part of these proposed amendments, the deadlines would no longer depend
on verification.41 Therefore, the definitions related to verification
in this context would no longer be necessary.
—————————————————————————

    40 For instance, current Sec.  45.3(c)(1)(i)(A) requires
reporting counterparties to report all PET data for a swap ASATP or
within 30 minutes of execution if verification occurs
electronically. See 17 CFR 45.3(c)(1)(i)(A).
    41 These proposed amendments are discussed in section II.C
below.
—————————————————————————

    The Commission is proposing to remove the definition of
“international swap” from Sec.  45.1. Currently, Sec.  45.1 defines
“international swap” to mean a swap required by U.S. law and the law
of another jurisdiction to be reported both to an SDR and to a
different TR registered with the other jurisdiction. The proposal to
remove this definition is explained in a discussion of the Commission’s
proposal to remove the requirements for international swaps in Sec. 
45.3(i). Those proposed changes are explained in section II.C.6 below.

[[Page 21583]]

Request for Comment
    The Commission requests comments on all aspects of the proposed
changes to Sec.  45.1. The Commission also invites specific comment on
the following:
    (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)? 42
—————————————————————————

    42 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).
—————————————————————————

B. Sec.  45.2–Swap Recordkeeping

    The Commission is proposing amendments to the Sec.  45.2 swap
recordkeeping regulations. The proposed amendments are technical and do
not impact the existing requirements or applicability of Sec. 
45.2.43 The proposed technical amendments to Sec.  45.2 are limited
to updating terminology and phrasing to improve consistency in the
reporting regulations, and to conform to changes proposed elsewhere in
part 45.
—————————————————————————

    43 In the 2019 Part 49 NPRM, the Commission proposed
relocating the recordkeeping requirements for SDRs from Sec. 
45.2(f) and (g) to Sec.  49.12. See 2019 Part 49 NPRM at 21103. The
request for comment for Sec.  45.2(f) and (g), as well as any
associated cost-benefit analysis, is in the 2019 Part 49 NPRM. See
id. at 21084-85.
—————————————————————————

    For instance, in this release, the Commission is proposing a
technical amendment to remove the phrase “subject to the jurisdiction
of the Commission” from Sec.  45.2. The Commission is proposing to
remove this phrase from all of part 45.44 The phrase is unnecessary,
as the Commission’s regulations apply to all swaps or entities within
the Commission’s jurisdiction, regardless of whether the regulation
states the fact.
—————————————————————————

    44 To limit repetition, the Commission will not discuss each
removal throughout this release.
—————————————————————————

C. Sec.  45.3–Swap Data Reporting: Creation Data

1. Introductory Text
    The Commission is proposing to remove the introductory text to
Sec.  45.3. As background, the introductory text to Sec.  45.3 provides
a broad overview of the swap data reporting regulations for registered
entities and swap counterparties. In providing this overview, the
introductory text to Sec.  45.3 cross-references reporting regulations
in parts 17, 18, 43, 45, 46, and 50.45 The introductory text also
specifies that Sec.  45.3(a) through (d) applies to all swaps except
clearing swaps, and Sec.  45.3(e) applies to clearing swaps.
—————————————————————————

    45 The introductory text to current Sec.  45.3 references: The
Sec.  45.13(b) regulations related to required data standards for
reporting swap data to SDRs; the Sec.  49.10 regulations requiring
SDRs to accept swap data; the part 46 regulations for reporting pre-
enactment swaps and transition swaps; the Sec.  45.4 regulations for
reporting required swap continuation data; the Sec.  45.6
regulations for the use of LEIs; the real-time public reporting
requirements in part 43; the part 50 regulations for counterparties
to report electing the end-user exception from clearing; and the
parts 17 and 18 regulations for large trader reporting.
—————————————————————————

    The Commission believes that the introductory text is superfluous
because the scope of Sec.  45.3 is clear from the operative provisions
of Sec.  45.3.46 Removing the introductory text would not impact any
regulatory requirements, including those referenced in the introductory
text.
—————————————————————————

    46 The Commission is proposing to move the reference in the
introductory text to required data standards for SDRs in Sec. 
45.13(b) to the regulatory text of proposed Sec.  45.3(a) and (b)
and renumber it from Sec.  45.13(b) to Sec.  45.13(a).
—————————————————————————

2. Sec.  45.3(a) Through (e)–Swap Data Reporting: Creation Data
a. Sec.  45.3(a)–Swaps Executed on or Pursuant to the Rules of a SEF
or DCM
    The Commission is proposing several changes to the Sec.  45.3(a)
required swap creation data reporting regulations for swaps executed on
or pursuant to the rules of a SEF or DCM. Current Sec.  45.3(a)
requires that SEFs and DCMs report all PET data for swaps ASATP after
execution. If the swap is not intended to be cleared at a DCO, Sec. 
45.3(a) requires that the SEF or DCM also report confirmation data for
the swap ASATP after execution.
    The Commission is first proposing to revise the Sec.  45.3(a)
requirement for SEFs and DCMs to submit both PET data and confirmation
data for swaps that are not intended to be cleared at a DCO. As
background, PET data reporting includes the reporting of approximately
sixty swap data elements, varying by asset class, enumerated in
appendix 1 to part 45.47 Confirmation data reporting includes
reporting all of the terms of a swap matched and agreed upon by the
counterparties in confirming a swap.48
—————————————————————————

    47 See 17 CFR 45.1 (definition of “primary economic terms”).
The Commission is proposing to remove the definition of “primary
economic terms” from Sec.  45.1, as discussed in section II.A.3
above.
    48 See 17 CFR 45.1 (definition of “confirmation data”). The
Commission is proposing to remove the definition of “confirmation
data” from Sec.  45.1, as discussed in section II.A.3 above.
“Confirmation” is defined as the consummation of legally binding
documentation that memorializes the agreement of the parties to all
terms of a swap. 17 CFR 45.1 (definition of “confirmation”).
—————————————————————————

    By the terms of the two definitions, PET data, which is a set
number of data elements for each asset class, appears to be a subset of
confirmation data, which is defined as, “all terms of a swap . . . .”
In defining two separate data sets, the Commission intended that that
the initial PET data report would ensure that an SDR would have
sufficient data on each swap for the Commission to perform its
regulatory functions while the more complete confirmation data may not
yet be available.49
—————————————————————————

    49 See 77 FR at 2142, 2148.
—————————————————————————

    However, the current Sec.  45.3 PET data and confirmation data
requirements may be encouraging the reporting of duplicative
information to SDRs. One of the PET data elements in current appendix 1
to part 45 is “[a]ny other term(s) . . . matched or affirmed by the
counterparties in verifying the swap.” The comments to this “catch-
all” data element in appendix 1 to part 45 instruct reporting
counterparties, SEFs, DCMs, and DCOs to use “as many data elements as
required to report each such term.” 50 The Commission believes that
this catch-all has obscured the difference between PET data and
confirmation data. The Commission is concerned that reporting
counterparties, SEFs, and DCMs are submitting duplicative reports to
meet the distinct, yet seemingly indistinguishable, regulatory
requirements at the expense of data quality.51
—————————————————————————

    50 17 CFR 45 appendix 1.
    51 For instance, in reviewing 49,766 part 45 credit default
swap reports from June 1, 2019 to June 7, 2019, Commission staff
found that out of the 12,336 swap reports submitted by SEFs and
DCMs, 5,883 reports were duplicative in that they related to swaps
that had already been reported, while SDs submitted 645 reports that
were similarly duplicative out of 22,264 total.
—————————————————————————

    DMO requested comment on whether to combine PET data and
confirmation data into a single, clearly defined, and electronically
reportable set of data elements as part of the Roadmap review.52
Several commenters supported combining PET and confirmation data as a
way to streamline reporting.53 One commenter supported

[[Page 21584]]

viewing PET data and confirmation data as a single set of data
elements, which would remove confusion in the industry as to what must
be reported as part of confirmation data.54 Other commenters
requested that, if the Commission maintains a separate confirmation
data reporting requirement, it specify what data elements should be in
confirmation data.55
—————————————————————————

    52 See Roadmap to Achieve High Quality Swap Data at 7.
    53 Letter from Global Foreign Exchange Division (“GFXD”) of
the Global Financial Markets Association (“GFMA”) (Aug. 21, 2017)
at 6-7; Letter from LedgerX (Aug. 18, 2017) at 1; 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 7; Letter from
Chatham Financial (“Chatham”) (Aug. 21, 2017) at 5.
    54 Letter from The Depository Trust & Clearing Corporation
(“DTCC”), which owns DTCC Data Repository (U.S.), LLC (“DDR”)
(Aug. 21, 2017) at 2, n.4.
    55 Joint letter from Bloomberg SDR LLC (“BSDR”), Chicago
Mercantile Exchange Inc. (“CME”), and ICE Trade Vault, LLC
(“Joint SDR Letter”) (Aug. 21, 2017) at 6. BSDR voluntarily
withdrew its provisional SDR registration on March 21, 2019.
—————————————————————————

    Other regulators have taken different approaches to required swap
creation data reporting. The Securities and Exchange Commission
(“SEC”), for instance, does not have rules for reporting separate
confirmation data reports.56 In the European Union (“EU”), the
European Market Infrastructure Regulation (“EMIR”) 57 requires
reporting of the details of any derivative contract counterparties have
concluded and of any modification or termination of the contract. The
European Securities and Markets Authority (“ESMA”) then develops the
specific technical standards and requirements for the implementation of
reporting.
—————————————————————————

    56 See generally 17 CFR 242.901.
    57 Regulation (EU) No 648/2012 of the European Parliament and
of the Council on OTC derivatives, central counterparties and trade
repositories, Article 9(1) (July 4, 2012) (requiring reporting after
execution without reference to separate reports); Commission
Implementing Regulation (EU) No 1247/2012 laying down implementing
technical standards with regard to the format and frequency of trade
reports to trade repositories according to Regulation (EU) No 648/
2012 of the European Parliament and of the Council on OTC
derivatives, central counterparties and trade repositories, Article
1 (Dec. 19, 2012) (referencing “single” reports under Article 9 of
Regulation (EU) No 648/2012).
—————————————————————————

    The Commission believes eliminating the confirmation data reporting
requirement would help streamline swap data reporting under part 45.
Therefore, the Commission is proposing to revise Sec.  45.3(a) to
require SEFs and DCMs to report a single required swap creation data
report, regardless of whether the swap is intended to be cleared.
    Second, the Commission is proposing to revise the Sec.  45.3(a)
requirement for SEFs and DCMs to report required swap creation data
ASATP following execution. As background, the CEA requires that all
swaps be reported to SDRs, but does not specify the timeframes for
reporting swap data to SDRs for regulatory purposes under sections
2(a)(13)(G) and 4r(a).58
—————————————————————————

    58 See 7 U.S.C. 2(a)(13)(G) (“Each swap (whether cleared or
uncleared) shall be reported to a registered [SDR]”); see also 7
U.S.C. 6r (establishing the SDR reporting requirements for uncleared
swaps without reference to a timing requirement); see also Swap Data
Recordkeeping and Reporting Requirements, 77 FR 2136, 2150.
—————————————————————————

    When part 45 was adopted in 2012, the Commission believed that
reporting swap data immediately following execution was important to
further the objectives of the Dodd-Frank Wall Street Reform and
Consumer Protection Act (the “Dodd-Frank Act”).59 Reporting swap
data ASATP would ensure that swap data is reported to SDRs in a manner
that ensures the ability of the Commission and other regulators to
fulfill the systemic risk mitigation, market transparency, position
limit monitoring, and market surveillance objectives of the Dodd-Frank
Act.60
—————————————————————————

    59 Swap Data Recordkeeping and Reporting Requirements, 77 FR
2136, 2150.
    60 See id. at 2149.
—————————————————————————

    The Commission is concerned that the ASATP deadline for regulatory
reporting may be causing reporting counterparties to hastily report
required swap creation data that has contributed to data quality
issues. As a result, the Commission is considering extending the
deadline for required swap creation data in a way that will continue to
permit it to fulfill the systemic risk mitigation, market transparency,
position limit monitoring, and market surveillance objectives of the
Dodd-Frank Act.
    DMO requested comment on whether to move to a new “T+1” reporting
timeline for part 45 in the Roadmap to understand whether additional
reporting time would be beneficial.61 DMO suggested a “T+1”
timeline would involve reporting required swap creation data on the
next business day following execution.62 DMO further noted that a
“T+1” standard would encourage alignment with the reporting deadlines
established by the SEC and ESMA.63 In response, several commenters
expressed support for moving part 45 reporting to “T+1” or a similar
delayed time.64
—————————————————————————

    61 See Roadmap to Achieve High Quality Swap Data at 10.
    62 See id.
    63 The SEC requires primary and secondary trade information be
reported within 24 hours of execution on the next business day. 17
CFR 242.901(j). The SEC noted that commenters raised concerns that
unreasonably short reporting timeframes would result in the
submission of inaccurate transaction information, and that the SEC’s
interim 24-hour reporting timeframe Sec.  901(j) strikes an
appropriate balance between the need for prompt reporting of
security-based swap transaction information and allowing reporting
entities sufficient time to develop fast and robust reporting
capability. See Regulation SBSR–Reporting and Dissemination of
Security-Based Swap Information, 80 FR 14564, 14623-64 (Mar. 19,
2015). ESMA requires reporting no later than the working day
following execution. Regulation (EU) No 648/2012 Article 9(1).
    64 Letter from Chatham at 5; Letter from CME (Aug. 21, 2017)
at 2; Letter from the London Clearing House, Ltd. (“LCH”) (Aug.
21, 2017) at 3; Letter from GFMA at 7-8; Joint SDR Letter at 10.
—————————————————————————

    The Commission believes this extended reporting timeline could help
improve data quality while encouraging alignment with reporting
deadlines set by other regulators. The Commission is therefore
proposing to revise Sec.  45.3(a) to extend the deadline for SEFs and
DCMs to report required swap creation data to T+1 following the
execution date. Revised Sec.  45.3(a) would therefore require that for
each swap executed on or pursuant to the rules of a SEF or DCM, the SEF
or DCM shall report swap creation data electronically to an SDR in the
manner provided in Sec.  45.13(a) not later than 11:59 p.m. eastern
time on the next business day following the execution date.
b. Sec.  45.3(b) Through (d)–Off-Facility Swaps
    The Commission is proposing several changes to the current Sec. 
45.3(b) through (d) required swap creation data reporting regulations
for off-facility swaps. Many of the proposed changes to requirements in
Sec.  45.3(b) through (d) would conform to the revisions proposed in
the previous sections to the requirements for swaps executed on SEFs
and DCMs.
    The current required swap creation data reporting obligations for
off-facility swaps are based on the type of swap and type of reporting
counterparty. In general, for off-facility swaps subject to the
Commission’s clearing requirement, Sec.  45.3(b) requires that SD/MSP
reporting counterparties report PET data ASATP after execution, with a
15-minute deadline, while non-SD/MSP reporting counterparties report
PET data ASATP after execution with a one business hour deadline.65
—————————————————————————

    65 17 CFR 45.3(b)(1)(i) and (ii).
—————————————————————————

    For off-facility swaps that are not subject to the clearing
requirement but have an SD/MSP reporting counterparty, Sec.  45.3(c)(1)
now generally requires that SD/MSP reporting counterparties report PET
data ASATP after execution with a 30-minute deadline, and confirmation
data for swaps that are not intended to be cleared ASATP with a 30
minute deadline if confirmation is electronic, or ASATP with a 24
business hour

[[Page 21585]]

deadline if not electronic, for credit, equity, foreign exchange, and
interest rate swaps.66
—————————————————————————

    66 17 CFR 45.3(c)(1)(i) through (ii).
—————————————————————————

    Section 45.3(c)(2) currently requires that for swaps in the other
commodity asset class, SD/MSP reporting counterparties report PET data
ASATP after execution, with a two-hour deadline, and confirmation data
for swaps that are not intended to be cleared ASATP after confirmation
with a 30-minute deadline if confirmation is electronic, or a 24
business hour deadline if confirmation is not electronic.67
—————————————————————————

    67 17 CFR 45.3(c)(2)(i) through (ii).
—————————————————————————

    For off-facility swaps that are not subject to the clearing
requirement but have a non-SD/MSP reporting counterparty, Sec.  45.3(d)
requires reporting counterparties report PET data ASATP after execution
with a 24 business hour deadline, and confirmation data ASATP with a 24
business hour deadline if the swap is not intended to be cleared.68
—————————————————————————

    68 17 CFR 45.3(d).
—————————————————————————

    The Commission’s proposed changes to Sec.  45.3(b) through (d) fall
into three categories, discussed below.
    First, as part of a restructuring of regulations in Sec.  45.3(a)
through (d), the Commission is proposing to replace Sec.  45.3(b)
through (d) with new Sec.  45.3(b), titled “Off-facility swaps.” This
proposed new Sec.  45.3(b) would contain the swap creation data
reporting requirements for off-facility swaps. The new timing
requirements for reporting off-facility swaps would depend on whether
the reporting counterparty is an SD/MSP/DCO or a non-SD/MSP/DCO
reporting counterparty. This means the timing requirements in Sec. 
45.3(b) would include the required swap creation data reporting
requirements for clearing swaps, as they are created at DCOs.69
Sections 45.3(c) through (d) would be replaced by provisions for
allocations and multi-asset swaps, as discussed in the following
sections.
—————————————————————————

    69 As part of this change, the Commission is proposing to move
the requirements for reporting required swap creation data for
clearing swaps from Sec.  45.3(e) to new Sec.  45.3(b).
—————————————————————————

    Second, the Commission is proposing to revise the requirement in
Sec.  45.3(b) through (d) for reporting counterparties to submit
separate PET data and confirmation data for all off-facility swaps that
are not intended to be cleared at a DCO. The background to this change
is discussed in section II.C.2.a above. As with swaps executed on SEFs
and DCMs, the Commission believes a single report would align with the
approach taken by other regulators, improve data quality, and be
responsive to Roadmap comments.
    Third, the Commission is proposing to revise the Sec.  45.3(b)
through (d) requirements for reporting counterparties to report
required swap creation data ASATP after execution with different
deadlines for off-facility swaps.70
—————————————————————————

    70 The background to this amendment is discussed in section
II.C.2.a above, in the context of SEF/DCM/DCO reporting.
—————————————————————————

    With respect to off-facility swaps, one Roadmap commenter explained
that the current requirement for SD/MSP reporting counterparties to
report uncleared swaps in Sec.  45.3(c)(1) within 30 minutes means that
reporting counterparties are inputting data before the trade is
confirmed, resulting in modifications as terms are finalized.71
Another commenter requested that end-users be given at least 36, if not
48, hours to report.72 One commenter requested that, if the
Commission maintains confirmation data reporting, the deadline for
reporting that data coincide with the deadline for issuing
confirmations under Sec.  23.501.73
—————————————————————————

    71 Letter from GFMA at 7.
    72 Letter from the Commercial Energy Working Group (“CEWG”)
(Aug. 21, 2017) at 4.
    73 Joint SDR Letter at 6. The regulation provides SDs and MSPs
entering into swaps with SD/MSP counterparties must execute
confirmations ASATP but in any event by the end of the first
business day following the day of execution. 17 CFR 23.501(a)(1).
—————————————————————————

    The Commission is proposing to revise the required swap creation
data reporting deadlines in Sec.  45.3(a) through (d) for off-facility
swaps in two new regulations: Sec.  45.3(b)(1) and Sec.  45.3(b)(2).
New Sec.  45.3(b)(1) would require that SD/MSP/DCO reporting
counterparties report swap creation data to an SDR by T+1 following the
execution date. This standard would be consistent with the standard
proposed for SEFs and DCMs in Sec.  45.3(a). The Commission believes
this standard would also address commenters’ concerns about needing
more time to report to avoid modifications to the data, and would allow
for errors identified during the confirmation process to be corrected
prior to reporting.
    New Sec.  45.3(b)(2) would require that non-SD/MSP/DCO reporting
counterparties report swap creation data to an SDR not later than T+2
following the execution date. The Commission anticipates that proposed
Sec.  45.3(b)(2) would provide non-SD/MSP/DCO reporting counterparties
relief in reporting swap creation data for the minority of off-facility
swaps in which both counterparties are non-SD/MSP/DCO counterparties.
This extended deadline reflects the Commission’s interest in relieving
some of the swap data reporting burdens previously imposed on end users
in a way that should also help improve data quality.
    Therefore the Commission is proposing revised Sec.  45.3(b) to
require that for each off-facility swap, the reporting counterparty
shall report electronically to an SDR as provided by Sec.  45.3(b)(1)
or (b)(2), as applicable.
    Proposed Sec.  45.3(b)(1) would require that if the reporting
counterparty is an SD, MSP, or DCO, the reporting counterparty shall
report swap creation data electronically to an SDR in the manner
provided in Sec.  45.13(a) not later than 11:59 p.m. eastern time on
the next business day following the execution date.
    Proposed Sec.  45.3(b)(2) would require that if the reporting
counterparty is a non-SD/MSP/DCO counterparty, the reporting
counterparty shall report required swap creation data electronically to
an SDR in the manner provided in Sec.  45.13(a) not later than 11:59
p.m. eastern time on the second business day following the execution
date.
c. Sec.  45.3(e)–Clearing Swaps
    As noted above, the Commission is proposing to move the required
swap creation data reporting requirements for clearing swaps from Sec. 
45.3(e) to revised Sec.  45.3(b)(1). The required swap creation data
reporting requirements would be covered under the “off-facility
swaps” regulations, as clearing swaps are created at DCOs. As
background, Sec.  45.3(e) currently requires that DCOs report required
swap creation data for clearing swaps ASATP after clearing or
execution, depending on whether the swap is replacing an original swap.
Current Sec.  45.3(e) specifies that required swap creation data for
clearing swaps includes all confirmation data and PET data.
    Consolidating the requirements for DCOs to report swap creation
data in Sec.  45.3(b) with those of SD/MSP reporting counterparties
would simplify the reporting requirements. Revised Sec.  45.3(b)(1)
would require that SD/MSP/DCO reporting counterparties report required
swap creation data to an SDR not later than T+1 following the execution
date.74 This would extend the time DCOs have to report required swap
creation data for clearing swaps pursuant to Sec.  45.3(e) from ASATP
after

[[Page 21586]]

clearing or execution to T+1 following the execution date.
—————————————————————————

    74 The background to this proposed amendment is discussed in
connection with the proposed amendment to the required swap creation
data reporting deadlines for off-facility swaps, discussed in
section II.C.2.b above.
—————————————————————————

    While the Commission is proposing to extend the time DCOs have to
report required swap creation data, the Commission recognizes that DCOs
are required to clear swaps ASATP after execution as if fully automated
systems were used.75 The Commission therefore expects that DCO
reporting counterparties may continue to report ASATP, especially if
their reporting and clearing processes are connected. However, proposed
Sec.  45.3(b)(1) would provide DCOs with the opportunity to change
their reporting practices to take advantage of the additional time.
—————————————————————————

    75 17 CFR 39.12(b)(7)(ii) and (iii).
—————————————————————————

3. Sec.  45.3(f)–Allocations
    The Commission is proposing several amendments to the Sec.  45.3(f)
regulations for reporting allocations, including re-designating it as
Sec.  45.3(c).76 As background, Sec.  45.3(f)(1) provides that the
reporting counterparty to an initial swap with an allocation agent
reports required swap creation data for the initial swap, including a
USI. For the post-allocation swaps, Sec.  45.3(f)(2)(i) provides that
the agent must tell the reporting counterparty the identities of the
actual counterparties ASATP after execution, with a deadline of eight
business hours. Section 45.3(f)(2)(ii) provides that the reporting
counterparty must create USIs for the swaps and report all required
swap creation data for each post-allocation swap ASATP after learning
the identities of the counterparties. Section 45.3(f)(2)(iii) provides
that the SDR to which the initial and post-allocation swaps were
reported must map together the USIs of the initial swap and each post-
allocation swap.
—————————————————————————

    76 The Commission is proposing to redesignate current Sec. 
45.3(f) as Sec.  45.3(c) to reflect the consolidation of Sec. 
45.3(b) through (d) into Sec.  45.3(b) discussed above.
—————————————————————————

    The Commission is proposing to specify that required swap creation
data for allocations must be reported “electronically” to SDRs in
Sec.  45.3(c), (c)(1), and (c)(2)(ii). This should be current practice
for reporting allocations to SDRs.
    The Commission is also proposing to replace the reference in Sec. 
45.3(f)(1) (re-designated as Sec.  45.3(c)(1)) to “Sec.  45.3(a)
through (d)” with a reference to paragraphs (a) or (b) of Sec.  45.3,
to reflect the structural revisions to Sec.  45.3(a) through (d)
discussed above. Because the Commission is proposing to extend the time
to report required swap creation data in Sec.  45.3(a) and (b),
reporting counterparties would have additional time to report required
swap creation data for the initial swaps as well.
    The Commission is proposing to amend current Sec.  45.3(f)(2)(ii)
(re-designated as Sec.  45.3(c)(2)(ii)) 77 to replace the requirement
to report required swap creation data for post-allocation swaps ASATP
after learning the identities of the actual counterparties with a
cross-reference to Sec.  45.3(b). This would give reporting
counterparties until T+1 or T+2, depending on their status, to report
required swap creation data for the allocated swaps, for reasons
previously explained.
—————————————————————————

    77 The Commission is not proposing to revise the Sec. 
45.3(f)(2)(i) requirement (re-designated as Sec.  45.3(c)(2)(i)) for
the agent to inform the reporting counterparty of the identities of
the reporting counterparty’s actual counterparties ASATP after
execution, with an eight business hour deadline. Reporting
counterparties will still need to know their actual counterparties,
and the eight hour deadline is consistent with other regulations for
allocations. See 17 CFR 1.35(b)(5)(iv).
—————————————————————————

    Finally,78 the Commission is proposing to remove Sec. 
45.3(f)(2)(iii) without re-designation. One of the swap data elements
the Commission is to require is an event data element.79 One of the
events in this data element will be “allocation,” which would require
reporting counterparties to indicate whether a swap is associated with
an allocation.
—————————————————————————

    78 The Commission is also proposing several non-substantive
minor and technical language edits, but is limiting discussion in
this section to substantive amendments.
    79 The swap data elements required to be reported to SDRs are
discussed in section V below.
—————————————————————————

    The Commission preliminarily believes this would simplify the
current process involving SDRs mapping data elements. The Commission
believes these data elements would also provide clarity to reporting
counterparties, who are the parties with the information needed to map
the data elements even though the rule placed the obligation on SDRs.
As a result, the Commission believes removing Sec.  45.3(f)(2)(iii)
without re-designation will result in a better process for reporting
counterparties and SDRs that should also help improve data quality.
    Therefore, in light of the above proposed amendments, revised Sec. 
45.3(c)(1) would require that the initial swap transaction between the
reporting counterparty and the agent shall be reported as required by
Sec.  45.3(a) or (b), as applicable. Section 45.3(c)(1) would also
require that a UTI for the initial swap transaction be created as
provided in Sec.  45.5.
    Section 45.3(c)(2)(i) would continue to provide that the agent
shall inform the reporting counterparty of the identities of the
reporting counterparty’s actual counterparties resulting from
allocation, ASATP after execution, but not later than eight business
hours after execution. Section 45.3(c)(2)(ii) would require that the
reporting counterparty report required swap creation data, as required
by Sec.  45.3(b), for each swap resulting from allocation to the same
SDR to which the initial swap transaction is reported. Section
45.3(c)(2)(ii) would also provide that the reporting counterparty shall
create a UTI for each such swap as required in Sec.  45.5.
4. Sec.  45.3(g)–Multi-Asset Swaps
    The Commission is proposing several amendments to the current Sec. 
45.3(g) regulations for reporting multi-asset swaps, proposed to be re-
designated as Sec.  45.3(d). Section 45.3(g) now provides that for each
multi-asset swap, required swap creation data and required swap
continuation data must be reported to a single SDR that accepts swaps
in the asset class treated as the primary asset class involved in the
swap by the SEF, DCM, or reporting counterparty making the first report
of required swap creation data pursuant to Sec.  45.3. Current Sec. 
45.3(g) also provides that the registered entity or reporting
counterparty making the first report of required swap creation data
report all PET data for each asset class involved in the swap.
    The Commission is proposing to amend Sec.  45.3(g) (re-designated
as Sec.  45.3(d)) to replace the reference to “making the first
report” of required swap creation data with “reporting” required
swap creation data. This would reflect the Commission’s proposal to
require a single report for required swap creation data, instead of
separate PET data and confirmation data reports.80
—————————————————————————

    80 See sections II.C.2.a and II.C.2.b above.
—————————————————————————

    The Commission is also proposing to remove the last sentence of the
regulation concerning all PET data for each asset class involved in the
swap. This sentence is unnecessary, and would no longer be relevant
with the Commission’s proposal to remove PET data from its regulations.
    Therefore, new Sec.  45.3(d) would require that required swap
creation data and required swap continuation data be reported to a
single SDR that accepts swaps in the asset class treated as the primary
asset class involved in the swap by the SEF, DCM, or reporting
counterparty reporting required swap creation data pursuant to Sec. 
45.3.
5. Sec.  45.3(h)–Mixed Swaps
    The Commission is proposing several conforming or otherwise non-
substantive amendments to Sec.  45.3(h) for

[[Page 21587]]

mixed swaps, including re-designating it as Sec.  45.3(e). Current
Sec.  45.3(h)(1) requires that for each mixed swap, required swap
creation data and required swap continuation data shall be reported to
an SDR registered with the Commission and to a security-based SDR
(“SBSDR”) registered with the SEC. This requirement may be satisfied
by reporting the mixed swap to an SDR or SBSDR registered with both
Commissions. Current Sec.  45.3(h)(2) requires that the registered
entity or reporting counterparty making the first report of required
swap creation data pursuant to Sec.  45.3(h) shall ensure that the same
USI is recorded for the swap in both the SDR and the SBSDR.
    For instance, as with proposed Sec.  45.3(d) for multi-asset swaps
and for the same reason, the Commission is proposing to replace
“making the first report” of required swap creation data with
“reporting” required swap creation data in re-designated Sec. 
45.3(e)(2) to improve readability.
    Therefore, Sec.  45.3(e)(1) would require that for each mixed swap,
required swap creation data and required swap continuation data shall
be reported to an SDR and to a SBSDR registered with the SEC.81
Amended Sec.  45.3(e)(2) would require that the registered entity or
reporting counterparty reporting required swap creation data pursuant
to Sec.  45.3(h) ensure that the same UTI is recorded for the swap in
both the SDR and the SBSDR.
—————————————————————————

    81 Section 45.3(e)(1) would continue to provide that the
requirement may be satisfied by reporting the mixed swap to an SDR
or SBSDR registered with both Commissions.
—————————————————————————

6. Sec.  45.3(i)–International Swaps
    The Commission is proposing to remove the Sec.  45.3(i) regulations
for international swaps. Section 45.3(i) requires that for each
international swap, the reporting counterparty must report to an SDR
the identity of the non-U.S. TR to which the swap is also reported and
the swap identifier used by the non-U.S. TR. “International swaps”
are defined in Sec.  45.1 as swaps required to be reported by U.S. law
and the law of another jurisdiction to be reported to both an SDR and
to a different TR registered with the other jurisdiction.82
—————————————————————————

    82 The Commission is proposing to remove the definition of
“international swap” from Sec.  45.1, as discussed in section
II.A.3 above.
—————————————————————————

    When Sec.  45.3(i) was adopted, the Commission believed that the
regulations for international swaps were necessary to provide an
accurate picture of the swaps market to regulators to further the
purposes of the Dodd-Frank Act.83 However, if the same swap is
reported to different jurisdictions, the USI, or UTI, as discussed in
section II.E below, should be the same. If the transaction identifier
is the same for the swap, there would be no need for the counterparties
to send the identifier to other jurisdictions. In addition, in the
future, regulators should have global TR access, further obviating the
need for reporting counterparties sending identifiers to multiple
jurisdictions.
—————————————————————————

    83 Swap Data Recordkeeping and Reporting Requirements, 77 FR
2136, 2151.
—————————————————————————

    As a result, the Commission believes that Sec.  45.3(i) is no
longer necessary and is proposing to remove Sec.  45.3(i) from its
regulations.
7. Sec.  45.3(j)–Choice of SDR
    The Commission is proposing non-substantive amendments to Sec. 
45.3(j) for reporting counterparties in choosing their SDR, including
re-designating it as Sec.  45.3(f). As background, Sec.  45.3(j) now
requires that the entity with the obligation to choose the SDR to which
all required swap creation data for the swap is reported shall be the
entity that is required to make the first report of all data pursuant
to Sec.  45.3, as follows: (i) For swaps executed on or pursuant to the
rules of a SEF or DCM, the SEF or DCM shall choose the SDR; (ii) for
all other swaps, the reporting counterparty, as determined in Sec. 
45.8, shall choose the SDR.
    For instance, the Commission is proposing to change the heading of
newly re-designated Sec.  45.3(f) from “Choice of SDR” to “Choice of
swap data repository” to be consistent with other headings throughout
part 45.
    Therefore, with the proposed amendments, Sec.  45.3(f) would
require that for swaps executed on or pursuant to the rules of a SEF or
DCM, the SEF or DCM shall choose the SDR, and for all other swaps, the
reporting counterparty, as determined in Sec.  45.8, shall choose the
SDR.
Request for Comment
    The Commission requests comment on all aspects of the proposed
changes to Sec.  45.3. The Commission also invites specific comment on
the following:
    (2) Is the Commission’s proposed T+1 deadline for reporting
required swap creation data appropriately harmonized with the deadlines
set by other regulators and jurisdictions?
    (3) Does the Commission’s proposed T+1 deadline create any problems
for SEFs, DCMs, SDRs, or reporting counterparties by referencing
eastern time? 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)? 84
—————————————————————————

    84 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).
—————————————————————————

    (4) Do any of the Commission’s proposed changes to the timing
deadlines for reporting required swap creation data in Sec.  45.3 raise
issues with the sequencing of messages for SDRs that could compromise
data quality? For instance, could a T+1 deadline for reporting original
swaps and clearing swaps create problems for SDRs in processing swap
terminations? Could the 8-hour delay for the allocation agent notifying
the reporting counterparty of the actual counterparty’s identity create
timing message sequencing issues for allocation reporting?

D. Sec.  45.4–Swap Data Reporting: Continuation Data

1. Introductory Text
    The Commission is proposing to remove the introductory text to
Sec.  45.4 for the same reasons it is proposing to remove the
introductory text to Sec.  45.3.85 Removing the introductory text
would not impact any regulatory requirements, including those
referenced in the introductory text.
—————————————————————————

    85 See discussion in II.C.1 above. The introductory text to
Sec.  45.4 references: The Sec.  45.13(b) regulations for required
data standards for reporting swap data to SDRs; the Sec.  49.10
regulations for SDRs to accept swap data; the part 46 regulations
for reporting pre-enactment swaps and transition swaps; the Sec. 
45.3 regulations for reporting required swap creation data; the
Sec.  45.6 regulations for the use of LEIs; the real-time public
reporting requirements in part 43; and the parts 17 and 18
regulations for large trader reporting.
—————————————————————————

2. Sec.  45.4(a)–Continuation Data Reporting Method Generally
    The Commission is proposing several changes to Sec.  45.4(a), which
concerns required swap continuation data reporting. Section 45.4(a)
requires that reporting counterparties and DCOs 86

[[Page 21588]]

required to report swap continuation data must do so in a manner
sufficient to ensure that all data in the SDR for a swap remains
current and accurate, and includes all changes to the PET data of the
swap occurring during the existence of the swap. Current Sec.  45.4(a)
further specifies that reporting entities and counterparties fulfill
their obligations by reporting, within the applicable deadlines set
forth in Sec.  45.4, the following: (i) Life cycle event data to an SDR
that accepts only life cycle event data reporting; (ii) state data to
an SDR that accepts only state data reporting; or (iii) either life
cycle event data or state data to an SDR that accepts both life cycle
event data and state data reporting.
—————————————————————————

    86 SEFs and DCMs do not have reporting obligations with
respect to required swap continuation data. DCOs are reporting
counterparties for clearing swaps, and are thus responsible for
reporting required swap continuation data for these swaps. However,
DCOs also have required swap continuation data obligations for
original swaps, to which DCOs are not counterparties. As a result,
Sec.  45.4(a) must address reporting counterparties and DCOs
separately.
—————————————————————————

    First, the Commission is proposing to revise the first two
sentences. The first two sentences state that “for each swap,
regardless of asset class, reporting counterparties and [DCOs] required
to report swap continuation data must do so in a manner sufficient to
ensure that all data in the [SDR] concerning the swap remains current
and accurate, and includes all changes to the [PET data] of the swap
occurring during the existence of the swap. Reporting entities and
counterparties fulfill this obligation by reporting either . . . .”
The Commission is proposing to replace the text with “for each swap,
regardless of asset class, reporting counterparties and [DCOs] required
to report required swap continuation data shall report . . . .” to
improve readability without changing the regulatory requirement
substantively.
    Second, the Commission is proposing to remove state data reporting
as an option for reporting changes to swaps from Sec.  45.4. As
background, state data reporting involves reporting counterparties re-
reporting the PET terms of a swap every day, regardless of whether any
changes have occurred to the terms of the swap since the last state
data report.87 In contrast, life cycle event data reporting involves
reporting counterparties re-submitting the PET terms of a swap when an
event has taken place that results in a change to the previously
reported terms of the swap.88
—————————————————————————

    87 17 CFR 45.1 (definition of “state data”). The Commission
is proposing to remove the definition of “state data” from Sec. 
45.1, as discussed in section II.A.3 above.
    88 17 CFR 45.1 (definition of “life cycle event”). The
Commission is proposing to amend the definition of “life cycle
event data” in Sec.  45.1, as discussed in section II.A.2 above.
—————————————————————————

    The Commission is proposing to eliminate state data reporting
because it would improve data quality without impeding the Commission’s
ability to fulfill the systemic risk mitigation, market transparency,
position limit monitoring, and market surveillance objectives of the
Dodd-Frank Act. In adopting part 45, the Commission gave reporting
counterparties the option of reporting changes to swaps by either the
state data reporting method or life cycle event method to provide
flexibility.89 The Commission is concerned that the option for state
data reporting may be contributing to data quality issues by filling
SDRs with unnecessary swap messages.
—————————————————————————

    89 Swap Data Recordkeeping and Reporting Requirements, 77 FR
2136, 2153.
—————————————————————————

    The Commission estimates that state data reporting messages
represent the vast majority of swap reports maintained by SDRs and the
Commission.90 The large number of state data reporting messages has
complicated the Commission’s use of swap data. For instance,
determining the changes that occurred over time to a five-year swap
reported via state data reporting would require Commission staff to
analyze all swap data elements on over 1,800 (360 x 5 = 1,800) state
data swap reports associated with the swap.
—————————————————————————

    90 For instance, an analysis of part 45 data showed that
during January 2018, SDRs received approximately 30 million state
data reporting messages, which included over 77% of all interest
rate swap reports submitted to SDRs during that time period. Since
reporting began, the Commission estimates that SDRs have received
and made available to the Commission over a billion state data
reporting messages.
—————————————————————————

    Other regulators have taken approaches that are less receptive to
state data reporting. The SEC, for instance, stated that “Regulation
SBSR would not prevent a registered SDR from developing for its members
a mechanism or other service that automates or facilitates the
production of life cycle events from state data.” 91 However, with
respect to state data reporting generally, the SEC noted that it “is
not sufficient merely to re-report all of the terms of the security-
based swap each day without identifying which data elements have
changed.” 92 Similarly, ESMA requires maintaining a reporting log
containing the reporting of “modifications” to the data registered in
TRs.93 With these modifications, ESMA requires the identity of the
person or persons requesting the modification, including the TR itself
if applicable, the reason or reasons for such modification, a date and
timestamp, and a clear description of the changes, including the old
and new contents of the relevant data.94
—————————————————————————

    91 See Regulation SBSR–Reporting and Dissemination of
Security-Based Swap Information, 80 FR 14564, 14640 n.692. The SEC
explained that its Sec.  901(e)(1) “requires the reporting of a
life cycle event . . . that results in a change to information
previously reported pursuant to [Sec.  ] 901(c), 901(d), or 901(i).
Thus, Rule 901(e)(1) contemplates the reporting of the specific
changes to previously reported information. Reports of life cycle
events, therefore, must clearly identify the nature of the life
cycle event for each security-based swap.”
    92 Id.
    93 Commission Delegated Regulation (EU) No 148/2013
supplementing Regulation (EU) No 648/2012 of the European Parliament
and of the Council on OTC derivatives, central counterparties and
trade repositories with regard to regulatory technical standards on
the minimum details of the data to be reported to trade
repositories, Article 4 (Dec. 19, 2012).
    94 Id.
—————————————————————————

    In light of the foregoing, the Commission is proposing to remove
the option for state data reporting in Sec.  45.4. The Commission
preliminarily believes that this would simplify swap reporting by
significantly reducing swap message traffic to only those messages
corresponding with a change in the terms of a swap. All terms would
continue to be reported with each change, but the event and action type
swap data elements would indicate the changes that have been made to
the swap transaction.95 This approach would facilitate the
Commission’s analysis of swap data by drastically reducing the number
of messages that would need to be analyzed for each swap. Moreover,
this approach would be consistent with the approach taken by other
regulators.
—————————————————————————

    95 The swap data elements required to be reported to SDRs are
discussed in section V below.
—————————————————————————

    Therefore, proposed Sec.  45.4(a) would require that for each swap,
regardless of asset class, reporting counterparties and DCOs required
to report required swap continuation data shall report life cycle event
data for the swap electronically to an SDR in the manner provided in
Sec.  45.13(a) within the applicable deadlines set forth in Sec. 
45.4.96
—————————————————————————

    96 The deadlines for reporting required swap continuation data
are discussed in the following two sections.
—————————————————————————

3. Sec.  45.4(b)–Continuation Data Reporting for Clearing Swaps
    The Commission is proposing several revisions to the Sec.  45.4(b)
required swap continuation data reporting requirements for clearing
swaps. First, the Commission is proposing to move the Sec.  45.4(b)
required swap continuation data reporting regulations for clearing
swaps to revised Sec.  45.4(c). The Commission is then proposing to
redesignate current Sec.  45.4(c) as Sec.  45.4(b). Current Sec. 
45.4(c) contains the continuation data reporting regulations for
original swaps. As revised, newly re-designated Sec.  45.4(b) would be
titled

[[Page 21589]]

“Continuation data reporting for original swaps.”
    Revised Sec.  45.4(c) would contain the continuation data reporting
requirements for all swaps other than original swaps, which would
include clearing swaps. The revisions to the continuation data
requirements for clearing swaps and uncleared swaps are discussed in
section II.D.4 below. The revisions to the continuation data
requirements for original swaps in revised Sec.  45.4(b) will be
discussed in this section.
    Second, the Commission is proposing several amendments to the
continuation data reporting regulations for original swaps in Sec. 
45.4(c), proposed to be redesignated as Sec.  45.4(b). Current Sec. 
45.4(c) requires that required swap continuation data, including
terminations, must be reported to the SDR to which the original swap
that was accepted for clearing was reported pursuant to Sec.  45.3(a)
through (d).97 For continuation data, Sec.  45.4(c)(1) requires: (i)
Life cycle event data or state data reporting either on the same day
that any life cycle event occurs with respect to the swap, or daily for
state data reporting; and (ii) daily valuation data. In addition, Sec. 
45.4(c)(2) requires the reporting of: (i) The LEI of the SDR to which
all required swap creation data for each clearing swap was reported by
the DCO pursuant to Sec.  45.3(e); (ii) the USI of the original swap
that was replaced by the clearing swaps; and (iii) the USI of each
clearing swap that replaces a particular original swap.
—————————————————————————

    97 The regulation also specifies the information must be
reported in the manner provided in Sec.  45.13(b) and in Sec.  45.4,
and must be accepted and recorded by such SDR as provided in Sec. 
49.10. 17 CFR 45.4(c).
—————————————————————————

    The Commission is proposing to extend the deadline for reporting
swap continuation data for original swaps in Sec.  45.4(c)(1). As
explained in sections II.C.2.a and II.C.2.b above, the Commission is
proposing to extend the deadlines for reporting required swap creation
data in Sec.  45.3 for swaps executed on SEFs and DCMs and those
executed off-facility to either T+1 or T+2, depending on the reporting
counterparty.98 As a result, the Commission reviewed the reporting
deadlines for required swap continuation data to ensure the amendments
to the required swap creation data reporting deadlines do not conflict.
—————————————————————————

    98 The background to these proposed amendments is discussed in
connection with the proposed revisions to the required swap creation
data reporting deadlines in Sec.  45.3(a) and (b), discussed in
sections II.C.2.a and II.C.2.b, respectively, above.
—————————————————————————

    In reviewing the continuation data reporting deadlines, the
Commission also considered those set by other regulators. For instance,
the SEC requires that any events that would result in a change in the
information reported to a SBSDR be reported within 24 hours of the
event taking place.99 EMIR similarly requires that contract
modifications be reported no later than the working day following the
modification.100 Both the SEC and ESMA generally have the same
deadlines for reporting new swaps as well as amendments, though the
deadline may be more than 24 hours in Europe depending on when the
trade was concluded and if the following day is a working day.
—————————————————————————

    99 17 CFR 242.900(g); 17 CFR 242.901(e).
    100 Reg. 648/2012 Art. 9(1).
—————————————————————————

    Original swaps are swaps that are accepted for clearing by a DCO.
Because they are cleared, the original swap reporting counterparties do
not report continuation data for original swaps to SDRs. However, the
Commission believes aligning the required swap creation data deadlines
with the required swap continuation data deadlines would be consistent
with the approach taken by other regulators. In light of the foregoing,
the Commission is proposing to extend the deadline for reporting
continuation data for original swaps to T+1 following any life cycle
event.
    The Commission is also proposing to remove the references to state
data reporting 101 in Sec.  45.4(b) and to clarify that required swap
continuation data must be reported “electronically.” As explained
earlier in this proposal, this should be current practice. In addition,
the Commission is proposing to update various cross references and make
non-substantive language edits to improve readability.
—————————————————————————

    101 The background to this proposed amendment is discussed in
connection with the proposed removal of the state data reporting
regulations from Sec.  45.4(a), discussed in section II.D.2 above.
—————————————————————————

    Therefore, proposed Sec.  45.4(b) would require that for each
original swap, the DCO shall report required swap continuation data,
including terminations, electronically to the SDR to which the swap
that was accepted for clearing was reported pursuant to Sec.  45.3 in
the manner provided in Sec.  45.13(a) and in Sec.  45.4, and such
required swap continuation data shall be accepted and recorded by such
SDR as provided in Sec.  49.10. Revised Sec.  45.4(b)(1) would require
that the DCO that accepted the swap for clearing shall report all life
cycle event data electronically to an SDR in the manner provided in
Sec.  45.13(a) not later than 11:59 p.m. eastern time on the next
business day following the day, as determined according to eastern
time, that any life cycle event occurs with respect to the swap.
    Revised Sec.  45.4(b)(2) would continue to require that in addition
to all other required swap continuation data, life cycle event data
shall include: (i) The LEI of the SDR to which all required swap
creation data for each clearing swap was reported by the DCO pursuant
to Sec.  45.3(b); (ii) the UTI of the original swap that was replaced
by the clearing swaps; and (iii) the UTI of each clearing swap that
replaces a particular original swap.
4. Sec.  45.4(c)–Continuation Data for Original Swaps
    The Commission is proposing several amendments to the Sec.  45.4(c)
regulations for reporting required swap continuation data for original
swaps. First, the Commission is proposing to move the required swap
continuation data reporting requirements for original swaps from Sec. 
45.4(c) to Sec.  45.4(b). The Commission is proposing to move the
continuation data reporting requirements for clearing swaps from Sec. 
45.4(b) to Sec.  45.4(c), and combine them with the continuation data
reporting requirements for uncleared swaps currently located in Sec. 
45.4(d). The Commission is proposing to retitle Sec.  45.4(c)
“Continuation data reporting for swaps other than original swaps” to
reflect the combination.
    The Commission is proposing several revisions to the continuation
data reporting regulations for clearing swaps and uncleared swaps in
Sec.  45.4(b) and (d), respectively, which are proposed to be
redesignated as Sec.  45.4(c). The revisions to the continuation data
requirements for original swaps are discussed in section II.D.3 above.
The revisions to the continuation data requirements for clearing swaps
and uncleared swaps to be combined in revised Sec.  45.4(c) will be
discussed below in this section.
    Current Sec.  45.4(b) requires that for all clearing swaps, DCOs
must report: (i) Life cycle event data or state data reporting either
on the same day that any life cycle event occurs with respect to the
swap, or daily for state data reporting; and (ii) daily valuation data.
Current Sec.  45.4(d) requires that for all uncleared swaps, including
swaps executed on a SEF or DCM, the reporting counterparty must report:
(i) All life cycle event data on the same day for SD/MSP reporting
counterparties, or the second business day if it relates to a corporate
event of the non-reporting counterparty, or state data daily; (ii) all

[[Page 21590]]

life cycle event data on the next business day for non-SD/MSP reporting
counterparties, or the end of the second business day if it relates to
a corporate event of the non-reporting counterparty, or state data
daily; (iii) daily valuation data for SD/MSP reporting counterparties;
and (iv) the current daily mark of the transaction as of the last day
of each fiscal quarter, within 30 calendar days of the end of each
fiscal quarter for non-SD/MSP reporting counterparties.102
—————————————————————————

    102 If a daily mark of the transaction is not available for
the swap, the reporting counterparty satisfies the requirement by
reporting the current valuation of the swap recorded on its books in
accordance with applicable accounting standards. 17 CFR
45.4(d)(2)(ii).
—————————————————————————

    The Commission is proposing to revise the life cycle event
reporting deadlines for these swaps to reflect the revisions proposed
to the Sec.  45.3(b) required swap creation data reporting deadlines
and the Sec.  45.4(b) original swap continuation data reporting
deadlines.103 The Commission is proposing to change the life cycle
event reporting deadline for SD/MSP/DCO reporting counterparties from
the same day to T+1 following any life cycle event.104 The Commission
is proposing to update the exception for corporate events of the non-
reporting counterparty to T+2.
—————————————————————————

    103 The background to these proposed revisions is discussed in
connection with the proposed revisions to the required swap creation
data reporting deadlines for off-facility swaps in revised Sec. 
45.3(b) and the required swap continuation data deadlines for
original swaps in Sec.  45.4(b), discussed in sections II.C.2.b and
II.D.3, respectively, above.
    104 The Commission is not similarly proposing to extend the
valuation data reporting deadline for SD/MSP/DCO reporting
counterparties. The Commission preliminarily believes that valuation
data should not be similarly delayed because SDs, MSPs, and DCOs are
already creating daily valuations and tracking margin and collateral
for reasons independent of their swap reporting obligations.
—————————————————————————

    For non-SD/MSP/DCO reporting counterparties, the Commission is
proposing to change the life cycle event reporting deadline to T+2
following the life cycle event.
    The Commission is also proposing to remove the references to state
data reporting in revised Sec.  45.4(c).105 The Commission is also
proposing to clarify that required swap continuation data must be
reported “electronically.” The Commission is also proposing to update
various cross references and make non-substantive language edits to
improve readability.
—————————————————————————

    105 The background to this proposed amendment is discussed in
connection with the proposed removal of the state data reporting
regulations from Sec.  45.4(a), discussed in section II.D.2 above.
—————————————————————————

    The Commission is also proposing revisions to the requirements for
reporting swap valuation data for all reporting counterparties. As
background, DCOs, SDs, and MSPs report valuation data daily, while non-
SD/MSP reporting counterparties report the daily mark of transactions
quarterly.106 For DCO, SD, and MSP reporting counterparties, the
Commission is proposing to maintain the daily reporting requirement.
However, the Commission is proposing to expand the requirement to
include margin and collateral data.107
—————————————————————————

    106 17 CFR 45.4(b)(2) and (d)(2).
    107 The Commission is proposing to add a definition of
“collateral data” to Sec.  45.1(a), as discussed in section II.A.1
above. As proposed “collateral data” would mean the data elements
necessary to report information about the money, securities, or
other property posted or received by a swap counterparty to margin,
guarantee, or secure a swap, as specified in appendix 1 to part 45.
—————————————————————————

    As background, the Commission decided not to require collateral
data reporting when it adopted part 45 in 2012. At the time, both the
Commission and industry understood that collateral information was
important for systemic risk management, but was not yet possible to
include in transaction-based reporting since it was calculated at the
portfolio level.108 In light of this limitation, the Commission
required that the daily mark be reported for swaps as valuation data,
but not collateral.109 However, the Commission noted that while the
industry had not yet developed data elements suitable for representing
the terms required to report collateral, the Commission could revisit
the issue in the future if and when industry and SDRs develop ways to
represent electronically the terms required for reporting
collateral.110
—————————————————————————

    108 Swap Data Recordkeeping and Reporting Requirements, 77 FR
2136, 2153.
    109 17 CFR 45.1 (definition of “valuation data”). The
Commission is proposing to amend the definition of “valuation
data” in Sec.  45.1(a), as discussed in section II.A.2 above. As
amended, “valuation data” would mean the data elements necessary
to report information about the daily mark of the transaction,
pursuant to CEA section 4s(h)(3)(B)(iii), and to Sec.  23.431 if
applicable, as specified in appendix 1 to part 45.
    110 Swap Data Recordkeeping and Reporting Requirements, 77 FR
2136, 2154.
—————————————————————————

    The Commission is concerned that not having margin and collateral
data impedes its ability to fulfill the systemic risk mitigation
objectives of the Dodd-Frank Act. As a result, the Commission is
revisiting this issue as the Commission noted in 2012 to determine
whether it is now feasible.
    DMO raised the issue of and received comments on new margin and
collateral reporting as part of the Roadmap review. Some commenters
opposed such reporting,111 with one recommending that the Commission
look for alternative means to collect the data.112 One commenter
indicated that increased harmonization with ESMA on issues such as
margin data collection could be helpful.113
—————————————————————————

    111 Letter from American Counsel of Life Insurers (“ACLI”)
(Aug. 21, 2017) at, 2-3 (asserting that margin data would not “be
constructive” and the burden would outweigh any benefit); Letter
from CEWG at 3; Joint ISDA-SIFMA Letter at 8.
    112 Joint ISDA-SIFMA Letter at 8.
    113 Letter from Chatham at 5.
—————————————————————————

    Other regulators have taken different approaches to margin and
collateral data reporting. The SEC does not require reporting of any
valuation data or margin and collateral data, for security-based
swaps.114 ESMA, in contrast, requires the reporting of many of the
same collateral and margin swap data elements the Commission is
proposing to require, either on a portfolio basis or by
transaction.115 With respect to valuation data, ESMA requires central
counterparties to report valuations for cleared swaps as the Commission
does.116 EMIR does provide an exemption from valuation reporting, as
well as reporting margin and collateral data, for non-financial
counterparties, unless they exceed a threshold of derivatives
activity.117
—————————————————————————

    114 Regulation SBSR–Reporting and Dissemination of Security-
Based Swap Information, 80 FR 14564, 14590 (noting that SEC will
continue to assess the reporting and public dissemination regime
under Regulation SBSR and could determine to propose additional
requirements, such as the reporting of valuations, as necessary or
appropriate.).
    115 The collateral and margin data elements themselves are
included below in section V.
    116 Reg. 148/2013 Art. 3(5).
    117 Reg. 148/2013 Art. 3(4); Reg. 648/2012 Art. 10.
—————————————————————————

    The Commission believes margin and collateral data is necessary to
monitor risk in the swaps market. Given that ESMA is already requiring
collateral reporting, and that the Commission is proposing to require
many of the swap data elements that ESMA requires, the Commission
believes industry is ready to report this data to SDRs.
    However, the Commission is concerned that valuation, margin, and
collateral data reporting could create a significant burden for non-SD/
MSP/DCO reporting counterparties. The Commission is aware that these
entities may be smaller and less active in the swaps market, with fewer
resources to devote to reporting this complex data. The Commission also
recognizes that the quarterly valuation data these counterparties
report is not integral to the Commission’s ability to monitor systemic
risk in the swaps market and may not justify the cost to these entities
to report it. The Commission is therefore proposing to remove the
current requirement for non-SD/MSP/DCO

[[Page 21591]]

reporting counterparties to report valuation data in Sec. 
45.4(d)(2)(ii). The Commission is also proposing not to require non-SD/
MSP/DCO reporting counterparties to report margin and collateral data.
The Commission preliminarily believes this would relieve these
counterparties from unnecessary burdens without impacting the
Commission’s ability to monitor systemic risk. The Commission also
notes this change would be consistent with the approach taken by ESMA
(and the SEC, insofar as the SEC does not require reporting of margin
and collateral data from any type of market participant).
    In light of the foregoing, the Commission is proposing to require
margin and collateral reporting for reporting counterparties that are
SDs, MSPs, and DCOs in Sec.  45.4(c)(2). Proposed Sec.  45.4(c) would
require that for each swap that is not an original swap, including
clearing swaps and swaps not cleared by a DCO, the reporting
counterparty report all required swap continuation data electronically
to an SDR in the manner provided in Sec.  45.13(a) as provided in Sec. 
45.4(c). Proposed Sec.  45.4(c)(1)(i) would require that SD/MSP/DCO
reporting counterparties report life cycle event data electronically to
an SDR in the manner provided in Sec.  45.13(a) not later than 11:59
p.m. eastern time on the next business day following the day, as
determined according to eastern time, that any life cycle event
occurred, with the sole exception that life cycle event data relating
to a corporate event of the non-reporting counterparty shall be
reported in the manner provided in Sec.  45.13(a) not later than 11:59
p.m. eastern time on the second business day following the day, as
determined according to eastern time, that such corporate event
occurred.
    Proposed Sec.  45.4(c)(1)(ii) would require that non-SD/MSP/DCO
reporting counterparties report life cycle event data electronically to
an SDR in the manner provided in Sec.  45.13(a) not later than 11:59
p.m. eastern time on the second business day following the day, as
determined according to eastern time, that any life cycle event
occurred.
    Proposed Sec.  45.4(c)(2) would require that SD/MSP/DCO reporting
counterparties report swap valuation data and collateral data
electronically to an SDR in the manner provided in Sec.  45.13(b) each
business day.
Request for Comment
    The Commission requests comment on all aspects of the proposed
changes to Sec.  45.4. The Commission also invites specific comment on
the following:
    (5) Are the Commission’s proposed T+1 and T+2 deadlines for
reporting required swap continuation data appropriately harmonized with
the deadlines set by other regulators and jurisdictions to benefit
market participants? Do the Commission’s proposed T+1 and T+2 deadlines
for reporting required swap continuation data create any operational
issues for reporting counterparties that the Commission has not
considered?
    (6) Is the requirement to report margin and collateral data without
distinction for whether a swap is cleared or uncleared redundant with
existing part 39 reporting requirements for cleared swaps? Are there
efficiencies for reporting counterparties to submit both cleared and
uncleared margin and collateral data together to SDRs?
    (7) Does the Commission’s proposal to no longer require non-SD/MSP/
DCO reporting counterparties to report valuation data raise any
concerns about the Commission’s ability to monitor systemic risk in the
U.S. swaps market?

E. Sec.  45.5–Unique Transaction Identifiers

    The Commission is proposing amendments to Sec.  45.5 for USIs. In
general, the Commission is proposing to amend Sec.  45.5(a) through (f)
to require each swap to be identified with a UTI in all recordkeeping
and all swap data reporting, and to require that the UTI be comprised
of the LEI of the generating entity and a unique alphanumeric code. The
proposed amendments to Sec.  45.5(a) through (f) are discussed in
sections II.E.1 to II.E.7 below.
    In general, Sec.  45.5 requires each swap to be identified with a
USI in all recordkeeping and all swap data reporting, and requires that
the USI be comprised of the identifier assigned by the Commission to
the generating entity and a unique alphanumeric code. In response to
the Roadmap, the Commission received comment letters supporting
adoption of the UTI and UPI standards as part of the review.118
—————————————————————————

    118 Joint ISDA-SIFMA Letter at 4; Joint SDR Letter at 7.
—————————————————————————

    Because the current USI requirement was implemented prior to global
consensus on the structure and format for a common swap identifier, the
Commission preliminarily believes that amending Sec.  45.5 to require
each swap to be identified with a UTI in all recordkeeping and all swap
data reporting and to require that the UTI be comprised of the LEI of
the generating entity and a unique alphanumeric code will result in the
structure and format for the swap identifier being consistent with the
UTI Technical Guidance, reduce cross-border reporting complexity and
encourage global swap data aggregation.
1. Title and Introductory Text
    The Commission is proposing several conforming amendments to the
Sec.  45.5 title and the introductory text. Current Sec.  45.5 is
titled “Unique swap identifiers.” The current introductory text
states that each swap subject to the jurisdiction of the Commission
shall be identified in all recordkeeping and all swap data reporting
pursuant to part 45 by the use of a USI, which shall be created,
transmitted, and used for each swap as provided in Sec.  45.5(a)
through (f).
    The Commission is proposing to replace “swap” in the title with
“transaction” to reflect the Commission’s proposed adoption of the
UTI. Accordingly, the Commission is also proposing to update the
reference to USI with UTI in the introductory text.
    The Commission is also proposing to update the reference to
paragraphs (a) through (f) of Sec.  45.5 to (a) through (h) of Sec. 
45.5. This amendment would reflect the Commission’s proposed addition
of Sec.  45.5(g) and (h), discussed in sections II.E.8 and II.E.9
below.
    Therefore, in light of the above proposed amendments, the
introductory text would state that each swap shall be identified in all
recordkeeping and all swap data reporting pursuant to part 45 by the
use of a UTI, which shall be created, transmitted, and used for each
swap as provided in paragraphs (a) through (h) of Sec.  45.5.
2. Sec.  45.5(a)–Swaps Executed on or Pursuant to the Rules of a SEF
or DCM
    The Commission is proposing several conforming amendments to Sec. 
45.5(a) for the creation and transmission of USIs for swaps executed on
or pursuant to the rules of SEFs and DCMs. Current Sec.  45.5(a)(1)
requires that for swaps executed on or pursuant to the rules of SEFs
and DCMs, SEFs and DCMs generate and assign USIs at or ASATP following
execution, but prior to the reporting of required swap creation data,
that consist of a single data field containing: (i) The unique
alphanumeric code assigned to the SEF or DCM by the Commission for the
purpose of identifying the SEF or DCM with respect to the USI creation;
and (ii) an alphanumeric code generated and assigned to that swap by
the automated systems of the SEF or DCM, which shall be unique with
respect to all such codes

[[Page 21592]]

generated and assigned by that SEF or DCM.119
—————————————————————————

    119 17 CFR 45.5(a)(1)(i) through (ii).
—————————————————————————

    Current Sec.  45.5(a)(2) requires that the SEF or DCM transmit the
USI electronically: (i) To the SDR to which the SEF or DCM reports
required swap creation data for the swap, as part of that report; (ii)
to each counterparty to the swap ASATP after execution of the swap; and
(iii) to the DCO, if any, to which the swap is submitted for clearing,
as part of the required swap creation data transmitted to the DCO for
clearing purposes.120
—————————————————————————

    120 17 CFR 45.5(a)(2)(i) through (iii).
—————————————————————————

    First, the Commission is proposing amendments to conform to the
Commission’s proposed adoption of the UTI. The Commission is proposing
to replace all references to USIs with UTIs in Sec.  45.5(a)(1) through
(2). In addition, the Commission is proposing to update the phrase in
Sec.  45.5(a)(1) that the USI shall consist of a single data “field”
that contains two components to a single data “element with a maximum
length of 52 characters” so that the length of the UTI is consistent
with the UTI Technical Guidance.121
—————————————————————————

    121 UTI Technical Guidance, Section 3.6.
—————————————————————————

    The Commission is also proposing to amend Sec.  45.5(a)(1)(i)
describing the first component of the UTI’s single data element to
replace “unique alphanumeric code assigned to” the SEF or DCM with
“legal entity identifier of” the SEF or DCM so that the identifier
used to identify the UTI generating entity is consistent with the UTI
Technical Guidance.122 The Commission is also proposing to delete the
phrase in the second half of the sentence stating “by the Commission
for the purpose of identifying the [SEF] or [DCM] with respect to the
[USI] creation,” because, according to the UTI Technical Guidance, an
LEI is used to identify the UTI generating entity instead of an
identifier assigned by individual regulators.
—————————————————————————

    122 UTI Technical Guidance, Section 3.5.
—————————————————————————

    Therefore, in light of the above proposed changes, Sec.  45.5(a)(1)
123 would require that for swaps executed on or pursuant to the rules
of SEFs or DCMs, SEFs and DCMs generate and assign UTIs at or ASATP
following execution, but prior to the reporting of required swap
creation data, that consist of a single data element with a maximum
length of 52 characters containing: (i) The LEI of the SEF or DCM; and
(ii) an alphanumeric code generated and assigned to that swap by the
automated systems of the SEF or DCM, which shall be unique with respect
to all such codes generated and assigned by that SEF or DCM.
—————————————————————————

    123 Current Sec.  45.5(a)(2) would remain unchanged, except
for the single updated reference to UTI in Sec.  45.5(a)(2).
—————————————————————————

3. Sec.  45.5(b)–Off-Facility Swaps With an SD or MSP Reporting
Counterparty
    The Commission is proposing several amendments to Sec.  45.5(b) for
the creation and transmission of USIs for off-facility swaps by SD/MSP
reporting counterparties. Current Sec.  45.5(b)(1) requires that for
off-facility swaps with SD/MSP reporting counterparties, the reporting
counterparty generate and assign a USI ASATP consisting of a single
data field. The single data field is to contain: (i) The unique
alphanumeric code assigned to the SD or MSP by the Commission at the
time of its registration for the purpose of identifying them with
respect to USI creation; and (ii) an alphanumeric code generated and
assigned to that swap by the automated systems of the SD or MSP, which
shall be unique with respect to all such codes generated and assigned
by that SD or MSP. The required USI is to be generated and assigned
after execution of the swap and prior to the reporting of required swap
creation data and the transmission of data to a DCO if the swap is to
be cleared.
    Current Sec.  45.5(b)(2) requires that the reporting counterparty
transmit the USI electronically: (i) To the SDR to which the reporting
counterparty reports required swap creation data for the swap, as part
of that report; and (ii) to the non-reporting counterparty to the swap,
ASATP after execution of the swap; and (iii) to the DCO, if any, to
which the swap is submitted for clearing, as part of the required swap
creation data transmitted to the DCO for clearing purposes.
    First, the Commission is proposing to expand the UTI creation and
transmission requirements for SD/MSP reporting counterparties to
include reporting counterparties that are financial entities.124 The
Commission preliminarily believes that amending Sec.  45.5(b) to extend
the responsibility for generating off-facility swap UTIs to reporting
counterparties that are financial entities will reduce the UTI-
generation burden on non-financial entities.
—————————————————————————

    124 17 CFR 45.1 (definition of “financial entity”).
—————————————————————————

    The Commission also believes this would more closely align the UTI
generation hierarchy with the reporting counterparty determination
hierarchy in Sec.  45.8, which incorporates financial entities for
purposes of determining the reporting counterparty.125 For example,
in an off-facility swap where neither counterparty is an SD nor MSP and
only one counterparty is a financial entity, the counterparty that is a
financial entity will be the reporting counterparty,126 yet the SDR
would generate the USI under current Sec.  45.5(c).127 The proposed
changes to Sec.  45.5(b) would ensure that for such swap, the financial
entity would be assigned to both the reporting counterparty and to
generate the UTI. This amendment to Sec.  45.5(b) would also reduce the
number of swaps for which SDRs would be required to generate the UTI.
—————————————————————————

    125 17 CFR 45.8.
    126 17 CFR 45.8(c).
    127 17 CFR 45.5(c).
—————————————————————————

    The Commission is also proposing conforming changes. These are to
replace “swap dealer or major swap participant reporting
counterparty” in the title to Sec.  45.5(b) with “financial entity
reporting counterparty” and to replace “swap dealer or major swap
participant” in the first sentence of Sec.  45.5(b) with “financial
entity.” As proposed, the new title of Sec.  45.5(b) would be “Off-
facility swaps with a financial entity reporting counterparty” and the
first sentence of Sec.  45.5(b) would begin with “For each off-
facility swap where the reporting counterparty is a financial entity .
. . .” 128 The Commission is similarly proposing to replace
references to “swap dealer or major swap participant” in Sec. 
45.5(b)(1)(i) and (ii) with “reporting counterparty.” 129
—————————————————————————

    128 See row “45.5(b)” of the table in section VIII.3 below.
    129 See row “45.5(b)(1)(ii)” of the table in section VIII.3
below.
—————————————————————————

    Second, the Commission is proposing amendments to conform to the
Commission’s proposed adoption of the UTI. The Commission is proposing
to replace all references to USIs with UTIs in Sec.  45.5(b)(1) through
(2). In addition, the Commission is proposing to update the phrase in
Sec.  45.5(b)(1) that the USI shall consist of a single data “field”
that contains two components to a single data “element with a maximum
length of 52 characters” so that the length of the UTI is consistent
with the UTI Technical Guidance.130
—————————————————————————

    130 UTI Technical Guidance, Section 3.6.
—————————————————————————

    The Commission is also proposing to amend Sec.  45.5(b)(1)(i)
describing the first component of the UTI’s single data element to
replace “unique alphanumeric code assigned to” the SD or MSP with
“legal entity identifier of” the reporting counterparty so that the
identifier used to identify the UTI generating entity is consistent
with the UTI Technical Guidance.131 The

[[Page 21593]]

Commission is also proposing to delete the phrase in the second half of
the sentence stating “by the Commission at the time of its
registration as such, for the purpose of identifying the [SD] or [MSP]
with respect to the [USI] creation,” because, according to the UTI
Technical Guidance, an LEI is used to identify the UTI generating
entity instead of an identifier assigned by individual regulators.
—————————————————————————

    131 UTI Technical Guidance, Section 3.5.
—————————————————————————

    Therefore, in light of the above proposed changes, Sec.  45.5(b)(1)
132 would require that for off-facility swaps with a financial entity
reporting counterparty, the reporting counterparties generate and
assign UTIs at or ASATP following execution, but prior to the reporting
of required swap creation data, that consist of a single data element
with a maximum length of 52 characters containing: (i) The LEI of the
reporting counterparty; and (ii) an alphanumeric code generated and
assigned to that swap by the automated systems of the reporting
counterparty, which shall be unique with respect to all such codes
generated and assigned by that reporting counterparty.
—————————————————————————

    132 Current Sec.  45.5(b)(2) would remain unchanged, except
for the single updated reference to UTI in Sec.  45.5(b)(2).
—————————————————————————

4. Sec.  45.5(c)–Off-Facility Swaps With a Non-SD/MSP Reporting
Counterparty
    The Commission is proposing several amendments to Sec.  45.5(c) for
the creation and transmission of USIs for off-facility swaps by non-SD/
MSP reporting counterparties. Current Sec.  45.5(c)(1) requires that
for off-facility swaps with non-SD/MSP reporting counterparties, the
SDR generates and assigns a USI ASATP after receiving the first report
of PET data consisting of a single data field containing: (i) The
unique alphanumeric code assigned to the SDR by the Commission at the
time of its registration for the purpose of identifying them with
respect to USI creation; and (ii) an alphanumeric code generated and
assigned to that swap by the automated systems of the SDR, which shall
be unique with respect to all such codes generated and assigned by that
SDR.
    Current Sec.  45.5(c)(2) requires that the SDR transmit the USI
electronically: (i) To the counterparties to the swap ASATP after
creation of the USI, and (ii) to the DCO, if any, to which the swap is
submitted for clearing ASATP after creation of the USI.
    First, the Commission is proposing to replace “non-SD/MSP
reporting counterparty” in the title to Sec.  45.5(c) with “non-SD/
MSP/DCO reporting counterparty that is not a financial entity” and to
replace “reporting counterparty is a non-SD/MSP counterparty” in the
first sentence of Sec.  45.5(c) with “reporting counterparty is a non-
SD/MSP/DCO counterparty that is not a financial entity.” As proposed,
the new title of Sec.  45.5(c) would be “Off-facility swaps with a
non-SD/MSP/DCO reporting counterparty that is not a financial entity”
and the first sentence of Sec.  45.5(c) would begin with “For each
off-facility swap for which the reporting counterparty is a non-SD/MSP/
DCO counterparty that is not a financial entity . . . .” As explained
in section II.E.3 above, the Commission is proposing to expand UTI
generation responsibilities to financial entities,133 and
preliminarily believes that this amendment is needed to clarify that
proposed Sec.  45.5(c) would apply only where a reporting counterparty
is a non-SD/MSP/DCO counterparty that is not a financial entity.
—————————————————————————

    133 17 CFR 45.1 (definition of “financial entity”).
—————————————————————————

    Second, the Commission is proposing to amend Sec.  45.5(c) to
provide non-SD/MSP/DCO reporting counterparties that are not financial
entities with the option to generate the UTI for an off-facility swap
or to request that the SDR to which required swap creation data will be
reported to generate the UTI. If the non-SD/MSP/DCO reporting
counterparty that is not a financial entity chooses to generate the UTI
for an off-facility swap, the reporting counterparty would follow the
creation and transmission requirements for financial entity reporting
counterparties in Sec.  45.5(b)(1) and (2). If the non-SD/MSP/DCO
reporting counterparty that is not a financial entity chooses to
request the SDR to generate the UTI, the SDR would follow the creation
and transmission requirements for SDRs in Sec.  45.5(c)(1) and (2). The
Commission is proposing amendments to the requirements for SDRs in
Sec.  45.5(c)(1), as discussed below.
    In the Joint SDR Letter, three SDRs expressed the view that the
Commission should adopt the UTI Technical Guidance without
modification, after which anyone with an LEI would be able to create a
USI, and SDRs would no longer need to generate and transmit UTIs.134
The Commission participated in the preparation of the UTI Technical
Guidance, which includes guidance to authorities for allocating
responsibility for UTI generation, including a generation flowchart
that places SDRs at the end.135 The UTI Technical Guidance also notes
that “[n]ot all factors” in the flowchart for allocating
responsibility for UTI generation “will be relevant for all
jurisdictions.” 136
—————————————————————————

    134 Joint SDR Letter at 7-8.
    135 UTI Technical Guidance at 12-14.
    136 UTI Technical Guidance at 12.
—————————————————————————

    Because the UTI Technical Guidance was produced with the need to
accommodate the different trading patterns and reporting rules in
jurisdictions around the world, certain factors included in the UTI
Technical Guidance generation flowchart are not applicable for the
Commission (e.g., factors relating to the principal clearing model
137 or electronic confirmation platforms),138 and therefore the
Commission is unable to adopt the UTI Technical Guidance without
modification. However, the Commission preliminarily believes that none
of the provisions of amended Sec.  45.5 conflict with the UTI Technical
Guidance, including maintaining the existing obligations for SDRs to
generate and transmit UTIs. While UTI generation and transmission
responsibilities by SDRs remain in amended Sec.  45.5(c), the
Commission also preliminarily believes that the proposed alignment of
the UTI generation and reporting counterparty determination for
financial entities in amended Sec.  45.5(b) and the proposed reporting
option for counterparties that are neither DCOs nor financial entities
in amended Sec.  45.5(c) will result in reduced overall UTI generation
and transmission burdens for SDRs.
—————————————————————————

    137 UTI Technical Guidance at 12 (Step 2: “Is a counterparty
to this transaction a clearing member of a CCP, and if so is that
clearing member acting in its clearing member capacity for this
transaction?”).
    138 UTI Technical Guidance at 12 (Step 6: “Has the
transaction been electronically confirmed or will it be and, if so,
is the confirmation platform able, willing and permitted to generate
a UTI within the required time frame under the applicable rules?”).
—————————————————————————

    The Commission preliminarily believes that amending Sec.  45.5(c)
to provide the reporting counterparty with the option to generate the
UTI for an off-facility swap where the reporting counterparty is
neither a DCO nor financial entity or, if the reporting counterparty
elects not to generate the UTI, to request that the SDR to which
required swap creation data will be reported to generate the UTI will
simultaneously: (i) Provide a reporting counterparty that is neither a
DCO nor financial entity with the flexibility to generate the UTI
should it choose to do so; and (ii) reduce the number of swaps where an
SDR is assigned with UTI generation responsibilities, while also
maintaining the existing SDR role as a guarantee that every off-
facility swap will be identified with a UTI.
    Third, the Commission is proposing amendments to conform to the
Commission’s proposed adoption of the

[[Page 21594]]

UTI. The Commission is proposing to replace all references to USIs with
UTIs in Sec.  45.5(c)(1) through (2). In addition, the Commission is
proposing to update the phrase in Sec.  45.5(c)(1) that the USI shall
consist of a single data “field” that contains two components to a
single data “element with a maximum length of 52 characters” so that
the length of the UTI is consistent with the UTI Technical
Guidance.139
—————————————————————————

    139 UTI Technical Guidance, Section 3.6.
—————————————————————————

    The Commission is also proposing to amend Sec.  45.5(c)(1)(i)
describing the first component of the UTI’s single data element to
replace “unique alphanumeric code assigned to” the SDR with “legal
entity identifier of” the SDR so that the identifier used to identify
the UTI generating entity is consistent with the UTI Technical
Guidance.140 The Commission is also proposing to delete the phrase in
the second half of the sentence stating “by the Commission at the time
of its registration as such, for the purpose of identifying the [SDR]
with respect to the [USI] creation,” because, according to the UTI
Technical Guidance, an LEI is used to identify the UTI generating
entity instead of an identifier assigned by individual regulators.
—————————————————————————

    140 UTI Technical Guidance, Section 3.5.
—————————————————————————

    Therefore, in light of the above proposed amendments, Sec. 
45.5(c)(1) 141 would require that for swaps with a non-SD/MSP/DCO
reporting counterparty that is not a financial entity, the reporting
counterparty shall either create and transmit a UTI as provided in
Sec.  45.5(b)(1) and Sec.  45.5(b)(2), or request that the SDR to which
it reports required swap creation data create and transmit one pursuant
to Sec.  45.5(c)(1) or (c)(2).
—————————————————————————

    141 Current Sec.  45.5(c)(2) would remain unchanged, except
for the updated references to UTI in Sec.  45.5(b)(2)(i)(A) through
(B).
—————————————————————————

    Proposed Sec.  45.5(c)(1) would provide that the SDR generate and
assign UTIs at or ASATP following receipt of a request from the
reporting counterparty, that consist of a single data element with a
maximum length of 52 characters containing: (i) The LEI of the SDR; and
(ii) an alphanumeric code generated and assigned to that swap by the
automated systems of the SDR, which shall be unique with respect to all
such codes generated and assigned by that SDR.
5. Sec.  45.5(d)–Clearing Swaps
    The Commission is proposing several amendments to the Sec.  45.5(d)
regulations for the creation and transmission of USIs for clearing
swaps. Current Sec.  45.5(d) requires that for each clearing swap, the
DCO that is a counterparty to such swap shall create and transmit a USI
upon, or ASATP after, acceptance of an original swap for clearing, or
execution of a clearing swap that does not replace an original swap,
and prior to the reporting of required swap creation data for the
clearing swap. Current Sec.  45.5(d)(1) requires that the USI shall
consist of a single data field that contains: (i) The unique
alphanumeric code assigned to the DCO by the Commission for the purpose
of identifying it with respect to USI creation; and (ii) an
alphanumeric code generated and assigned to that clearing swap by the
automated systems of the DCO, which shall be unique with respect to all
such codes generated and assigned by that DCO.
    Current Sec.  45.5(d)(2) requires that the DCO transmit the USI
electronically to: (i) The SDR to which the DCO reports required swap
creation data for the clearing swap; and (ii) to the counterparty to
the clearing swap, ASATP after accepting the swap for clearing or
executing the swap, if it does not replace an original swap.
    First, the Commission is proposing to retitle the section “Off-
facility swaps with a [DCO] reporting counterparty.” The Commission is
proposing to rephrase the introductory text in Sec.  45.5(d) to reflect
this shift in terminology.
    Second, the Commission is proposing amendments to conform to the
Commission’s proposed adoption of the UTI. The Commission is proposing
to replace all references to USIs with UTIs in Sec.  45.5(d)(1) through
(2). In addition, the Commission is proposing to update the phrase in
Sec.  45.5(d)(1) that the USI shall consist of a single data “field”
that contains two components to a single data “element with a maximum
length of 52 characters” so that the length of the UTI is consistent
with the UTI Technical Guidance.142
—————————————————————————

    142 UTI Technical Guidance, Section 3.6.
—————————————————————————

    The Commission is also proposing to amend Sec.  45.5(d)(1)(i)
describing the first component of the UTI’s single data element to
replace “unique alphanumeric code assigned to the “DCO reporting
counterparty with “legal entity identifier of” the DCO so that the
identifier used to identify the UTI generating entity is consistent
with the UTI Technical Guidance.143 The Commission is also proposing
to delete the phrase in the second half of the sentence stating “by
the Commission at the time of its registration as such, for the purpose
of identifying the [DCO] with respect to the [USI] creation,” because,
according to the UTI Technical Guidance, an LEI is used to identify the
UTI generating entity instead of an identifier assigned by individual
regulators.
—————————————————————————

    143 UTI Technical Guidance, Section 3.5.
—————————————————————————

    Therefore, in light of the above proposed amendments, Sec. 
45.5(d)(1) 144 would require that for off-facility swaps with a DCO
reporting counterparty, the reporting counterparty generate and assign
UTIs at or ASATP following clearing or execution, but prior to the
reporting of required swap creation data for the clearing swap, that
consist of a single data element with a maximum length of 52 characters
containing: (i) The LEI of the DCO; and (ii) an alphanumeric code
generated and assigned to that swap by the automated systems of the
DCO, which shall be unique with respect to all such codes generated and
assigned by that DCO.
—————————————————————————

    144 Current Sec.  45.5(d)(2) would remain unchanged, except
for the single updated reference to UTI in Sec.  45.5(d)(2).
—————————————————————————

6. Sec.  45.5(e)–Allocations
    The Commission is proposing several amendments to the Sec.  45.5(e)
regulations for the creation and transmission of USIs for allocations.
The Commission is proposing to replace references to USIs with UTI
throughout Sec.  45.5(e) to conform to the Commission’s proposed
adoption of the UTI. The Commission is also proposing non-substantive
technical and language edits to update cross-references and improve
readability.
7. Sec.  45.5(f)–Use
    The Commission is proposing several amendments to the Sec.  45.5(f)
regulations for the use of UTIs by registered entities and swap
counterparties. Current Sec.  45.5(f) requires that registered entities
and swap counterparties subject to the jurisdiction of the Commission
include the USI for a swap in all of its records and all of its swap
data reporting concerning that swap, from the time it creates or
receives the USI, throughout the existence of the swap and for as long
as any records are required by the CEA or Commission regulations to be
kept concerning the swap, regardless of any life cycle events or any
changes to state data concerning the swap, including, without
limitation, any changes with respect to the counterparties to or the
ownership of the swap.
    Section 45.5(f) also specifies that this requirement shall not
prohibit the use by a registered entity or swap counterparty in its own
records of any additional identifier or identifiers internally
generated by the automated systems of the registered entity or swap
counterparty, or the reporting to an

[[Page 21595]]

SDR, the Commission, or another regulator of such internally generated
identifiers in addition to the reporting of the USI.
    First, the Commission is proposing amendments to conform to the
Commission’s proposed adoption of the UTI. The Commission is proposing
to replace all references to USIs with UTIs in Sec.  45.5(f). The
Commission is also proposing to remove the reference to state data in
the regulation,145 and make minor technical language edits, including
removing reference to ownership of the swap, which is not needed given
the reference to counterparties.
—————————————————————————

    145 See discussion in section II.D.2 above.
—————————————————————————

    Second, the Commission is proposing to remove the provision
permitting the reporting of any additional identifier or identifiers
internally generated by the automated systems of the registered entity
or swap counterparty to an SDR, the Commission, or another regulator.
The Commission believes this amendment would improve consistency in the
swap data reported to SDRs, and further the goal of harmonization of
SDR data across Financial Stability Board (“FSB”) member
jurisdictions.
    Therefore, in light of the above proposed amendments, Sec.  45.5(f)
would require that registered entities and swap counterparties include
the UTI for a swap in all of their records and all of their swap data
reporting concerning that swap, from the time they create or receive
the UTI, throughout the existence of the swap and for as long as any
records are required by the CEA or Commission regulations to be kept
concerning the swap, regardless of any life cycle events concerning the
swap, including, without limitation, any changes with respect to the
counterparties to the swap.
8. Sec.  45.5(g)–Third-Party Service Provider
    The Commission is proposing to add new Sec.  45.5(g) to its
regulations, titled “Third-party service provider.” Proposed Sec. 
45.5(g) would create requirements for registered entities and reporting
counterparties to, when contracting with third-party service providers
to facilitate reporting pursuant to Sec.  45.9, ensure that the third-
party service providers create and transmit UTIs.146
—————————————————————————

    146 17 CFR 45.9.
—————————————————————————

    As background, the Commission has encountered inconsistencies in
the format and standard of USIs for swaps reported using third-party
service providers. The Commission preliminarily believes that proposed
Sec.  45.5(g) will help ensure consistency with the UTI Technical
Guidance in the format and standard of UTIs for swaps reported by
third-party service providers. The Commission further believes that
proposed Sec.  45.5(g) will reinforce the existing responsibility of a
registered entity or reporting counterparty under Sec.  45.9 for the
data reported on its behalf by a third-party service provider.
    Therefore, proposed Sec.  45.5(g) would provide that if a
registered entity or reporting counterparty required by part 45 to
report required swap creation data or required swap continuation data
contracts with a third-party service provider to facilitate reporting
pursuant to Sec.  45.9, the registered entity or reporting counterparty
ensures that such third-party service provider creates and transmits
the UTI as otherwise required for such category of swap by Sec. 
45.5(a) through (e). It would further provide that the UTI shall
consist of a single data element with a maximum length of 52 characters
that contains: (i) The LEI of the third-party service provider; and
(ii) an alphanumeric code generated and assigned to that swap by the
automated systems of the third-party service provider, which shall be
unique with respect to all such codes generated and assigned by that
third-party service provider.
9. Sec.  45.5(h)–Cross-Jurisdictional Swaps
    The Commission is proposing to add new Sec.  45.5(h) to its
regulations, titled “Cross-jurisdictional swaps.” Proposed Sec. 
45.5(h) would clarify that if a swap is also reportable to one or more
other jurisdictions with a regulatory reporting deadline earlier than
the deadline set forth in Sec.  45.3, the swap is to be identified in
all reporting pursuant to part 45 with the same UTI that has been
generated according to the rules of the jurisdiction with the earliest
regulatory reporting deadline.
    The Commission believes that the benefits resulting from global
swap data aggregation and harmonization are realizable only if each
swap is identified in all regulatory reporting worldwide with a single
UTI so as to avoid double- or triple-counting of the swap. While the
current requirement in part 45 for swap creation data to be reported
ASATP after execution results in the Commission having the earliest
regulatory reporting deadline, changes to the reporting deadline in
proposed amendments to Sec.  45.3 may result in a cross-jurisdictional
swap being required to be reported to another jurisdiction earlier than
to the Commission. Because the Commission considers it critical that
only one unique UTI is used to identify each swap, whether reportable
only to the Commission or to multiple jurisdictions, the Commission
proposes that, if a cross-jurisdictional swap is reportable to another
jurisdiction earlier than required under part 45, the UTI for such swap
reported pursuant to part 45 be generated according to the rules of the
jurisdiction with the earliest regulatory reporting deadline.
    The Commission preliminarily believes that the new proposed
provision would: (i) Ensure consistency with the UTI Technical
Guidance; 147 (ii) assist the Commission, SDRs, and swap
counterparties to avoid potentially identifying a single cross-
jurisdictional trade with multiple UTIs; and (iii) eliminate the
potential for market participants to be faced with a situation of
attempting to comply with conflicting UTI generation rules.
—————————————————————————

    147 UTI Technical Guidance at 13 (Step 10: “UTI generation
rules of the jurisdiction with the sooner reporting deadline should
be followed”).
—————————————————————————

    Therefore, proposed Sec.  45.5(h) would require that
notwithstanding the provisions of Sec.  45.5(a) through (g), if a swap
is also reportable to one or more other jurisdictions with a regulatory
reporting deadline earlier than the deadline set forth in Sec.  45.3,
the same UTI generated according to the rules of the jurisdiction with
the earliest regulatory reporting deadline shall be transmitted
pursuant to Sec.  45.5(a)-(g) and used in all recordkeeping and all
swap data reporting pursuant to part 45.
Request for Comment
    The Commission requests comment on all aspects of the proposed
changes to Sec.  45.5.

F. Sec.  45.6–Legal Entity Identifiers 148
—————————————————————————

    148 The Commission is proposing to re-number the requirements
of Sec.  45.6 to correct current extensive numbering errors.
—————————————————————————

1. Introductory Text
    The Commission is proposing amendments to the introductory text of
the Sec.  45.6 regulations for LEIs. The current introductory text
states that each counterparty to any swap subject to the jurisdiction
of the Commission shall be identified in all recordkeeping and all swap
data reporting pursuant to part 45 by means of a single LEI as
specified in Sec.  45.6.
    First, the Commission is proposing to replace “each counterparty”
with each SEF, DCM, DCO, SDR, entity reporting pursuant to Sec.  45.9,
and counterparty to any swap. The Commission believes a list of
entities would be more precise and help market participants referring
to the introductory text.
    Second, the Commission is proposing to revise the introductory text
to require

[[Page 21596]]

each SEF, DCM, DCO, SDR, entity reporting pursuant to Sec.  45.9, and
counterparty to any swap that is eligible to receive an LEI to
“obtain” as well as be identified in all recordkeeping and swap data
reporting by a single LEI. The Commission is aware of uncertainty as to
whether the requirement to identify each counterparty with an LEI in
current Sec.  45.6 also includes a requirement for the counterparty to
obtain an LEI, and the Commission preliminarily believes that amending
Sec.  45.6 to clarify that a person or entity required to be identified
with an LEI in recordkeeping and swap data reporting also has an
associated affirmative requirement to obtain an LEI will clarify that
identification using LEI necessarily requires the identified person or
entity, if eligible to receive an LEI, to obtain an LEI.
    The Commission also preliminarily believes that extending the
requirement for each counterparty to any swap to be identified in all
recordkeeping and swap data reporting by a single LEI to all SEFs,
DCMs, DCOs, entities reporting pursuant to Sec.  45.9, and SDRs will
ensure consistency with the CDE Technical Guidance, allow for
standardization in the identification in recordkeeping and swap data
reporting, and encourage global swap data aggregation.
    Therefore, in light of the above proposed amendments, the
introductory text to Sec.  45.6 would state that each SEF, DCM, DCO,
SDR, entity reporting pursuant to Sec.  45.9, and counterparty to any
swap eligible to receive an LEI shall obtain and be identified in all
recordkeeping and all swap data reporting pursuant to part 45 by a
single LEI as specified in Sec.  45.6.
2. Sec.  45.6(a)–Definitions
    The Commission is proposing several changes to the definitions for
the LEI regulations in Sec.  45.6(a). As background, current Sec. 
45.6(a) provides definitions for “control,” “legal identifier
system,” “level one reference data,” “level two reference data,”
“parent,” “self-registration,” “third-party registration,” and
“ultimate parent.”
    The Commission is proposing to move certain definitions pertaining
to LEIs to Sec.  45.1(a). The Commission believes these definitions
should be in Sec.  45.1(a) because they are used in regulations outside
of Sec.  45.6. These definitions are: “Global Legal Entity Identifier
System,” 149 “legal entity identifier” or “LEI,” and “Legal
Entity Identifier Regulatory Oversight Committee.” These definitions
are discussed in section II.A.1 above.
—————————————————————————

    149 “Global Legal Entity Identifier System” and “local
operating unit” would be updated versions of the current definition
of “legal identifier system.”
—————————————————————————

    The Commission is also proposing to remove certain definitions
pertaining to LEIs from Sec.  45.6(a). These definitions would no
longer be necessary in light of the proposed amendments to the LEI
regulations, discussed in sections II.F.3 to II.F.8 below. These
definitions are: “control,” “level one reference data,” “level two
reference data,” “parent,” and “ultimate parent.”
    The Commission is proposing to amend certain definitions pertaining
to LEIs in Sec.  45.6(a). The Commission is proposing to amend the
definition of “self-registration” in several respects. First, the
Commission is proposing to remove the specific reference to “level one
or level two” reference data, and the accompanying specifier “as
applicable.” This amendment would reflect the Commission’s proposal to
remove the definitions of “level one reference data” and “level two
reference data.” 150
—————————————————————————

    150 Instead, as discussed below, the Commission is proposing
to add a definition of “reference data.” The proposed amendment to
“self-registration” would be consistent with the new definition.
—————————————————————————

    Second, the Commission is proposing to add a reference to
“individuals,” to reflect the fact that swap counterparties may be
individuals who need to obtain LEIs. As amended, “self-registration”
would mean submission by a legal entity or individual of its own
reference data.
    The Commission is also proposing to amend the definition of
“third-party registration.” First, the Commission is proposing to
remove the specific references to “level one or level two” reference
data, and the accompanying specifier “as applicable.” This amendment
would reflect the Commission’s proposal to remove the definitions of
“level one reference data” and “level two reference data.” 151
—————————————————————————

    151 Instead, as discussed below, the Commission is proposing
to add a definition of “reference data.” The proposed amendment to
“self-registration” would be consistent with the new definition.
—————————————————————————

    Second, the Commission is proposing to add references to
“individuals,” to reflect that swap counterparties may be individuals
who need to obtain LEIs. As amended, “third-party registration” would
mean submission of reference data for a legal entity or individual that
is or may become a swap counterparty, made by an entity or organization
other than the legal entity or individual identified by the submitted
reference data. Examples of third-party registration include, without
limitation, submission by an SD or MSP of reference data for its swap
counterparties, and submission by a national numbering agency, national
registration agency, or data service provider of reference data
concerning legal entities or individuals with respect to which the
agency or service provider maintains information.
    Finally, the Commission is proposing to add two definitions
pertaining to LEIs to Sec.  45.6(a). First, the Commission is proposing
to add a definition of “local operating unit.” As proposed, “local
operating unit” would mean an entity authorized under the standards of
the Global Legal Entity Identifier System to issue legal entity
identifiers. Second, the Commission is proposing to add a definition of
“reference data.” As proposed, “reference data” would mean all
identification and relationship information, as set forth in the
standards of the Global Legal Entity Identifier System, of the legal
entity or individual to which an LEI is assigned. The terms “local
operating unit” and “reference data” are explained in a discussion
of the proposed amendments to Sec.  45.6(e) in section II.F.7 below.
3. Sec.  45.6(b)–International Standard for the Legal Entity
Identifier
    The Commission is proposing several changes to Sec.  45.6(b)
regulations for the international standards for LEIs. The proposed
amendments to Sec.  45.6(b) would reflect changes that have taken place
since the current LEI regulations in Sec.  45.6 were adopted in 2012.
As background, Sec.  45.6(b) now states that the LEI used in all
recordkeeping and all swap data reporting required by part 45,
following designation of the legal entity identifier system as provided
in Sec.  45.6(c)(2), shall be issued under, and shall conform to,
International Organization for Standardization (“ISO”) Standard
17442, Legal Entity Identifier (LEI), issued by the ISO.
    The Commission is proposing to remove the phrase “following
designation of the [LEI] system as provided in [Sec.  45.6(c)(2)].”
The governance of the Global Legal Entity Identifier System designed by
the FSB with the contribution of private sector participants is now
fully in place: While at the beginning of the Global Legal Entity
Identifier System, LEI issuers were operating under a temporary
endorsement of the LEI ROC, all active LEI issuers have now been
accredited.152 The LEI ROC establishes policy standards, such as the
definition of the eligibility to obtain an LEI and conditions for
obtaining an LEI; the

[[Page 21597]]

definition of reference data and any extension thereof, such as the
addition of information on relationships between entities; the
frequency of update for some or all the reference data; the nature of
due diligence and other standards necessary for sufficient data
quality; or high level principles governing data and information
access.153
—————————————————————————

    152 Progress report by the LEI ROC, The Global LEI System and
regulatory uses of the LEI, 2 (Apr. 30, 2018), available at https://www.leiroc.org/publications/gls/roc_20180502-1.pdf.
    153 Id.
—————————————————————————

    Therefore, in light of the above proposed amendments, Sec.  45.6(b)
would state that the LEI used in all recordkeeping and all swap data
reporting required by part 45 shall be issued under, and shall conform
to, ISO Standard 17442, Legal Entity Identifier (LEI), issued by the
ISO.
4. Sec.  45.6(b)–Technical Principles for the Legal Entity Identifier
    The Commission is proposing to remove this redundantly-numbered
Sec.  45.6(b) for the technical principles for the LEI.154
Regulations for LEI reference data are currently located in Sec. 
45.6(e), which the Commission is proposing to move to Sec.  45.6(c).
The revisions to the current Sec.  45.6(e) reference data regulations
are discussed in section II.F.7 below.
—————————————————————————

    154 This Sec.  45.6(b) was numbered in error, as there is
already a Sec.  45.6(b), discussed in section II.F.3 above.
—————————————————————————

    Currently, this Sec.  45.6(b) regulation enumerates the six
technical principles for the legal entity identifier to be used in all
recordkeeping and all swap data reporting. The principles in Sec. 
45.6(b) are: (i) Uniqueness; (ii) neutrality; (iii) reliability; (iv)
open source; (v) extensibility; and (vi) persistence.
    The Commission is proposing to remove the above technical
principles from Sec.  45.6(b). The Commission adopted Sec.  45.6(b)
before global technical principles for the LEI were developed. The
Commission has participated in the Global Legal Entity Identifier
System and the LEI ROC since their establishment in 2013, through which
global technical principles have been developed and a functioning LEI
system introduced. The Commission preliminarily believes that deleting
this current Sec.  45.6(b) to remove the technical principles for the
legal entity identifier to be used in all recordkeeping and all swap
data reporting is now warranted because the global technical principles
that have been developed conform to the technical principles in Sec. 
45.6(b).
5. Sec.  45.6(c)–Governance Principles for the Legal Entity Identifier
    The Commission is proposing to remove the current Sec.  45.6(c)
regulations for the governance principles for the LEI.155 Regulations
for the use of the LEI are currently located in Sec.  45.6(f), which
the Commission is proposing to move to Sec.  45.6(d), which would be
correctly renumbered as Sec.  45.6(d). The revisions to the current
Sec.  45.6(f) use of LEI regulations are discussed in section II.F.8
below.
—————————————————————————

    155 Current Sec.  45.6(c) was also numbered in error because
of the duplicate Sec.  45.6(b) sections.
—————————————————————————

    Current Sec.  45.6(c) enumerates the five governance principles for
the legal entity identifier to be used in all recordkeeping and all
swap data reporting. The governance principles are: International
governance; reference data access; non-profit operation and funding;
unbundling and non-restricted use; and commercial advantage
prohibition.
    The Commission is proposing to remove the above governance
principles from Sec.  45.6(c). The Commission adopted Sec.  45.6(c)
before global governance principles for the LEI were developed. The
Commission has participated in the Global Legal Entity Identifier
System and the LEI ROC since their establishment in 2013, through which
global governance principles have been developed and a functioning LEI
system introduced. The Commission preliminarily believes that deleting
current Sec.  45.6(c) to remove the governance principles for the legal
entity identifier to be used in all recordkeeping and all swap data
reporting is now warranted because the global governance principles
that have been developed conform to the governance principles in Sec. 
45.6(c).
6. Sec.  45.6(e)–Designation of the Legal Entity Identifier System
    The Commission is proposing to remove the Sec.  45.6(e) regulations
for the designation of the legal entity identifier system. Current
Sec.  45.6(e) enumerates the procedures for determining whether a legal
entity identifier system meets the Commission’s requirements and the
procedures for designating the legal entity identifier system as the
provider of legal entity identifiers to be used in all recordkeeping
and all swap data reporting.
    The Commission adopted Sec.  45.6(e) before a global legal entity
identifier system was developed. The Commission has participated in the
Global Legal Entity Identifier System and the LEI ROC since their
establishment in 2013, through which a functioning LEI system has been
introduced, overseeing the issuance of LEIs by local operating units.
The Commission preliminarily believes that deleting this current Sec. 
45.6(e) to remove the procedures for determining whether a legal entity
identifier system meets the Commission’s requirements and the
procedures for designating the legal entity identifier system as the
provider of legal entity identifiers to be used in all recordkeeping
and all swap data reporting is now warranted because such determination
and designation procedures are no longer needed due to the
establishment of Global Legal Entity Identifier System.
7. Sec.  45.6(e)–Reference Data Reporting
    The Commission is proposing changes to the Sec.  45.6(e)
regulations for LEI reference data reporting.156 First, the
Commission is proposing to move the requirements for reporting LEI
reference data in Sec.  45.6(e) to correctly-renumbered Sec.  45.5(c).
—————————————————————————

    156 This Sec.  45.6(e) was numbered in error, as there is
already a Sec.  45.6(e) directly preceding it.
—————————————————————————

    Second, the Commission is proposing amendments to the requirements
for reporting LEI reference data in current Sec.  45.6(e), proposed to
be moved to Sec.  45.6(c). Current Sec.  45.6(e)(1) requires level one
reference data for each counterparty to be reported via self-
registration, third-party registration, or both, and details the
procedures for doing so, including the requirement to update level one
reference data in the event of a change or discovery of the need for a
correction. Current Sec.  45.6(e)(2) contains the requirement, once the
Commission has determined the location of the level two reference
database, for level two reference data for each counterparty to be
reported via self-registration, third-party registration, or both, and
the procedures for doing so, including the requirement to update level
two reference data in the event of a change or discovery of the need
for a correction.
    The Commission is proposing to remove the distinction between level
one and level two reference data now found in Sec.  45.6(e). Instead,
proposed new Sec.  45.6(c) would require that all reference data for
each SEF, DCM, DCO, SDR, entity reporting pursuant to Sec.  45.9, and
counterparty to any swap be reported via self-registration, third-party
registration, or both, to a local operating unit in accordance with the
standards set by the Global Legal Entity Identifier System. Proposed
new Sec.  45.6(c) would retain the requirement in current Sec.  45.6(e)
to update the reference data in the event of a change or discovery of
the need for a correction.
    The Commission adopted Sec.  45.6(e) before a global legal entity
identifier system was developed. The Commission

[[Page 21598]]

has participated in the Global Legal Entity Identifier System and the
LEI ROC since their establishment in 2013, through which a functioning
LEI system has been introduced that sets, and updates as needed, the
standards governing the identification and relationship reference data
required to be provided in order to obtain an LEI. The Commission
preliminarily believes that removing Sec.  45.6(e) to remove the
distinction between level one and level two reference data, and
proposing a new Sec.  45.6(c) to require that all reference data is
reported to a local operating unit in accordance with the standards set
by the Global Legal Entity Identifier System is warranted because the
establishment of Global Legal Entity Identifier System removes the role
of individual authorities in determining the standards governing LEI
reference data.
    While current Sec.  45.6(e) requires that reference data for only
the counterparties to a swap be reported, the extension of the
requirement to be identified in all recordkeeping and swap data
reporting by a single LEI to all SEFs, DCMs, DCOs, entities reporting
pursuant to Sec.  45.9, and SDRs described in section II.F.1 above also
necessarily requires that all SEFs, DCMs, DCOs, entities reporting
pursuant to Sec.  45.9, and SDRs report their LEI reference data.
    Therefore, in light of the above proposed amendments, Sec.  45.6(c)
would require that LEI reference data regarding each SEF, DCM, DCO,
SDR, entity reporting pursuant to Sec.  45.9, and counterparty to any
swap shall be reported, by means of self-registration, third-party
registration, or both, to a local operating unit in accordance with the
standards set by the Global Legal Entity Identifier System. All
subsequent changes and corrections to reference data previously
reported would be reported, by means of self-registration, third-party
registration, or both, to a local operating unit ASATP following
occurrence of any such change or discovery of the need for a
correction.
8. Sec.  45.6(f)–Use of the Legal Entity Identifier System by
Registered Entities and Swap Counterparties
    The Commission is proposing changes to the Sec.  45.6(f)
regulations for the use of LEIs by registered entities and swap
counterparties. Current Sec.  45.6(f)(1) requires that when a legal
entity identifier system has been designated by the Commission pursuant
to Sec.  45.6(e), each registered entity and swap counterparty shall
use the LEI provided by that system in all recordkeeping and swap data
reporting pursuant to part 45. Current Sec.  45.6(f)(2) requires that
before a legal entity identifier system has been designated by the
Commission, each registered entity and swap counterparty shall use a
substitute counterparty identifier created and assigned by an SDR in
all recordkeeping and swap data reporting pursuant to part 45.157
—————————————————————————

    157 The requirements for the substitute identifier were set
forth in Sec.  45.6(f)(2)(i) through (iv). As the Global Legal
Entity Identifier System has been introduced that oversees the
issuance of LEIs by local operating units, these requirements are no
longer applicable, the Commission will limit the detail of their
discussion in this release.
—————————————————————————

    Current Sec.  45.6(f)(3) requires that for swaps reported pursuant
to part 45 prior to Commission designation of a legal entity identifier
system, after such designation each SDR shall map the LEIs for the
counterparties to the substitute counterparty identifiers in the record
for each such swap. Current Sec.  45.6(f)(4) requires that prior to
October 15, 2012, if an LEI has been designated by the Commission as
provided in Sec.  45.6, but a reporting counterparty’s automated
systems are not yet prepared to include LEIs in recordkeeping and swap
data reporting pursuant to part 45, the counterparty shall be excused
from complying with Sec.  45.6(f)(1), and shall instead comply with
Sec.  45.6(f)(2), until its automated systems are prepared with respect
to LEIs, at which time it must commence compliance with Sec. 
45.6(f)(1).158
—————————————————————————

    158 The regulation specified that this paragraph would have no
effect on or after October 15, 2012. 17 CFR 45.6(f)(4).
—————————————————————————

    The Commission is proposing to retitle the section “Use of the
legal entity identifier,” because, as discussed below, the LEI will no
longer be used only by registered entities and swap counterparties. The
Commission is also proposing to move the requirements for the use of
LEIs from current Sec.  45.6(f) to correctly renumbered Sec. 
45.6(d),159 as a result, the Commission’s proposed amendments to the
requirements for the use of LEIs in current Sec.  45.6(f) discussed
below will be captured in new Sec.  45.6(d).
—————————————————————————

    159 As previously noted, current Sec.  45.6(c) was numbered in
error because of the duplicate Sec.  45.6(b) sections.
—————————————————————————

    The Commission is proposing to remove the sections of Sec.  45.6(f)
that are no longer operative, either because the Commission has
designated a legal entity identifier system, or the provisions have
expired. For these reasons, the Commission is proposing to remove Sec. 
45.6(f)(2) and (4). As a result, the substantive requirements of Sec. 
45.6(f)(2) and (4) will not be moved to Sec.  45.6(d).
    While the provisions of Sec.  45.6(f)(3) relating to substitute
counterparty identifiers are no longer applicable for new swaps, the
substantive requirements in Sec.  45.6(f)(3), which are still
applicable for swaps previously reported pursuant to part 45 using
substitute counterparty identifiers assigned by an SDR prior to
Commission designation of a legal entity identifier system, will be
moved to new Sec.  45.6(d)(4). Since this provision is applicable only
to old swaps and does not alter existing SDRs obligations, the
Commission considers this change to be non-substantive.
    The Commission is also proposing the following substantive changes
to the regulations requiring the use of LEIs. First, the Commission is
proposing revisions to the Sec.  45.6(f)(1) regulations for the use of
LEIs. The revised regulations will be moved to Sec.  45.6(d)(1), but
discussed below.
    The Commission proposes to delete the introductory clause “[w]hen
a legal entity identifier system has been designated by the Commission
pursuant to paragraph (e) of this section” in Sec.  45.6(f)(1) because
it is no longer relevant due to the establishment of the Global Legal
Entity Identifier System and the LEI ROC in 2013. In addition, while
Sec.  45.6(f)(1) currently requires “each registered entity and swap
counterparty” to use LEIs in all recordkeeping and swap data reporting
pursuant to part 45, the Commission proposes to replace “each
registered entity and swap counterparty” with “[e]ach [SEF], [DCM],
[DCO], [SDR], entity reporting pursuant to Sec.  45.9, and swap
counterparty” in order to, as described in section II.F.1 above,
ensure consistency with the CDE Technical Guidance, allow for
standardization in the identification in recordkeeping and swap data
reporting, and encourage global swap data aggregation. The Commission
also proposes to add “to identify itself and swap counterparties”
immediately after “use [LEIs]” in this section to clarify the
intended use of LEIs. Finally, the Commission proposes to add a new
sentence in this section to clarify that if a swap counterparty is not
eligible to receive an LEI, such counterparty should be identified in
with an alternate identifier pursuant to Sec.  45.13(a). Because some
counterparties, including many individuals, are currently ineligible to
receive an LEI based on the standards of the Global Legal Entity
Identifier System, the Commission believes that this sentence will
provide clarity as to how LEI-ineligible counterparties should be
identified.
    Second, the Commission is proposing new Sec.  45.6(d)(2) to require
each SD, MSP, SEF, DCM, DCO, and SDR to maintain and renew its LEI in
accordance with the standards set by the Global Legal Entity Identifier
System.

[[Page 21599]]

Current Sec.  45.6(e) requires that reference data be updated in the
event of a change or discovery of the need for a correction, which will
continue to be required under new Sec.  45.6(c).
    Pursuant to the Global Legal Entity Identifier System, established
in 2013, a person or entity is issued an LEI after: (1) Providing its
identification and relationship reference data to a local operating
unit and (2) paying a fee, currently as low as approximately $65, to
the local operating unit to validate the provided reference data. After
initial issuance, an LEI holder is asked to certify the continuing
accuracy of, or provide updates to, its reference data annually, and
pay a fee, currently as low as approximately $50, to the local
operating unit. LEIs that are not renewed annually are marked as
lapsed. Section 45.6 does not currently require annual LEI renewal
because part 45 was drafted and implemented prior to the establishment
of the Global Legal Entity Identifier System. Since the implementation
of Sec.  45.6, the Commission has received consistent feedback from
certain market participants and industry groups that the Commission
should require at least some LEI holders to annually renew their LEIs.
    The Commission is aware that some LEI holders have not complied
with the continuing requirement to update reference data as currently
required by Sec.  45.6(e), and imposing an annual renewal requirement
may increase the accuracy of their reference data. The Commission also
recognizes that other LEI holders are in compliance with the continuing
requirement to update reference data, and imposing an annual renewal
requirement may impose costs on those LEI holders without necessarily
increasing the accuracy of their reference data. The Commission has
participated in the Global Legal Entity Identifier System since its
inception, and values the functionality of the LEI reference data
collected, including the introduction of level two reference data.
    The Commission considers the activities of SDs, MSPs, SEFs, DCMs,
DCOs, and SDRs to have the most systemic impact affecting the
Commission’s ability to fulfill its regulatory mandates and, in light
of the introduction of LEI level two reference data, the Commission
preliminarily believes that requiring each SD, MSP, SEF, DCM, DCO, and
SDR to maintain and renew its LEI in accordance with the standards set
by the Global Legal Entity Identifier System in new Sec.  45.6(d)(2)
strikes the appropriate balance between the Commission’s interest in
accurate LEI reference data and cost to LEI holders.
    Third, the Commission proposes a new Sec.  45.6(d)(3) that would
obligate each DCO and each financial entity reporting counterparty
executing a swap with a counterparty that does not have an LEI but is
eligible for one to cause, prior to reporting any required swap
creation data for such swap, an LEI to be assigned to the counterparty,
including if necessary, through third-party registration.
    The Commission is aware that some counterparties currently have not
obtained an LEI. While proposed amendments to Sec.  45.6 discussed
above clarify that a counterparty required to be identified with an LEI
in swap data reporting also has an associated affirmative requirement
to obtain an LEI, the Commission anticipates that a small percentage of
counterparties nonetheless will not have obtained an LEI before
executing a swap. Swap data that does not identify eligible
counterparties with an LEI hinders the Commission’s fulfillment of its
regulatory mandates, including monitoring systemic risk, market
monitoring, and market abuse prevention. The Commission preliminarily
believes that proposing new Sec.  45.6(d)(3) to require each DCO and
each financial entity reporting counterparty executing a swap with a
counterparty that does not have an LEI to cause an LEI to be assigned
to the non-reporting counterparty will further the objective of
identifying each counterparty to a swap with an LEI.
    New Sec.  45.6(d)(3) would not prescribe the initial manner in
which a DCO or financial entity reporting counterparty causes an LEI to
be assigned to the non-reporting counterparty, though if initial
efforts are unsuccessful, new Sec.  45.6(d)(3) requires the DCO or
financial entity reporting counterparty to obtain an LEI for the non-
reporting counterparty. The Commission preliminarily believes that
having a DCO or financial entity reporting counterparty serving as a
backstop under new Sec.  45.6(d)(3) to ensure the identification of the
non-reporting counterparty with an LEI is appropriate because: (i) Each
DCO and financial entity reporting counterparty already has obtained,
via its “know your customer” and anti-money laundering compliance
processes, all identification and relationship reference data of the
non-reporting counterparty required by a local operating unit to issue
an LEI for the non-reporting counterparty; (ii) multiple local
operating units offer expedited issuance of LEI in sufficient time to
allow reporting counterparties to meet their new extended deadline in
Sec.  45.3(a) through (b) for reporting required swap creation data;
and (iii) the Commission anticipates that third-party registration in
these instances will be infrequent, as the Commission expects most non-
reporting counterparties to be mindful of their direct obligation to
obtain their own LEIs pursuant to Sec.  45.6.160
—————————————————————————

    160 ESMA also issued temporary relief to investment firms
transacting with a client without an LEI on the condition that they
“[obtain] the necessary documentation from this client to apply for
an LEI code on his behalf,” available at https://www.esma.europa.eu/press-news/esma-news/esma-issues-statement-lei-implementation-under-mifid-ii.
—————————————————————————

    Therefore, in light of the above proposed amendments, Sec. 
45.6(d)(1) would require that each SEF, DCM, DCO, SDR, entity reporting
pursuant to Sec.  45.9, and swap counterparty use an LEI to identify
itself and swap counterparties in all recordkeeping and all swap data
reporting pursuant to part 45. If a swap counterparty is not eligible
to receive an LEI as determined by the Global Legal Entity Identifier
System, such counterparty would be identified in all recordkeeping and
all swap data reporting pursuant to part 45 with an alternate
identifier as prescribed by the Commission pursuant to Sec.  45.13(a).
    Proposed Sec.  45.6(d)(2) would provide that each SD, MSP, SEF,
DCM, DCO, and SDR shall maintain and renew its LEI in accordance with
the standards set by the Global Legal Entity Identifier System.
Proposed Sec.  45.6(d)(3) would require that each DCO and each
financial entity reporting counterparty executing a swap with a
counterparty that is eligible to receive an LEI, but has not been
assigned an LEI, prior to reporting any required swap creation data for
such swap, cause an LEI to be assigned to the counterparty, including
if necessary, through third-party registration.
    Proposed Sec.  45.6(d)(4) would require that for swaps previously
reported pursuant to part 45 using substitute counterparty identifiers
assigned by an SDR prior to Commission designation of an LEI system,
each SDR map the LEIs for the counterparties to the substitute
counterparty identifiers in the record for each such swap.
Request for Comment
    The Commission requests comment on all aspects of the proposed
changes to Sec.  45.6. The Commission also invites specific comment on
the following:
    (8) Should the Commission expand requiring LEIs to be renewed
annually beyond SDs, MSPs, SEFs, DCMs, DCOs, and SDRs? Please explain
why or why

[[Page 21600]]

not, including specification of any material costs or benefits.
    (9) Are there other ways to ensure that an LEI is obtained and
reported for a counterparty without an LEI, but is eligible for an LEI,
other than each DCO and each financial entity reporting counterparty
potentially being required to obtain an LEI on behalf of the
counterparty through third-party registration?

G. Sec.  45.8 161–Determination of Which Counterparty Shall Report
—————————————————————————

    161 The Commission is proposing minor, non-substantive
amendments to Sec.  45.7.
—————————————————————————

    The Commission is proposing to amend the introductory text to the
Sec.  45.8 reporting counterparty determination regulations. The
current introductory text states that determination of which
counterparty is the reporting counterparty for all swaps, except
clearing swaps, shall be made as provided in Sec.  45.8(a) through (h),
and that the determination of which counterparty is the reporting
counterparty for all clearing swaps shall be made as provided in Sec. 
45.8(i).
    The Commission believes that much of the introductory text is
superfluous, given that the scope of what Sec.  45.8 covers is clear
from the operative provisions of Sec.  45.8. The Commission is
proposing to amend the introductory text to Sec.  45.8 to state that
the determination of which counterparty is the reporting counterparty
for each swap shall be made as provided in Sec.  45.8.

H. Sec.  45.10 162–Reporting to a Single SDR
—————————————————————————

    162 The Commission is proposing minor, non-substantive
amendments to Sec.  45.9.
—————————————————————————

    The Commission is proposing to revise the Sec.  45.10 regulations
for reporting swap data to a single SDR. As part of these revisions,
the Commission is proposing to amend and remove current regulations,
and add new regulations to Sec.  45.10. In particular, new Sec. 
45.10(d) would permit reporting counterparties to change the SDR to
which they report swap data and swap transaction and pricing data.
1. Introductory Text
    The Commission is proposing to amend the introductory text to the
Sec.  45.10 regulations for reporting to a single SDR. The current
introductory text states that all swap data for a given swap, which
shall include all swap data required to be reported pursuant to parts
43 and 45, must be reported to a single SDR, which shall be the SDR to
which the first report of required swap creation data is made pursuant
to part 45.
    First, the Commission is proposing to remove the reference to parts
43 and 45. In its place, the Commission is proposing to clarify in the
beginning of the introductory text that all “swap transaction and
pricing data and swap data” (both terms that the Commission proposes
to newly define and add to Sec.  45.1(a)) 163 for a given swap must
be reported. As newly defined, “swap transaction and pricing data”
and “swap data” would expressly refer, respectively, to data subject
to part 43 and part 45, making the current Sec.  45.10 introductory
text’s express reference to the two parts redundant.
—————————————————————————

    163 The Commission’s proposed addition of defined terms for
“swap data” and “swap transaction and pricing data” to Sec. 
45.1(a) is discussed in section II.A.1 above.
—————————————————————————

    Second, the Commission is proposing to add a qualifier to the end
of the introductory text. The qualifier would specify that all swap
data and swap transaction and pricing data for a swap must be reported
to a single SDR “unless the reporting counterparty changes the [SDR]
to which such data is reported” pursuant to the new regulations
proposed in Sec.  45.10(d). New Sec.  45.10(d) would permit reporting
counterparties to change the SDR to which they report swap data and
swap transaction and pricing data.164
—————————————————————————

    164 New Sec.  45.10(d) is discussed in section II.H.5 below.
—————————————————————————

    Finally, the Commission is proposing ministerial language
amendments in the introductory text to improve readability.
    Therefore, the introductory text to Sec.  45.10 would state that
all swap transaction and pricing data and swap data for a given swap
shall be reported to a single SDR, which shall be the SDR to which the
first report of such data is made, unless the reporting counterparty
changes the SDR to which such data is reported pursuant to Sec. 
45.10(d).

2. Sec.  45.10(a)–Swaps Executed on or Pursuant to the Rules of a SEF
or DCM

    The Commission is proposing to amend the Sec.  45.10(a) regulations
for reporting swaps executed on or pursuant to the rules of a SEF or
DCM to a single SDR. Current Sec.  45.10(a) requires that to ensure
that all swap data, including all swap data required to be reported
pursuant to parts 43 and 45, for a swap executed on or pursuant to the
rules of a SEF or DCM is reported to a single SDR: (i) The SEF or DCM
that reports required swap creation data as required by Sec.  45.3
shall report all such data to a single SDR, and ASATP after execution
shall transmit to both counterparties to the swap, and to any DCO, the
identity of the SDR and the USI for the swap; and (ii) thereafter, all
required swap creation data and all required swap continuation data
reported for the swap reported by any registered entity or counterparty
shall be reported to that same SDR (or to its successor in the event
that it ceases to operate, as provided in part 49).
    First, the Commission is proposing to remove the phrase “(or to
its successor in the event that it ceases to operate, as provided in
part 49)” in Sec.  45.10(a)(2). This phrase would no longer be
necessary with the proposed regulations in Sec.  49.10(d) that would
permit reporting counterparties to change SDRs.165
—————————————————————————

    165 Id.
—————————————————————————

    Second, the Commission is proposing to update all references to
swap data throughout Sec.  45.10(a). The Commission is proposing to
replace all references to “swap data” with all “swap transaction and
pricing data and swap data.”
    Third, the Commission is proposing to remove Sec.  45.10(a)(1)(ii).
As discussed above, Sec.  45.10(a)(1)(ii) requires SEFs and DCMs to
transmit the USI to both counterparties to the swap, and to any DCO.
This requirement is already located in Sec.  45.5(a)(2). Since the
Commission is proposing to remove Sec.  45.10(a)(1)(ii), the Commission
is also proposing to combine the text of Sec.  45.10(a) and (a)(i) into
a single provision in Sec.  45.10(a).
    Finally, the Commission is proposing to add the qualifier to the
end of Sec.  45.10(a)(2) that all swap data and swap transaction and
pricing data for a swap must be reported to a single SDR “unless the
reporting counterparty changes the [SDR] to which such data is
reported” pursuant to the new regulations proposed in Sec.  45.10(d).
New Sec.  45.10(d) would permit reporting counterparties to change the
SDR to which they report swap data and swap transaction and pricing
data.166
—————————————————————————

    166 Id.
—————————————————————————

    Therefore, Sec.  45.10(a) would require that to ensure that all
swap transaction and pricing data and swap data for a swap executed on
or pursuant to the rules of a SEF or DCM is reported to a single SDR:
(i) The SEF or DCM shall report all swap transaction and pricing data
and required swap creation data for a swap to a single SDR, and ASATP
after execution of the swap shall transmit to both counterparties to
the swap, and to any DCO, the identity of the SDR to which such data is
reported; and (ii) thereafter, all swap transaction and pricing data,
required swap creation data, and required swap continuation data for
the swap shall be reported to that same SDR, unless the reporting
counterparty changes the SDR to which

[[Page 21601]]

such data is reported pursuant to Sec.  45.10(d).
3. Sec.  45.10(b)–Off-Facility Swaps With an SD or MSP Reporting
Counterparty
    The Commission is proposing to amend the Sec.  45.10(b) regulations
for reporting swaps executed off-facility with an SD/MSP reporting
counterparty to a single SDR. Section 45.10(b)(1) requires that to
ensure that all swap data, including all swap data required to be
reported pursuant to parts 43 and 45, for off-facility swaps with an SD
or MSP reporting counterparty is reported to a single SDR: (i) If the
reporting counterparty reports PET data to an SDR as required by Sec. 
45.3, the reporting counterparty shall report PET data to a single SDR
and ASATP after execution, but no later than as required pursuant to
Sec.  45.3, shall transmit to the other counterparty to the swap both
the identity of the SDR to which PET data is reported by the reporting
counterparty, and the USI for the swap created pursuant to Sec.  45.5;
and (ii) if the swap will be cleared, the reporting counterparty shall
transmit to the DCO at the time the swap is submitted for clearing both
the identity of the SDR to which PET data is reported by the reporting
counterparty, and the USI for the swap created pursuant to Sec.  45.5.
    Thereafter, Sec.  45.10(b)(2) requires that all required swap
creation data and all required swap continuation data reported for the
swap, by any registered entity or counterparty, shall be reported to
the SDR to which swap data has been reported pursuant to Sec. 
45.10(b)(1) or (2) (or to its successor in the event that it ceases to
operate, as provided in part 49).
    First, the Commission is proposing to combine the requirements for
SD/MSP reporting counterparties in Sec.  45.10(b) for off-facility
swaps with the requirements for non-SD/MSP reporting counterparties in
Sec.  45.10(c) for off-facility swaps. Revised Sec.  45.10(b) would be
retitled “Off-facility swaps that are not clearing swaps.” The
Commission believes that the requirements for SD/MSP reporting
counterparties and non-SD/MSP reporting counterparties could be
combined to simplify the regulations in Sec.  45.10. The requirements
of current Sec.  45.10(c) are discussed in section II.H.4 below.
    Second, the Commission is proposing to remove the phrase “(or to
its successor in the event that it ceases to operate, as provided in
part 49)” from Sec.  45.10(b)(2). This phrase would no longer be
necessary with the proposed regulations in Sec.  49.10(d) that would
permit reporting counterparties to change SDRs.
    Third, the Commission is proposing to update all references to swap
data throughout Sec.  45.10(b). The Commission is proposing to replace
all references to “swap data” with all “swap transaction and pricing
data and swap data.”
    Fourth, the Commission is proposing to remove Sec.  45.10(b)(1).
Current Sec.  45.10(b) contains the condition that Sec.  45.10(b)(1)(i)
through (iii) apply “[i]f the reporting counterparty reports [PET
data] to a [SDR] as required by Sec.  45.3.” This condition is
unnecessary, as all reporting counterparties must report required swap
creation data to an SDR pursuant to Sec.  45.3 for off-facility swaps.
As a result, the Commission is proposing to remove Sec.  45.10(b)(1)
and combine and move the regulations in Sec.  45.10(b)(1)(i) through
(iii) into Sec.  45.10(b)(1).
    Fifth, the Commission is proposing to remove the requirement in
current Sec.  45.10(b)(1)(ii) for the reporting counterparty to
transmit the USI to the non-reporting counterparty to the swap. This
requirement is already located in Sec.  45.5(b)(2) and (c)(2),
depending on the type of counterparty.
    Finally, the Commission is proposing to add the qualifier to the
end of Sec.  45.10(b)(2) that all swap data and swap transaction and
pricing data for a swap must be reported to a single SDR “unless the
reporting counterparty changes the [SDR] to which such data is
reported” pursuant to the new regulations proposed in Sec.  45.10(d).
New Sec.  45.10(d) would permit reporting counterparties to change the
SDR to which they report swap data and swap transaction and pricing
data.167
—————————————————————————

    167 New Sec.  45.10(d) is discussed in section II.H.5 below.
—————————————————————————

    Therefore, proposed Sec.  45.10(b)(1) would require that to ensure
that all swap transaction and pricing data and swap data for an off-
facility swap that is not a clearing swap is reported to a single SDR:
(i) The reporting counterparty shall report all swap transaction and
pricing data and required swap creation data to an SDR, and ASATP after
execution, shall transmit to the other counterparty to the swap, and to
any DCO that will clear the swap, the identity of the SDR to which such
data is reported. Thereafter, proposed Sec.  45.10(b)(2) would require
that all swap transaction and pricing data, required swap creation
data, and required swap continuation data for the swap shall be
reported to the same SDR, unless the reporting counterparty changes the
SDR to which such data is reported pursuant to Sec.  45.10(d).
4. Sec.  45.10(c)–Off-Facility Swaps With a Non-SD/MSP Reporting
Counterparty
    As discussed in section II.H.3 above, the Commission is proposing
to move the Sec.  45.10(c) requirements for non-SD/MSP reporting
counterparties to report off-facility swaps to a single SDR to revised
Sec.  45.10(b). The requirements in current Sec.  45.10(b) and (c)
would be combined to create revised Sec.  45.10(b), which would contain
the requirements for reporting counterparties to report off-facility
swaps that are not clearing swaps. As a result, the Commission is
proposing to move the requirements in current Sec.  45.10(d) to Sec. 
45.10(c). The requirements of current Sec.  45.10(d) are discussed in
the following section II.H.5.
    Current Sec.  45.10(c)(1) requires that to ensure that all swap
data, including all swap data required to be reported pursuant to parts
43 and 45, for such swaps is reported to a single SDR: (i) If the
reporting counterparty reports PET data to an SDR as required by Sec. 
45.3, the reporting counterparty reports PET data to a single SDR, and
ASATP after execution, but no later than as required pursuant to Sec. 
45.3, the reporting counterparty shall transmit to the other
counterparty to the swap the identity of the SDR to which PET data was
reported by the reporting counterparty; and (ii) if the swap will be
cleared, the reporting counterparty shall transmit to the DCO at the
time the swap is submitted for clearing the identity of the SDR to
which PET data was reported by the reporting counterparty.
    Current Sec.  45.10(c)(2) requires that the SDR to which the swap
is reported as provided in Sec.  45.10(c) shall transmit the USI
created pursuant to Sec.  45.5 to both counterparties and to any DCO,
ASATP after creation of the USI. Thereafter, Sec.  45.10(c)(3) requires
that all required swap creation data and all required swap continuation
data reported for the swap, by any registered entity or counterparty,
shall be reported to the SDR to which swap data has been reported
pursuant to Sec.  45.10(c)(1) (or to its successor in the event that it
ceases to operate, as provided in part 49 of the Commission’s
regulations).
    As discussed above, the Commission preliminarily believes that the
requirements for SD/MSP reporting counterparties and non-SD/MSP
reporting counterparties are nearly identical. Therefore, the
Commission is proposing to move the requirements for non-SD/MSP
reporting counterparties to revised Sec.  45.10(b). The discussion of
Sec.  45.10(b), including the Commission’s proposed revisions to the
new combined

[[Page 21602]]

section, are discussed in section II.H.3 above.
5. Sec.  45.10(d)–Clearing Swaps
    As discussed above, the Commission is proposing to move the
requirements for reporting clearing swaps to a single SDR from Sec. 
45.10(d) to Sec.  45.10(c). As proposed, newly re-designated Sec. 
45.10(c) also would amend the current requirements for reporting
clearing swaps to a single SDR now located in Sec.  45.10(d). The
Commission is proposing to replace current Sec.  45.10(d) with new
requirements for reporting counterparties to change SDRs. Below is a
discussion of the proposed amendments to the regulatory requirements
for reporting clearing swaps to a single SDR in newly re-designated
Sec.  45.10(c) (currently Sec.  45.10(d)), followed by a discussion of
the new regulations permitting reporting counterparties to change SDRs.
a. Amendments to Current Sec.  45.10(d) (Re-Designated as Sec. 
45.10(c))
    Current Sec.  45.10(d)(1) requires that to ensure that all swap
data for a given clearing swap, and for clearing swaps that replace a
particular original swap or that are created upon execution of the same
transaction and that do not replace an original swap, is reported to a
single SDR: The DCO that is a counterparty to such clearing swap shall
report all required swap creation data for that clearing swap to a
single SDR, and ASATP after acceptance of an original swap by a DCO for
clearing or execution of a clearing swap that does not replace an
original swap, the DCO shall transmit to the counterparty to each
clearing swap the LEI of the SDR to which the DCO reported the required
swap creation data for that clearing swap.
    Thereafter, Sec.  45.10(d)(2) requires that all required swap
creation data and all required swap continuation data reported for that
clearing swap shall be reported by the DCO to the SDR to which swap
data has been reported pursuant to Sec.  45.10(d)(1) (or to its
successor in the event that it ceases to operate, as provided in part
49). Current Sec.  45.10(d)(3) requires that for clearing swaps that
replace a particular original swap, and for equal and opposite clearing
swaps that are created upon execution of the same transaction and that
do not replace an original swap, the DCO shall report all required swap
creation data and all required swap continuation data for such clearing
swaps to a single SDR.
    As proposed, newly re-designated Sec.  45.10(c) would include
several amendments to the requirements now found in Sec.  45.10(d).
First, the Commission is proposing to remove the phrase “(or to its
successor in the event that it ceases to operate, as provided in part
49)” as now used in Sec.  45.10(d)(2) from re-designated Sec. 
49.10(c)(2). This phrase would no longer be necessary with the proposed
regulations in new Sec.  49.10(d) that would permit reporting
counterparties to change SDRs.
    Second, the Commission is proposing in re-designated Sec.  45.10(c)
to update all references to swap data now found throughout Sec. 
45.10(d). The Commission is proposing to replace all references to
“swap data” with all “swap transaction and pricing data and swap
data.”
    Third, the Commission is proposing in re-designated Sec. 
45.10(c)(2) to add the following qualifier to the requirement now found
in Sec.  45.10(d)(2) for reporting all swap data and swap transaction
and pricing data for a swap to a single SDR: “unless the reporting
counterparty changes the [SDR] to which such data is reported”
pursuant to the new regulations proposed in Sec.  45.10(d). Finally,
the Commission is also proposing numerous language edits to improve
readability, and to update certain cross-references.
    Therefore, Sec.  45.10(c)(1) would require that to ensure that all
swap transaction and pricing data and swap data for a given clearing
swap, including clearing swaps that replace a particular original swap
or that are created upon execution of the same transaction and that do
not replace an original swap, is reported to a single SDR: (i) The DCO
that is a counterparty to such clearing swap report all swap
transaction and pricing data and required swap creation data for that
clearing swap to a single SDR; and (ii) ASATP after acceptance of an
original swap for clearing, or execution of a clearing swap that does
not replace an original swap, the DCO transmit to the counterparty to
each clearing swap the identity of the SDR to which such data is
reported.
    Thereafter, Sec.  45.10(c)(2) would require that all swap
transaction and pricing data, required swap creation data and required
swap continuation data for that clearing swap shall be reported by the
DCO to the same SDR to which swap data has been reported pursuant to
Sec.  45.10(c)(1), unless the reporting counterparty changes the SDR to
which such data is reported pursuant to Sec.  45.10(d).
    Proposed Sec.  45.10(c)(3) would require that for clearing swaps
that replace a particular original swap, and for equal and opposite
clearing swaps that are created upon execution of the same transaction
and that do not replace an original swap, the DCO report all swap
transaction and pricing data, required swap creation data, and required
swap continuation data for such clearing swaps to a single SDR.
b. New Regulations for Changing SDRs
    The Commission is proposing new regulations in Sec.  45.10(d) to
permit reporting counterparties to change the SDR to which they report
swap data and swap transaction and pricing data. Current Sec.  45.10
provides that all swaps must be reported to a “single [SDR].” 168
—————————————————————————

    168 17 CFR 45.10(a) through (d).
—————————————————————————

    As background, when the Commission adopted Sec.  45.10 in 2012, it
believed that regulators’ ability to see necessary information
concerning swaps could be impeded if data concerning a swap was spread
over multiple SDRs.169 However, since then: (i) The Commission has
come to recognize that swap data from different SDRs can be aggregated
and made available for Commission analysis and (ii) the Commission has
received requests to permit reporting counterparties to change
SDRs.170
—————————————————————————

    169 Swap Data Recordkeeping and Reporting Requirements, 77 FR
2136, 2168.
    170 See, e.g., Joint SDR Letter at 15.
—————————————————————————

    However, the ability to change SDRs cannot frustrate the
Commission’s ability to use swap data due to duplicative swap reports
housed at multiple SDRs. Therefore, the Commission is proposing to
permit reporting to change SDRs, subject to certain procedures
described below to ensure swaps are properly transferred between SDRs.
    The Commission is proposing new regulations in Sec.  45.10(d),
titled “Change of [SDR] for swap transaction and pricing data and swap
data reporting.” The introductory text to Sec.  45.10(d) would state
that a reporting counterparty may change the SDR to which swap
transaction and pricing data and swap data is reported as set forth in
this Sec.  45.10(d).
    Proposed Sec.  45.10(d)(1) would require that at least five
business days prior to changing the SDR to which the reporting
counterparty reports swap transaction and pricing data and swap data
for a swap, the reporting counterparty shall provide notice of such
change to the other counterparty to the swap, the SDR to which swap
transaction and pricing data and swap data is currently reported, and
the SDR to which swap transaction and pricing data and swap data will
be reported going forward. Such notification would include the UTI of
the swap and the date on which the reporting counterparty will begin
reporting such

[[Page 21603]]

swap transaction and pricing data and swap data to a different SDR.
    Proposed Sec.  45.10(d)(2) would require that after providing
notification, the reporting counterparty shall: (i) Report the change
of SDR to the SDR to which the reporting counterparty is currently
reporting swap transaction and pricing data and swap data as a life
cycle event for such swap pursuant to Sec.  45.4; (ii) on the same day
that the reporting counterparty reports required swap continuation data
as required by Sec.  45.10(d)(2)(i), the reporting counterparty shall
also report the change of SDR to the SDR to which swap transaction and
pricing data and swap data will be reported going forward, as a life
cycle event for such swap pursuant to Sec.  45.4, and the report shall
identify the swap using the same UTI used to identify the swap at the
previous SDR; (iii) thereafter, all swap transaction and pricing data,
required swap creation data, and required swap continuation data for
the swap shall be reported to the same SDR, unless the reporting
counterparty for the swap makes another change to the SDR to which such
data is reported pursuant to Sec.  45.10(d).
Request for Comment
    The Commission requests comment on all aspects of the proposed
changes to Sec.  45.10. The Commission also invites specific comment on
the following:
    (10) Would the Commission’s proposal to permit reporting
counterparties to change SDRs raise any operational issues for
reporting counterparties, SDRs, or non-reporting counterparties?
    (11) Should the Commission adopt additional requirements to ensure
that a reporting counterparty’s choice to change SDRs does not result
in the loss of any data or information?

I. Sec.  45.11–Data Reporting for Swaps in a Swap Asset Class Not
Accepted by Any SDR

    The Commission is proposing non-substantive amendments to the Sec. 
45.11 regulations for reporting swaps in an asset class not accepted by
any SDR. Current Sec.  45.11(a) requires that should there be a swap
asset class for which no SDR registered with the Commission currently
accepts swap data, each registered entity or counterparty required by
part 45 to report any required swap creation data or required swap
continuation data with respect to a swap in that asset class must
report that same data to the Commission.
    For instance, the Commission is proposing to remove the phrase
“registered with the Commission” following the term SDR. The
Commission believes this phrase could create confusion, as the three
SDRs are provisionally registered with the Commission pursuant to Sec. 
49.4(b). The Commission also believes this phrase is unnecessary, as
provisionally registered SDRs and fully registered SDRs are subject to
the same requirements in the CEA and the Commission’s regulations. The
Commission is also proposing to replace “each registered entity or
counterparty” with SEFs, DCMs, and DCOs, and the term “reporting
counterparty.” The list of entities would be more precise.
    Therefore, proposed Sec.  45.11(a) would require that should there
be a swap asset class for which no SDR registered currently accepts
swap data, each SEF, DCM, DCO, or reporting counterparty required by
part 45 to report any required swap creation data or required swap
continuation data with respect to a swap in that asset class shall
report that same data to the Commission.
    Current Sec.  45.11(c) and (d) contain a delegation of authority to
the Chief Information Officer of the Commission concerning the
requirements in Sec.  45.11(a) and (b). The Commission is proposing to
move this delegation to a new section, Sec.  45.15, specifically for
delegations of authority. This delegation of authority, including the
Commission’s proposed amendments to it, is discussed in section II.L
below.
Request for Comment
    The Commission requests comment on all aspects of the proposed
changes to Sec.  45.11.

J. Sec.  45.12–Voluntary Supplemental Reporting

    The Commission is proposing to remove the Sec.  45.12 regulations
for voluntary supplemental reporting from part 45. Current Sec.  45.12
permits the submission of voluntary supplemental swap data reports by
swap counterparties.171 Voluntary supplemental swap data reports are
defined as “any report of swap data to a [SDR] that is not required to
be made pursuant to [part 45] or any other part in this chapter.”
172
—————————————————————————

    171 17 CFR 45.12(b) through (e). Current Sec.  45.12(d)
requires that voluntary supplemental reports contain an indication
the report is voluntary, a USI, the identity of the SDR to which
required swap creation data and required swap continuation data were
reported, if different from the SDR to which the voluntary
supplemental report was reported, the LEI of the counterparty making
the voluntary supplemental report, and an indication the report is
made pursuant to laws of another jurisdiction, if applicable.
    172 17 CFR 45.12(a).
—————————————————————————

    As background, when the Commission adopted Sec.  45.12 in 2012, it
believed that voluntary supplemental reporting could have benefits for
data accuracy and counterparty business processes, especially for
counterparties that were not the reporting counterparty to a swap.173
The Commission recognized that Sec.  45.12 would lead to the submission
of duplicative reports for the same swap.174 In response, the
Commission believed that requiring an indication that voluntary
supplemental reports were voluntary would help prevent double-counting
of the same swaps within SDRs.175
—————————————————————————

    173 Swap Data Recordkeeping and Reporting Requirements, 77 FR
2136, 2169.
    174 Id.
    175 Id.
—————————————————————————

    In practice, the Commission is concerned that these reports
compromise data quality and provide no clear regulatory benefit. In
analyzing reports that have been marked as “voluntary reports,” it is
not immediately apparent to the Commission why reporting parties mark
them as being voluntary. In some cases, it appears these reports can be
related to products outside the Commission’s jurisdiction. The
Commission believes it should not accept duplicative or non-
jurisdictional reports at the expense of the CFTC’s technical and
staffing resources with no clear regulatory benefit.
    The Commission adopted Sec.  45.12 in 2012 without the benefit of
having swap data available to consider the practical implications of
Sec.  45.12. However, after years of use by Commission staff, the
Commission now believes that Sec.  45.12 has led to swap data reporting
that inhibits the Commission’s use of the swap data. Therefore, the
Commission is proposing to eliminate the Sec.  45.12 regulations for
voluntary supplemental reporting.
Request for Comment
    The Commission requests comment on all aspects of the proposed
changes to Sec.  45.12.

K. Sec.  45.13–Required Data Standards

1. Sec.  45.13(a)–Data Maintained and Furnished to the Commission by
SDRs
    The Commission is proposing to revise the Sec.  45.13(a)
regulations for data maintained and furnished to the Commission by
SDRs. As part of these revisions, the Commission is proposing to remove
and replace Sec.  45.13(a)’s current language, including by moving
current Sec.  45.13(b) to amended Sec.  45.13(a)(3). Current Sec. 
45.13(a) requires that each SDR maintain all swap data

[[Page 21604]]

reported to it 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.
    The 2019 Part 49 NPRM proposed moving the requirements of Sec. 
45.13(a) to Sec.  49.17(c).176 Proposed amended Sec.  49.17(c) would
contain the requirements for SDRs to provide Commission access to swap
data.177 The Commission did not propose corresponding modifications
to current Sec.  45.13 in that release.178 Therefore, the Commission
is now proposing to amend Sec.  45.13(a) by removing language that the
2019 Part 49 NPRM proposed for incorporation in Sec.  49.17(c). The
revisions to Sec.  45.13(b), proposed to be moved to Sec.  45.13(a)(3),
are discussed in the following section.
—————————————————————————

    176 2019 Part 49 NPRM at 21060.
    177 Id.
    178 Id. at 21060 n.132 (noting the Commission’s expectation to
modify Sec.  45.13 in a subsequent Roadmap rulemaking).
—————————————————————————

    Proposed Sec.  45.13(a)(1) would require that in reporting required
swap creation data and required swap continuation data to an SDR, each
reporting counterparty, SEF, DCM, and DCO, shall report the swap data
elements in appendix 1 in the form and manner provided in the technical
specifications published by the Commission.
    Proposed Sec.  45.13(a)(2) would require that in reporting required
swap creation data and required swap continuation data to an SDR, each
reporting counterparty, SEF, DCM, and DCO making such report satisfy
the swap data validation procedures of the SDR receiving the swap data.
The Commission is proposing companion requirements for SDRs to validate
swap data in Sec.  49.10. The proposed validation requirements for SDRs
in Sec.  49.10 are discussed in section IV.C below. Proposed Sec. 
45.13(a)(2) would establish the regulatory requirement for reporting
counterparties, SEFs, DCMs, and DCOs to satisfy the data validation
procedures established by SDRs pursuant to Sec.  49.10. The Commission
is also proposing to specify the requirements for the validation
messages in Sec.  45.13(b). These requirements are discussed in the
following discussion.
2. Sec.  45.13(b)–Data Reported to SDRs
a. Amendments to Current Sec.  45.13(b) (Re-Designated as Sec. 
45.13(a)(3))
    The Commission is proposing to re-designate the regulations for
data reported to SDRs currently located in Sec.  45.13(b). Current
Sec.  45.13(b) requires that in reporting swap data to an SDR as
required by part 45, each reporting entity or counterparty shall use
the facilities, methods, or data standards provided or required by the
SDR to which the entity or counterparty reports the data. Current Sec. 
45.13(b) further provides that 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 meet the
requirements of Sec.  45.13(a) with respect to maintenance and
transmission of swap data.
    The Commission is also proposing to amend the requirements of
current Sec.  45.13(b), as re-designated in new Sec.  45.13(a)(3).
First, the Commission is proposing to replace “each reporting entity
or counterparty” with “each reporting counterparty [SEF, DCM, and
DCO].” The Commission believes a list of entities would be more
precise.
    Second, the Commission is proposing to remove the second sentence
in current Sec.  45.13(b). The second sentence in Sec.  45.13(b)
pertains to the requirements of Sec.  45.13(a), which the Commission
has proposed to move to part 49. Therefore, the Commission is proposing
to remove the outdated reference.
    As a result, new Sec.  45.13(a)(3) would require that in reporting
swap data to an SDR as required by part 45, each reporting
counterparty, SEF, DCM, and DCO use the facilities, methods, or data
standards provided or required by the SDR to which the entity or
counterparty reports the swap data.
b. New Regulations for Data Validation Acceptance Messages
    The Commission is proposing to specify the requirements for data
validation acceptance messages for SDRs, SEFs, DCMs, DCOs, and
reporting counterparties. As proposed Sec.  45.13(b)(1) would require
that for each required swap creation data or required swap continuation
data report submitted to an SDR, an SDR notify the reporting
counterparty, SEF, DCM, DCO or third-party service provider submitting
the report whether the report satisfied the swap data validation
procedures of the SDR. The SDR would be required to provide such
notification ASATP after accepting the required swap creation data or
required swap continuation data report. An SDR would satisfy these
requirements by transmitting data validation acceptance messages as
required by proposed Sec.  49.10.
    Proposed Sec.  45.13(b)(2) would require that if a required swap
creation data or required swap continuation data report to an SDR does
not satisfy the data validation procedures of the SDR, the reporting
counterparty, SEF, DCM, or DCO required to submit the report has not
yet satisfied its obligation to report required swap creation or
continuation data in the manner provided by paragraph (a) within the
timelines set forth in Sec. Sec.  45.3 and 45.4. The reporting
counterparty, SEF, DCM, or DCO has not satisfied its obligation until
it submits the required swap data report in the manner provided by
paragraph (a), which includes the requirement to satisfy the data
validation procedures of the SDR, within the applicable time deadline
set forth in Sec. Sec.  45.3 and 45.4.
3. Sec.  45.13(c)–Delegation of Authority to the Chief Information
Officer
    Current Sec.  45.13(c) and (d) contain a delegation of authority to
the Chief Information Officer of the Commission concerning the
requirements in Sec.  45.13(a). The Commission is proposing to remove
the delegation, delegate authority to the Director of the Division of
Market Oversight, and move the delegation to new Sec.  45.15. New Sec. 
45.15 is discussed in the next section.
Request for Comment
    The Commission requests comment on all aspects of the proposed
changes to Sec.  45.13. The Commission also invites specific comment on
the following:
    (12) Should the Commission provide a limited exception to the
validation requirements for swaps that, for instance, may be a new type
of swaps that may fall within one of the five asset classes, but for
which swap data reporting standards have not yet been adopted?
    (13) Even with technical standards published by the Commission,
there is a risk of inconsistent data across SDRs if the Commission
allows the SDRs to specify the facilities, methods or data standards
for reporting. In order to ensure data quality, should the Commission
mandate a certain standard for reporting to the SDRs? If so, what
standard would you propose and what would be the benefits? If not, why
not?
    (14) The CPMI-IOSCO Governance Arrangements for critical OTC
derivatives data elements (other than UTI and UPI) (“CDE Governance
Arrangements”),179 assigned ISO to execute the maintenance functions
for the CDE data elements included in the CDE Technical Guidance. Some
of the reasons include that almost half of the CDE data elements are
already tied to an ISO standard and because ISO has significant
experience maintaining data standards, specifically in financial

[[Page 21605]]

services. CPMI and IOSCO, in the CDE Governance Arrangements, also
decided that the CDE data elements should be included in the ISO 20022
data dictionary and supported the development of an ISO 20022-compliant
message for CDE data elements. Given these factors, should the
Commission consider mandating ISO 20022 message scheme for reporting to
SDRs? Please comment on the advantages and disadvantages of mandating
ISO 20022 for swap transaction reporting.
—————————————————————————

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

L. Sec.  45.15 180–Delegation of Authority
—————————————————————————

    180 The Commission has proposed amendments to Sec.  45.14 in
the 2019 Part 49 NPRM. Therefore, Sec.  45.14 will not be discussed
in this release. See 2019 Part 49 NPRM at 21067.
—————————————————————————

    The Commission is proposing to add a new section to its regulations
for delegations of authority. As proposed, Sec.  45.15 would be titled
“Delegation of authority,” and would contain the delegation of
authority currently in Sec.  45.11 and add a new delegation of
authority to the Director of the Division of Market Oversight regarding
the reporting under Sec.  45.13.
    Current Sec.  45.11(c) delegates to the Chief Information Officer
of the Commission, or other such employee he or she designates, with
respect to swaps in an asset class not accepted by any SDR, the
authority to determine: The manner, format, coding structure, and
electronic data transmission standards and procedures acceptable to the
Commission; whether the Commission may permit or require use by
reporting entities or counterparties in reporting pursuant to Sec. 
45.11 of one or more particular data standards (such as FIX, FpML, ISO
20022, or some other standard), in order to accommodate the needs of
different communities of users; and the dates and times at which
required swap creation data or required swap continuation data shall be
reported to the Commission.
    Current Sec.  45.11(d) requires the Chief Information Officer to
publish from time to time in the Federal Register and on the website of
the Commission the format, data schema, electronic data transmission
methods and procedures, and dates and times for reporting acceptable to
the Commission with respect to swap data reporting pursuant to Sec. 
45.11.
    Separately, current Sec.  45.13 delegates to the Chief Information
Officer, until the Commission orders otherwise, the authority to
establish the format by which SDRs maintain swap data reported to it,
and the format by which SDRs transmit the data to the Commission. The
authority includes the authority to determine the manner, format,
coding structure, and electronic data transmission standards and
procedures acceptable to the Commission for the purposes of Sec. 
45.13(a); and the authority to determine whether the Commission may
permit or require use by reporting entities or counterparties, or by
SDRs, of one or more particular data standards (such as FIX, FpML, ISO
20022, or some other standard), in order to accommodate the needs of
different communities of users, or to enable SDRs to comply with Sec. 
45.13(a).
    Current Sec.  45.13(d) requires the Chief Information Officer to
publish from time to time in the Federal Register and on the website of
the Commission the format, data schema, and electronic data
transmission methods and procedures acceptable to the Commission.
    The Commission is proposing to move the delegations in Sec. Sec. 
45.11(c) through (d) and 45.13(c) through (d) to Sec.  45.15(a) and
(b). The Commission is also proposing to update the delegations to
reflect the changes to the cross-references resulting from the
Commission’s amendments to part 45. Proposed Sec.  45.15(b) would
therefore delegate to the Director of DMO, until the Commission orders
otherwise, the authority set forth in Sec.  45.13(a)(1), to be
exercised by the Director of DMO or by such other employee or employees
of the Commission as may be designated from time to time by the
Director of DMO. The DMO Director would be able to submit to the
Commission for its consideration any matter which has been delegated
pursuant to Sec.  45.13(b). Nothing in Sec.  45.15(b) would prohibit
the Commission, at its election, from exercising the authority
delegated in Sec.  45.15(b).
    The authority delegated to the Director of DMO would continue to
include, subject to the above-mentioned updates: (1) The authority to
publish the technical specifications providing the form and manner for
reporting the swap data elements in appendix 1 to SDRs as provided in
Sec.  45.13(a)(1); (2) the authority to determine whether the
Commission may permit or require use by SEFs, DCMs, DCOs, or reporting
counterparties in reporting pursuant to Sec.  45.13(a)(1) of one or
more particular data standards (such as FIX, FpML, ISO 20022, or some
other standard), in order to accommodate the needs of different
communities of users; and (3) the dates and times at which required
swap creation data or required swap continuation data shall be reported
pursuant to Sec.  45.13(a)(1). Section 45.15(b)(4) would continue to
provide, with updates, that (4) the DMO director publish from time to
time in the Federal Register and on the website of the Commission the
technical specifications for swap data reporting pursuant to Sec. 
45.13(a)(1).
Request for Comment
    The Commission requests comment on all aspects of the proposed
changes to Sec.  45.15.

III. Proposed Amendments to Part 46

    Part 46 of the Commission’s regulations establishes the
requirements for reporting pre-enactment and transition swaps to SDRs.
In some instances, the proposed revisions to part 45 described in
section II above would necessitate corresponding revisions and
amendments to the regulations in part 46. The Commission describes any
substantive revisions and amendments in this section.

A. Sec.  46.1–Definitions

    Current Sec.  46.1 contains the definitions for terms used
throughout the regulations in part 46. Current Sec.  46.1 does not
contain any subordinate paragraphs. The Commission is proposing to
separate Sec.  46.1 into two paragraphs: Sec.  46.1(a) for definitions
and Sec.  46.1(b), which would state that terms not defined in part 46
have the meanings assigned to the terms in Sec.  1.3.
    The Commission is proposing to add a definition of “historical
swaps” to Sec.  46.1(a). As proposed, “historical swaps” would mean
pre-enactment swaps or transition swaps. This term is already used in
part 46.
    The Commission is proposing to add a definition of “substitute
counterparty identifier” to Sec.  46.1(a). As proposed, “substitute
counterparty identifier” would mean a unique alphanumeric code
assigned by an SDR to a swap counterparty prior to the Commission
designation of an LEI identifier system on July 23, 2012. The term
“substitute counterparty identifier” is already used throughout Sec. 
46.4.
    The Commission is proposing non-substantive minor technical changes
to “asset class” and “required swap continuation data.”
    The Commission is proposing to amend the definition of “non-SD/MSP
counterparty” in Sec.  46.1(a) to conform to the amendments proposed
to the corresponding term in Sec.  45.1(a).181 The Commission is
proposing to update the term throughout part 46.
—————————————————————————

    181 The proposed amendments to the term in Sec.  45.1(a) are
discussed in section II.A.2 above.
—————————————————————————

    The Commission is proposing to amend the definition of “reporting
counterparty” to update the reference to

[[Page 21606]]

“swap data.” Currently, “reporting counterparty” means the
counterparty required to report swap data pursuant to part 46, selected
as provided in Sec.  46.5. As discussed in section II.A.1 above, the
Commission is proposing to define “swap data” to mean swap data
reported pursuant to part 45. As a result, the Commission is proposing
to change the reference to “data for a pre-enactment swap or
transition swap” to reflect that the reference is to part 46 data.
    The Commission is proposing to remove the following definitions
from Sec.  46.1. The Commission has determined that the following
definitions are redundant because the terms are already defined in
either Sec.  1.3 or CEA section 1a: “Credit swap;” “foreign exchange
forward;” “foreign exchange instrument;” “foreign exchange swap;”
“interest rate swap;” “major swap participant;” “other commodity
swap;” “swap data repository;” and “swap dealer.”
    The Commission is proposing to remove the definition of
“international swap,” as there are no regulations for international
swaps in part 46.
Request for Comment
    The Commission requests comment on all aspects of the proposed
changes to Sec.  46.1.

B. Sec.  46.3–Data Reporting for Pre-Enactment Swaps and Transition
Swaps

    Current Sec.  46.3(a)(2)(i) 182 requires that for each uncleared
pre-enactment or transition swap in existence on or after April 25,
2011, throughout the existence of the swap following the compliance
date, the reporting counterparty must report all required swap
continuation data required to be reported pursuant to part 45, with the
exception that when a reporting counterparty reports changes to minimum
PET data for a pre-enactment or transition swap, the reporting
counterparty is required to report only changes to the minimum PET data
listed in appendix 1 to part 46 and reported in the initial data report
made pursuant to Sec.  46(a)(1), rather than changes to all minimum PET
data listed in appendix 1 to part 45.
—————————————————————————

    182 The Commission is not proposing substantive amendments
outside of Sec.  46.3(a)(2)(i).
—————————————————————————

    The Commission is proposing to amend Sec.  46.3(a)(2)(i) to remove
the exception from PET data reporting for pre-enactment and transition
swaps to specify that reporting counterparties would report updates to
pre-enactment and transition swaps according to part 45. The Commission
believes this is current practice and would not result in any
significant change for the entities reporting updates to historical
swaps.
    Therefore, proposed Sec.  46.3(a)(2)(i) would require that for each
uncleared pre-enactment swap or transition swap in existence on or
after April 25, 2011, throughout the existence of the swap following
the compliance date, the reporting counterparty shall report all
required swap continuation data as required by part 45.
Request for Comment
    The Commission requests comment on all aspects of the proposed
changes to Sec.  46.3.

C. Sec.  46.10–Required Data Standards

    Current Sec.  46.10 requires that in reporting swap data to an SDR
as required by part 46, each reporting counterparty use the facilities,
methods, or data standards provided or required by the SDR to which
counterparty reports the data.
    The Commission is proposing to add a provision that “[i]n
reporting required swap continuation data as required by this part,
each reporting counterparty shall comply with the required data
standards set forth in part 45 of this chapter, including those set
forth in Sec.  45.13(a) of this chapter.” As discussed above in the
previous section, the Commission believes this is current practice for
reporting counterparties and should not result in any significant
change for reporting counterparties.
Request for Comment
    The Commission requests comment on all aspects of the proposed
changes to Sec.  46.10.

D. Sec.  46.11–Reporting of Errors and Omissions in Previously
Reported Data

    Consistent with the Commission’s proposal to remove the option to
report required swap continuation data by the state data reporting
method, discussed in section II.D.2 above, the Commission proposes to
remove the option in Sec.  46.11(b) for pre-enactment/transition swaps
reporting. Specifically, Sec.  46.11(b) currently provides that for
pre-enactment or transition swaps for which part 46 requires reporting
of continuation data, reporting counterparties reporting state data as
provided in part 45 may fulfill the requirement to report errors or
omissions by making appropriate corrections in their next daily report
of state data pursuant to part 45. Further to the proposed removal of
current Sec.  46.11(b), the Commission is also proposing to re-
designate current Sec.  46.11(c) and (d) as new Sec.  46.11(b) and (c),
respectively.
Request for Comment
    The Commission requests comment on all aspects of the proposed
changes to Sec.  46.11.

IV. Proposed Amendments to Part 49

A. Sec.  49.2–Definitions

    The Commission is proposing to add four definitions to Sec. 
49.2(a): “Data validation acceptance message,” “Data validation
error,” “Data validation error message,” and “Data validation
procedures.” 183 The four definitions are explained in a discussion
of the proposed Sec.  49.10 regulations for the acceptance and
validation of data in section IV.C below.
—————————————————————————

    183 The Commission has also proposed to define the term “SDR
data” in the 2019 Part 49 NPRM. As proposed, “SDR data” would
mean the specific data elements and information required to be
reported to an SDR or disseminated by an SDR, pursuant to two or
more of parts 43, 45, 46, and/or 49, as applicable. See 2019 Part 49
NPRM at 21047. The term “SDR data” is also used in the proposed
amendments to Sec.  49.10 in this release.
—————————————————————————

B. Sec.  49.4–Withdrawal From Registration

    The Commission is proposing to amend the Sec.  49.4 regulations for
SDR withdrawals from registration. Current Sec.  49.4(a)(1)(iv)
requires that a request to withdraw filed pursuant to Sec.  49.4(a)(1)
shall specify, among other items, a statement that the custodial SDR is
authorized to make such data and records available in accordance with
Sec.  1.44.184
—————————————————————————

    184 The Commission is not proposing substantive amendments to
Sec.  49.4(a)(1)(i) through (iii). The Commission is limiting the
discussion in this release to Sec.  49.4(a)(1)(iv).
—————————————————————————

    Current Sec.  49.4(a)(2) requires that prior to filing a request to
withdraw, a registered SDR shall file an amended Form SDR to update any
inaccurate information. A withdrawal of registration shall not affect
any action taken or to be taken by the Commission based upon actions,
activities or events occurring during the time that the facility was
designated by the Commission.
    First, the Commission is proposing to remove the Sec. 
49.4(a)(1)(iv) requirement for SDRs to submit a statement to the
Commission that the custodial SDR is authorized to make the withdrawing
SDR’s data and records available in accordance with Sec.  1.44. The
reference to Sec.  1.44 is erroneous. Section 1.44 requires
“depositories” to maintain all books, records, papers, and memoranda
relating to the storage and warehousing of commodities in such
warehouse, depository or other similar entity for a period of 5 years
from the date thereof.185 The recordkeeping

[[Page 21607]]

requirements for SDRs are located in Sec.  49.12.186 The Commission
is proposing to remove erroneous Sec.  49.4(a)(1)(iv) to avoid
confusion.
—————————————————————————

    185 17 CFR 1.44(d).
    186 The Commission has proposed amendments to Sec.  49.12 in
the 2019 Part 49 NPRM. However, these amendments do not impact the
substance of the SDR recordkeeping requirements. See 2019 Part 49
NPRM at 21055. Pursuant to Sec.  49.12(b), SDRs must maintain swap
data, including historical positions, throughout the existence of
the swap and for five years following final termination of the swap,
during which time the records must be readily accessible to the
Commission via real-time electronic access; and in archival storage
for which the swap data is retrievable by the SDR within three
business days.
—————————————————————————

    Second, the Commission is proposing to remove the Sec.  49.4(a)(2)
requirement that prior to filing a request to withdraw, a registered
SDR file an amended Form SDR to update any inaccurate information.187
The Commission believes that this requirement is unnecessary and does
not help the Commission confirm the successful transfer of data and
records to a custodial SDR. The Commission has a significant interest
in ensuring that the data and records of an SDR withdrawing from
registration are successfully transferred to a custodial SDR. In
addition, the Commission needs confirmation that the custodial SDR will
retain the data and records for at least the remainder of the time that
records are required to be retained according to the Commission’s
recordkeeping rules. When an SDR is withdrawing from registration, the
Commission would no longer have a regulatory need for the information
in Form SDR to be updated.
—————————————————————————

    187 Current Sec.  49.4(a)(2) further provides that a
withdrawal of registration shall not affect any action taken or to
be taken by the Commission based upon actions, activities or events
occurring during the time that the facility was designated by the
Commission. The Commission is proposing to remove this part of Sec. 
49.4(a)(2) as well.
—————————————————————————

    The Commission is proposing to instead create a new requirement in
Sec.  49.4(a)(2) for SDRs to execute an agreement with the custodial
SDR governing the custody of the withdrawing SDR’s data and records
prior to filing a request to withdraw with the Commission. Proposed
Sec.  49.4(a)(2) would also specify that the custodial SDR retain such
records for at least as long as the remaining period of time the SDR
withdrawing from registration would have been required to retain such
records pursuant to part 49. The Commission believes that proposed
Sec.  49.4(a)(2) would better address the Commission’s primary concerns
in an SDR withdrawal from registration.
    Therefore, Sec.  49.4(a)(2) would require that prior to filing a
request to withdraw, an SDR shall execute an agreement with the
custodial SDR governing the custody of the withdrawing SDR’s data and
records. The custodial SDR shall retain such records for at least as
long as the remaining period of time the SDR withdrawing from
registration would have been required to retain such records pursuant
to part 49.
Request for Comment
    The Commission requests comment on all aspects of the proposed
changes to Sec.  49.4.

C. Sec.  49.10–Acceptance and Validation of Data

    The Commission is proposing to revise the Sec.  49.10(a) through
(d) 188 and (f) requirements for the acceptance of data. As part of
these revisions, the Commission is proposing to retitle the section to
reflect new requirements for SDRs to validate data proposed in Sec. 
49.10(c) as “Acceptance and validation of data.”
—————————————————————————

    188 The Commission has proposed amendments to the Sec. 
49.10(e) requirements for correction of errors and omissions in SDR
data in the 2019 Part 49 NPRM. See 2019 Part 49 NPRM at 21050.
—————————————————————————

1. Sec.  49.10(a)–General Requirements
    The Commission is proposing to amend the general requirements in
Sec.  49.10(a) for SDRs to have policies and procedures to accept swap
data and swap transaction and pricing data. Section 49.10(a) requires
that registered SDRs establish, maintain, and enforce policies and
procedures for the reporting of swap data to the registered SDR and
shall accept and promptly record all swap data in its selected asset
class and other regulatory information that is required to be reported
pursuant to parts 43 and 45 by DCMs, DCOs, SEFs, SDs, MSPs, or non-SD/
MSP counterparties.
    First, the Commission is proposing to title Sec.  49.10(a)
“General requirements” to distinguish it from the rest of the
requirements in Sec.  49.10. Second, the Commission is proposing to
number the requirement in Sec.  49.10(a) as Sec.  49.10(a)(1), and
renumber Sec.  49.10(a)(1) as Sec.  49.10(a)(2).
    Third, the Commission is proposing to revise the first sentence to
specify that SDRs shall maintain and enforce policies and procedures
reasonably designed to facilitate the complete and accurate reporting
of SDR data.
    Fourth, the Commission is proposing to remove the last phrase of
Sec.  49.10(a) beginning with “all swap data in its selected asset
class” and create a second sentence requiring SDRs to promptly accept,
validate, and record SDR data.
    Finally, the Commission is proposing non-substantive edits to Sec. 
49.10(a)(1), renumbered as Sec.  49.10(a)(2), to correct references to
defined terms and improve consistency in use of terminology. Together,
the amendments to Sec.  49.10(a)(1) through (2) would improve the
readability of Sec.  49.10(a) while updating the terminology to use the
proposed “SDR data” term for the data SDRs are required to accept,
validate, and record pursuant to Sec.  49.10.189
—————————————————————————

    189 The background for the proposed validations regulations is
discussed in section IV.C.3 below.
—————————————————————————

    Therefore, Sec.  49.10(a)(1) would require that an SDR shall
establish, maintain, and enforce policies and procedures reasonably
designed to facilitate the complete and accurate reporting of SDR data.
Proposed Sec.  49.10(a)(1) would further provide that an SDR shall
promptly accept, validate, and record SDR data.
    Proposed Sec.  49.10(a)(2) would require that for the purpose of
accepting SDR data, the SDR shall adopt policies and procedures,
including technological protocols, which provide for electronic
connectivity between the SDR and DCMs, DCOs, SEFs, SDs, MSPs, and non-
SD/MSP/DCO reporting counterparties who report such data. Proposed
Sec.  49.10(a)(2) would further provide that the technological
protocols established by an SDR shall provide for the receipt of SDR
data. The SDR shall ensure that its mechanisms for SDR data acceptance
are reliable and secure.
2. Sec.  49.10(b)–Duty To Accept SDR Data
    The Commission is proposing to amend the Sec.  49.10(b)
requirements for SDRs to accept SDR data. Current Sec.  49.10(b)
requires that a registered SDR shall set forth in its application for
registration as described in Sec.  49.3 the specific asset class or
classes for which it will accept swaps data. If an SDR accepts swap
data of a particular asset class, then it shall accept data from all
swaps of that asset class, unless otherwise prescribed by the
Commission.
    First, the Commission is proposing to title Sec.  49.10(b) “Duty
to accept SDR data” to distinguish it from the other requirements of
Sec.  49.10. Second, the Commission is proposing to update references
to data in Sec.  49.10(b) to “SDR data” to use the correct defined
term. These amendments would not change the substantive requirements of
Sec.  49.10(b).
    Therefore, Sec.  49.10(b) would require that an SDR shall set forth
in its application for registration as described in Sec.  49.3 the
specific asset class or classes for which it will accept SDR data. If
an SDR accepts SDR data of a particular asset class, then it shall

[[Page 21608]]

accept SDR data from all swaps of that asset class, unless otherwise
prescribed by the Commission.
3. Sec.  49.10(c)–Duty To Validate SDR Data
    As part of the revisions to Sec.  49.10, the Commission is
proposing to add new regulations for the SDR validation of SDR data in
Sec.  49.10(c). The Commission is proposing to move the requirements in
current Sec.  49.10(c) to Sec.  49.10(d).190
—————————————————————————

    190 The amendments to the current requirements of Sec. 
49.10(c), proposed to be moved to Sec.  49.10(d), are discussed in
section IV.C.4 below.
—————————————————————————

    SDRs currently check each swap report for compliance with a list of
rules specific to each SDR. However, the Commission is concerned that
SDRs apply different validation rules that could be making it difficult
for SDR data to either be reported to the SDR or the SDRs’ real-time
public data feeds. The SDRs applying different validations to swap
reports creates numerous challenges for the Commission and market
participants. While one SDR may reject a report based on an incorrect
value in a particular swap data element, another SDR may accept reports
containing the same erroneous value in the same data element. Further,
the Commission is concerned that responses to SDR validation messages
vary across reporting counterparties, given the lack of current
standards.
    The Commission received several comments on data validations in
response to the Roadmap. Commenters were broadly supportive 191 of
including swap data validations in revisions to the Commission’s data
reporting regulations.192 Commenters recommended that the
requirements for data validation be implemented at the same time or
after the Commission harmonized and updated the data elements to be
reported 193 and that the validations be implemented all at
once.194 Many commenters also requested that the Commission provide
specific guidance and requirements for the validations, including, for
example, a defined list of minimum validations, form and manner
specifications, mapping, and allowable values.195
—————————————————————————

    191 No comment letters directly opposed data validations,
though not all letters addressed the topic.
    192 Joint SDR Letter at 1-4, 6, 9; Letter from Chatham at 3;
Letter from CME at 2; Letter from DTCC at 2-3; Letter from Eurex
Clearing AG (“Eurex”) (Aug. 21, 2017) at 3; Letter from GFMA at 5-
6; Joint ISDA-SIFMA Letter at 3, 6; Letter from LCH at 3.
    193 Joint SDR Letter at 1-3, 9; Letter from CME at 2; Letter
from GFMA at 5-6; Joint ISDA-SIFMA Letter at 3, 6.
    194 Joint SDR Letter at 9.
    195 Joint SDR Letter at 4, 6; Letter from DTCC at 2-3; Joint
ISDA-SIFMA Letter at 3, 6; Letter from LCH at 3.
—————————————————————————

    Commenters diverged in some instances in regards to continuing the
SDRs’ current validation practices. The SDRs advocated for leveraging
existing SDR validation processes in order to minimize the costs
associated with system changes.196 The SDRs also argued that the SDRs
should not be required to implement the exact same validations and that
the SDRs should have the flexibility to design their own validations,
as long as the data is provided to the Commission in the mandated
format.197 In contrast, one commenter advocated for the Commission to
ensure that data element collection and validations are consistent
across all SDRs.198 The commenter also advocated for limiting the
data SDRs may request to the data required under the Commission’s
regulations.199
—————————————————————————

    196 Joint SDR Letter at 2; Letter from CME at 2; Letter from
DTCC at 2.
    197 Joint SDR Letter at 3; Letter from DTCC at 2-3.
    198 Joint ISDA-SIFMA Letter at 6.
    199 Id. at 5.
—————————————————————————

    Commenters also raised other specific validation-related issues.
The SDRs suggested that data should be required to be validated against
public sources, to the extent possible, such as the GLEIF database for
LEIs.200 One commenter stated that the Commission should resolve any
uncertainty regarding what a reporting counterparty must report when a
data element may not apply to the reported swap and/or data may not be
available at the time of reporting.201
—————————————————————————

    200 Joint SDR Letter at 4.
    201 Joint ISDA-SIFMA Letter at 6. The Commission has requested
specific comment on this issue above in connection with Sec.  45.13.
—————————————————————————

    ESMA has published specific validations for TRs to perform to
ensure that derivatives data meets the requirements set out in the
technical standards pursuant to EMIR.202 ESMA’s validations, for
instance, set forth when data elements are mandatory, conditional,
optional, or must be left blank, and specify conditions for data
elements along with the format and content of allowable values for
almost 130 data elements.203
—————————————————————————

    202 See https://www.esma.europa.eu/policy-rules/post-trading/trade-reporting.
    203 See id.
—————————————————————————

    The Commission believes that similarly consistent SDR validations
would help improve data quality. Therefore, the Commission is proposing
to require SDRs to apply validations and inform the entity submitting
the swap report of any associated rejections. SDRs would be required to
apply the validations approved in writing by the Commission. The
Commission is also proposing regulations for SDRs to send validation
messages to SEFs, DCMs, and reporting counterparties.204 The
Commission believes that the consistent application of validation rules
across SDRs would lead to an improvement in the quality of swap data
maintained at SDRs.
—————————————————————————

    204 The Commission is also proposing regulations for reporting
counterparties, SEFs, and DCMs to address the validations messages
sent by SDRs and to resubmit any rejected swap reports in time to
meet their obligations to report creation and continuation data. The
requirements for reporting counterparties, SEFs, and DCMs to comply
with SDR validations are proposed in Sec.  45.13(b).
—————————————————————————

    Proposed Sec.  49.10(c)(1) would provide that SDRs shall validate
each SDR data report submitted and notify the reporting counterparty,
SEF, DCM, or third party service provider submitting the report whether
the report satisfied 205 the data validation procedures 206 of the
SDR ASATP after accepting the SDR data report.
—————————————————————————

    205 The Commission is proposing to define “data validation
acceptance message” to mean a notification that SDR data satisfied
the data validation procedures applied by an SDR.
    206 The Commission is proposing to define “data validation
procedures” to mean procedures established by an SDR pursuant to
Sec.  49.10 to validate SDR data reported to the SDR.
—————————————————————————

    Proposed Sec.  49.10(c)(2) would provide that if SDR data contains
one or more data validation errors,207 the SDR shall distribute a
data validation error message 208 to the DCM, SEF, reporting
counterparty, or third-party service provider that submitted such SDR
data ASATP after acceptance of such data. Each data validation error
message shall indicate which specific data validation error(s) was
identified in the SDR data.
—————————————————————————

    207 The Commission is proposing to define “data validation
error” to mean that a specific data element of SDR data did not
satisfy the data validation procedures applied by an SDR.
    208 The Commission is proposing to define “data validation
error message” to mean a notification that SDR data contained one
or more data validation error(s).
—————————————————————————

    Proposed Sec.  49.10(c)(3) would require that if an SDR allows for
the joint submission of swap transaction and pricing data and swap
data, the SDR validate the swap transaction and pricing data and swap
data separately. Swap transaction and pricing data that satisfies the
data validation procedures applied by an SDR shall not be deemed to
contain a data validation error because it was submitted to the SDR
jointly with swap data that contained a data validation error.

[[Page 21609]]

4. Sec.  49.10(d)–Policies and Procedures To Prevent Invalidation or
Modification
    As described above, the Commission is proposing to move the
requirement currently in Sec.  49.10(c) for SDRs to have policies and
procedures to prevent invalidations or modifications of swaps to an
amended Sec.  49.10(d). As a result, the Commission is also proposing
to redesignate Sec.  49.10(d) as new Sec.  49.10(f).209 Section
49.10(c) currently requires registered SDRs to establish policies and
procedures reasonably designed to prevent any provision in a valid swap
from being invalidated or modified through the confirmation or
recording process of the SDR.210
—————————————————————————

    209 The amendments to the current requirements of Sec. 
49.10(d), proposed to be redesignated as Sec.  49.10(f), are
discussed in section IV.C.5 below.
    210 Current Sec.  49.10(c) further provides that the policies
and procedures must ensure that the SDR’s user agreements must be
designed to prevent any such invalidation or modification. 17 CFR
49.10(c).
—————————————————————————

    The Commission is also proposing non-substantive amendments to the
current language of Sec.  49.10(c), proposed to be moved to Sec. 
49.10(d). For instance, the Commission is proposing to title Sec. 
49.10(c) “Policies and procedures to prevent invalidation or
modification” to distinguish it from the other requirements in Sec. 
49.10.
    In light of the above proposed amendments, Sec.  49.10(d) would
require SDRs to establish policies and procedures reasonably designed
to prevent provision in a valid swap from being invalidated or modified
through the verification or recording process of the SDR. The policies
and procedures shall ensure that the SDR’s user agreements are designed
to prevent any such invalidation or modification.
5. Sec.  49.10(f)–Policies and Procedures for Resolving Disputes
Regarding Data Accuracy
    As described above, the Commission is proposing to redesignate
Sec.  49.10(d) as Sec.  49.10(f).211 The Commission is also proposing
non-substantive amendments to the requirements currently set out in
Sec.  49.10(d), proposed to be redesignated as new Sec.  49.10(f).
Current Sec.  49.10(d) requires that registered SDRs establish
procedures and provide facilities for effectively resolving disputes
over the accuracy of the swap data and positions that are recorded in
the SDR.
—————————————————————————

    211 The Commission’s proposed revisions to Sec.  49.10(e) are
discussed in the 2019 part 49 NPRM. See 2019 part 49 NPRM at 21050.
—————————————————————————

    First, the Commission is proposing to title Sec.  49.10(f)
“Policies and procedures for resolving disputes regarding data
accuracy” to distinguish it from the other requirements of Sec. 
49.10. Second, the Commission is proposing to update terminology in the
regulation. These updates include replacing “swap” with the correct
term “SDR data, and removing the term “registered” before references
to SDRs.
    Therefore, in light of the above proposed amendments, Sec. 
49.10(f) would require SDRs to establish procedures and provide
facilities for effectively resolving disputes over the accuracy of the
SDR data and positions that are recorded in the SDR.
Request for Comment
    The Commission requests comment on all aspects of the proposed
changes to Sec.  49.10.

V. Swap Data Elements Reported to Swap Data Repositories

A. General

    The Commission is proposing to revise appendix 1 to part 45 to
update and further standardize the swap data being reported to SDRs and
the swap data SDRs make available to the Commission. The Commission’s
current minimum primary economic terms for swaps in each swap asset
class are found in appendix 1 to part 45. The current primary economic
terms for swaps contain a set of “data categories and fields”
followed by “comments” instead of specifications such as allowable
values, formats, and conditions.212 In some cases, these comments
include directions, such as to use “yes/no” indicators for certain
data elements (e.g., an indication whether the reporting counterparty
is an SD).213 In others, the comments reference Commission
regulations (e.g., to report the LEI of the non-reporting counterparty
“[a]s provided in Sec.  45.6”).214
—————————————————————————

    212 See generally 17 CFR 45 appendix 1.
    213 Id.
    214 Id.
—————————————————————————

    In adopting part 45, the Commission intended that the primary
economic terms would ensure uniformity in “essential data” concerning
swaps across all of the asset classes and across SDRs to ensure the
Commission had the necessary information to characterize and understand
the nature of reported swaps.215 However, in practice, this approach
permitted a degree of discretion in reporting swap data that led to a
lack of standardization, and therefore a reduction in data quality,
which makes it more difficult for the Commission to analyze and
aggregate swap data. The Commission recognizes that each SDR has worked
to standardize the data within each SDR over recent years, and
Commission staff has noted the improvement in data quality. The
Commission however believes a significant effort must be made to
standardize swap data across SDRs. As a result, the Commission decided
to revisit the data elements currently required to be reported to SDRs
in appendix 1 to part 45.
—————————————————————————

    215 See 77 FR at 2149.
—————————————————————————

    In the Roadmap, DMO announced an intention to propose detailed
technical specifications once the CPMI-IOSCO harmonization efforts had
sufficiently progressed.216 In the Roadmap, DMO also signaled its
intention to match foreign regulators as closely as possible in the
technical specifications, but noted that some data elements may be
different depending on Commission’s needs.217
—————————————————————————

    216 See Roadmap at 9.
    217 Id.
—————————————————————————

    In response to the Roadmap, DMO received many comments on swap data
elements. Commenters broadly supported efforts to reduce the number of
reportable data elements and to remove the requirement to report “any
other term(s) of the swap matched or affirmed” by the counterparties
(commonly known as the “catchall” provision).218 Commenters were
also broadly supportive of the CPMI-IOSCO harmonization efforts to
standardize critical data elements,219 as both reducing burdens on
reporters 220 and as increasing the utility of the data for
regulators and the users of public data.221
—————————————————————————

    218 Joint SDR Letter at 8; Letter from Chatham at 5; Letter
from CME at 3; Letter from NRECA-APPA at 3; Letter from LCH at 2;
Joint ISDA-SIFMA Letter at 7; Letter from the Natural Gas Supply
Association (“NGSA”) at 1.
    219 Letter from ACLI at 2; Joint SDR Letter at 7; Letter from
Chatham at 5; Letter from CEWG at 3; Letter from the Coalition for
Derivatives End Users (“CDEU”) (Aug. 21, 2017) at 5; Letter from
DTCC at 2; Letter from Eurex at 3-4; Letter from GFMA at 3; Joint
ISDA-SIFMA Letter at 5; Letter from Japanese Bankers Association
(“JBA”) (Aug. 21, 2017) at 2; Letter from SIFMA Asset Management
Group (“AMG”) (Aug. 18, 2017) at 2.
    220 Letter from GFMA at 3; Letter from JBA at 2; Joint SDR
Letter at 8.
    221 Letter from Better Markets (Aug. 21, 2017) at 7; Letter
from DTCC at 2; Letter from GFMA at 3; Joint ISDA-SIFMA Letter at 5.
—————————————————————————

    Several commenters asked for precise definitions for required data
elements.222 Several commenters acknowledged that the Commission may
require some data elements beyond the final CDE Technical Guidance data
elements,223 but cautioned the Commission to be careful when making
that determination.224 One commenter, while supporting harmonization
generally, opposed expanding reporting

[[Page 21610]]

to cover any additional data elements.225 Two commenters noted that
differences between the CFTC and other regulators, including the SEC,
were not only in the data elements that must be reported, but also in
what transactions must be reported.226
—————————————————————————

    222 Letter from GFMA at 4; Letter from CEWG at 3; Letter from
CME at 3; Letter from Eurex at 3-4.
    223 Joint SDR Letter at 9.
    224 Letter from GFMA at 4.
    225 Letter from CEWG 3.
    226 Letter from CDEU at 6; Letter from GFMA at 3.
—————————————————————————

    Several commenters indicated potential opposition to individual CDE
Technical Guidance data elements.227 Another commenter recommended
using the final CDE Technical Guidance as a “tool” rather than a
“mandate,” and to only implement those data elements that the
Commission needs for its oversight obligations.228 One commenter
suggested not pursuing the data elements proposed in DMO’s December
2015 Request for Comment on Draft Technical Specifications for Certain
Swap Data Elements, as they would unnecessarily increase costs without
benefits.229
—————————————————————————

    227 Letter from GFMA at 4; Joint ISDA-SIFMA Letter at 4, 9;
Letter from SIFMA AMG at 2.
    228 Joint ISDA-SIFMA Letter at 4.
    229 Id. at 8.
—————————————————————————

    In the course of revisiting which swap data elements should be
reported to SDRs, the Commission reviewed the swap data elements
currently 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. The Commission then reviewed the CDE
Technical Guidance to determine which data elements the Commission
could adopt according to the CDE Technical Guidance.
    As a general matter, the Commission believes that the
implementation of the CDE Technical Guidance will further improve the
harmonization of SDR data across FSB member jurisdictions. This
international harmonization, when widely implemented, would allow
market participants to report swap data to several jurisdictions in the
same format, allowing for potential cost-savings. This harmonization,
when widely implemented, would also allow the Commission to potentially
receive more standardized information regarding swaps reported to TRs
regulated by other authorities. For instance, such standardization
across SDRs and TRs could support data aggregation for the analysis of
global systemic risk in swaps markets.
    As part of this process, the Commission also reviewed the part 43
swap transaction and pricing data and part 45 swap data elements to
determine whether any differences could be reconciled.230 Having
completing this assessment, 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. In a separate NPRM, the Commission is
proposing to list the swap transaction and pricing data elements
required to be reported to, and then publicly disseminated by, SDRs
pursuant to part 43 in appendix C to part 43. The swap transaction and
pricing data elements would be a harmonized subset of the swap data
elements in appendix 1 to part 45.
—————————————————————————

    230 The Commission 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 77 FR at 1226 (noting that “it is important that the data
fields for both the real-time and regulatory reporting requirements
work together”). However, there is no current regulatory
requirement linking the two sets of data elements.
—————————————————————————

    At the same time as the Commission is proposing to update the swap
data elements in appendix 1, DMO is publishing draft technical
specifications for reporting the swap data elements in appendix 1 to
part 45 to SDRs, as specified in proposed Sec.  45.13(a)(1), and for
reporting and publicly disseminating the swap transaction and pricing
data elements in appendix C to part 43 described in a separate NPRM.
DMO would then publish the technical specifications in the Federal
Register pursuant to the delegation of authority proposed in Sec. 
45.15(b).
    DMO is proposing to establish technical standards for certain swap
data elements according to the CDE Technical Guidance, where possible.
Commenters are invited to comment on both the technical standards and
the swap data elements proposed in appendix 1.
    The swap data elements proposed to be reported to SDRs would
therefore consist of: (i) The data elements implementing the CDE
Technical Guidance; and (ii) additional CFTC-specific data elements
that support the Commission’s regulatory responsibilities.231 While,
as explained below, much of this swap data is already being reported to
SDRs according to each SDR’s technical standards, the technical
standards and validation conditions that the Commission is proposing
for the SDRs to implement would be new. A discussion of the swap data
elements and requests for comment on the technical standards follows
below. Data elements specific to part 43 are discussed in the separate
part 43 NPRM.
—————————————————————————

    231 The proposed update of appendix 1 and technical standards
are expected to represent a significant reduction in the number of
swap data elements that could be reported to an SDR by market
participants.
—————————————————————————

B. Swap Data Elements To Be Reported to Swap Data Repositories

    DMO’s proposed technical standards contains an extensive
introduction to help reviewers. As a preliminary matter, the Commission
notes that the swap data elements in appendix 1 do not include swap
data elements specific to swap product terms. The Commission is
currently heavily involved in separate international efforts to
introduce UPIs.232 The Commission preliminarily expects UPIs will be
available within the next two years.233 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 and then later designates UPIs
pursuant to Sec.  45.7.
—————————————————————————

    232 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/.
    233 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 as well as provide examples and
jurisdiction-specific requirements. However, the Commission has not
included these footnotes in appendix 1. In addition, the definitions
from CDE Technical Guidance data elements included in appendix 1
sometimes include references to allowable values in the CDE Technical
Guidance, which may

[[Page 21611]]

not be included in appendix 1, but can be found in the 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, in 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 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, Quantity unit of
measure, and Custom basket constituents’ unit of measure).
    The Commission invites comment on any of the swap data elements
proposed in appendix 1. The Commission briefly discusses the swap data
elements below by category to simplify the topics for market
participants to comment on. 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, as necessary.
1. Category: Clearing
    The Commission is proposing to require reporting counterparties
report twelve clearing data elements.234 Nearly all of this
information is currently being reported to SDRs. Three of these data
elements are consistent with the CDE Technical Guidance. Four of these
data elements would transition clearing swap and original swap USIs to
UTIs. All of these data elements help the Commission monitor the
cleared swaps market.
—————————————————————————

    234 In appendix 1, these data elements are: Cleared (1);
Central counterparty (2); Clearing account origin (3); Clearing
member (4); Clearing swap USIs (5); Clearing swap UTIs (6); Original
swap USI (7); Original swap UTI (8); Original swap SDR identifier
(9); Clearing receipt timestamp (10); Clearing exemptions–
Counterparty 1 (11); and Clearing exemptions–Counterparty 2 (12).
—————————————————————————

    The Commission requests specific comment on the following related
to the clearing data elements:
    (15) The Commission is considering including a data element called
“Mandatory clearing indicator” to indicate whether a swap is subject
to the clearing requirement in part 50 of the Commission’s regulations.
The Commission requests specific comment on whether commenters believe
this data element could be reported to SDRs.
2. Category: Counterparty
    The Commission is proposing to require reporting counterparties
report ten counterparty data elements.235 Nearly all of this
information is currently being reported to SDRs. Six of these data
elements are consistent with the CDE Technical Guidance.
—————————————————————————

    235 In appendix 1, these data elements are: Counterparty 1
(reporting counterparty) (13); Counterparty 2 (14); Counterparty 2
identifier source (15); Counterparty 1 financial entity indicator
(16); Counterparty 2 financial entity indicator (17); Buyer
identifier (18); Seller identifier (19); Payer identifier (20);
Receiver identifier (21); and Submitter identifier (22).
—————————————————————————

    The Commission requests specific comment on the following related
to the counterparty data elements:
    (16) The CFTC needs the ability to link swap counterparties to
their parent entities to aggregate swap data to be able to monitor
risk. Given the complicated nature of how some entities are structured
within a larger legal entity, the CFTC also needs information related
to the ultimate parent entity. The Commission believes this information
is necessary to collect for both swap counterparties. The Commission
requests specific comment on whether commenters believe this data could
be reported as part of swap data reporting.236 Given the static
nature of these relationships, the Commission requests comment on
whether reporting counterparties should report parent and ultimate
parent information for each swap trade or in a regularly updated (e.g.,
monthly or quarterly) reference file maintained by SDRs.
—————————————————————————

    236 The SEC has rules providing for SBSDR participants to
provide SBSDRs with information sufficient to identify their
ultimate parent(s) and any affiliate(s) that are also participants
of the SBSDR using ultimate parent identifiers and counterparty
identifiers. See 17 CFR 242.906(b).
—————————————————————————

3. Category: Events
    The Commission is proposing to require reporting counterparties
report four event data elements.237 Nearly all of this information is
currently being reported to SDRs. Event data elements were not included
in the CDE Technical Guidance. This information is, however, critical
for the Commission to be able to properly utilize swap data. Without
it, the Commission would be unable to discern why each swap event is
reported following the initial required swap creation data report.
—————————————————————————

    237 In appendix 1, these data elements are: Action type (24);
Event type (25); Event identifier (26); and Event timestamp (27).
—————————————————————————

    The Commission requests specific comment on the following related
to the event data elements:
    (17) Are there ways in which the Commission could harmonize the
event model with ESMA’s? Would harmonization in this area reduce
burdens for SDRs and reporting counterparties? The Commission proposes
to require reporting transactions for simultaneous clearing and
allocation at a DCO using a new event type of “Clearing and
Allocation” in the events model. Is there a more efficient method to
report related transactions when a DCO simultaneously clears and
allocates transactions?
4. Category: Notional Amounts and Quantities
    The Commission is proposing to require reporting counterparties
report twelve notional data elements.238 Nearly all of this
information is currently being reported to SDRs. Nine of these data
elements are consistent with the CDE Technical Guidance. Exposure
information, in conjunction with valuation information, is critical
for, and currently used extensively by, the Commission to monitor
activity and risk in the swaps market.
—————————————————————————

    238 In appendix 1, these data elements are: Notional amount
(28); Notional currency (29); Delta (30); 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).
—————————————————————————

    The Commission requests specific comment on the following related
to the notional data elements:
    (18) The Commission is considering including the notional schedule
data elements from the CDE Technical Guidance.239 The Commission has
learned through experience with swap data that notional data elements
are applicable to a substantial number of swaps within certain product
areas such as energy swaps and amortizing interest rate swaps. Does
such concentration exist and, if so, what gaps would exist in the
Commission’s ability to evaluate and monitor market activity in these
areas if notional schedule data elements are inadequately or improperly
represented? The Commission requests comment on whether SDRs and
reporting counterparties would be able

[[Page 21612]]

to both accept and report this information.
—————————————————————————

    239 The notional schedule data elements in the CDE Technical
Guidance are: 2.78.1 (Effective date of the notional amount); 2.78.2
(End date of the notional amount); 2.78.3 (Notional amount in effect
on the associated effective date); 2.80.1 (Effective date of the
notional quantity); 2.80.2 (End date of the notional quantity); and
2.80.3 (Notional quantity in effect on the associated effective
date).
—————————————————————————

    (19) The Commission requests specific comment on how SDRs would
implement these CDE data elements for reporting counterparties to
report notional schedule-related data. Should the Commission mandate a
specific reporting structure for reporting notional schedule-related
data elements to the SDRs? If so, what standard would you propose and
what would be the benefits? If not, why not?
    (20) The Commission is considering requiring reporting
counterparties to provide a USD equivalent notional amount that
represents the entire overall transaction for tracking notional volume
(in addition to leg-by-leg notional data reported pursuant to other
proposed data elements). The Commission believes that this additional
data element could allow staff to more effectively assess compliance
with CFTC regulations, including but not limited to SD registration and
uncleared margin requirements, and help staff more efficiently monitor
swap market risk. The Commission specifically requests comment on the
frequency with which reporting counterparties should report USD
equivalent notional.
5. Category: Packages
    The Commission is proposing to require reporting counterparties to
report four package transaction data elements.240 The Commission
believes some of this information is currently being reported to SDRs.
Each of these data elements are consistent with the CDE Technical
Guidance. The Commission anticipates using this information to better
understand risk in the swaps market, as the Commission understands that
many swaps are executed as part of packages.
—————————————————————————

    240 In appendix 1, these data elements are: Package identifier
(40); Package transaction price (41); Package transaction price
currency (42); and Package transaction price notation (43).
—————————————————————————

    The Commission requests specific comment on the following related
to the package data elements in appendix 1:
    (21) The Commission is considering including the additional package
transaction data elements from the CDE Technical Guidance.241 The
Commission requests comment on whether SDRs and reporting
counterparties would be able to both accept and report this
information. The Commission requests specific comment on how SDRs would
implement these CDE data elements for reporting counterparties to
report the data.
—————————————————————————

    241 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 reporting counterparties
report twelve data elements related to payments.242 Nine of these
data elements are consistent with the CDE Technical Guidance. Nearly
all of this information is currently being reported to SDRs.
—————————————————————————

    242 In appendix 1, these data elements are: Day count
convention (44); Fixing date (45); 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); Other payment date (51); Other payment payer (52);
Other payment receiver (53); Payment frequency period (54); and
Payment frequency period multiplier (55).
—————————————————————————

7. Category: Prices
    The Commission is proposing to require reporting counterparties
report eighteen data elements related to swap prices.243 Nearly all
of this information is currently being reported to SDRs. Seventeen of
these data elements are consistent with the CDE Technical Guidance.
This information is critical for, and currently used by, the Commission
in understanding pricing in the swaps market.
—————————————————————————

    243 In appendix 1, 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); Option premium payment
date (72); and First exercise date (73).
—————————————————————————

    The Commission requests specific comment on the following related
to the price data elements:
    (22) The Commission is considering including the price schedule
data elements from the CDE Technical Guidance.244 The Commission has
learned through experience with swap data that price data elements are
applicable to a substantial number of swaps within certain product
areas such as energy swaps and amortizing interest rate swaps. Does
such concentration exist and, if so, what gaps would exist in the
Commission’s ability to evaluate and monitor market activity in these
areas if schedule data elements are inadequately or improperly
represented? The Commission requests comment on whether SDRs and
reporting counterparties would be able to both accept and report this
information. The Commission requests specific comment on how SDRs would
implement these CDE data elements for reporting counterparties to
report the data. Should the Commission mandate a specific reporting
structure for reporting schedule-related data elements to the SDRs? If
so, what standard would you propose and what would be the benefits? If
not, why not?
—————————————————————————

    244 The price schedule data elements in the CDE Technical
Guidance are: 2.54.1 (Unadjusted effective date of the price);
2.54.2 (Unadjusted end date of the price); 2.54.3 (Price in effect
between the unadjusted effective date and unadjusted end date
inclusive); 2.63.1 (Unadjusted effective date of the strike price);
2.63.2 (Unadjusted end date of the strike price); and 2.63.3 (Strike
price in effect between the unadjusted effective date and unadjusted
end date inclusive).
—————————————————————————

8. Category: Product
    The Commission is proposing to require reporting counterparties
report five product-related data elements.245 The Commission believes
some of this information is currently being reported to SDRs. Two of
these data elements are in the CDE Technical Guidance. The Commission
has preliminarily determined these data elements are critical for
monitoring risk in the swaps market, even though the Commission expects
any additional product data elements to remain unstandardized until the
UPI is introduced.
—————————————————————————

    245 In appendix 1, these data elements are: CDS index
attachment point (74); CDS index detachment point (75); Index factor
(76); Embedded option type (77); and Unique product identifier (78).
—————————————————————————

    The Commission requests specific comment on the following related
to the other product data elements:
    (23) The CFTC intends to collect sufficient granular detail on the
economic terms of swaps to conduct independent valuation and stress
testing analysis. The CFTC will rely on UPI for many product related
data elements, but forthcoming UPI standards may not describe some
swaps with enough detail to allow the CFTC to independently value the
transaction. Are there additional product data elements the CFTC should
collect outside of UPI to ensure the CFTC may independently value swaps
with sufficient accuracy?
9. Category: Settlement
    The Commission is proposing to require reporting counterparties
report two settlement data elements.246 The Commission believes this
information is currently being reported to SDRs. These data elements
are consistent with the CDE Technical Guidance.
—————————————————————————

    246 In appendix 1, these data elements are: Final contractual
settlement date (79) and Settlement currency (80).
—————————————————————————

    The Commission requests specific comment on the following related
to the settlement data elements:
    (24) Should the Commission include the additional swap data element
related to settlement included in the

[[Page 21613]]

CDE Technical Guidance? 247 Please comment on alternative methods to
report offshore currencies that are not included in ISO 4217 currency
code list.
—————————————————————————

    247 The settlement data element in the CDE Technical Guidance
is 2.21 (Settlement location).
—————————————————————————

10. Category: Transaction-Related
    The Commission is proposing to require reporting counterparties
report fifteen data elements that provide information about each swap
transaction.248 The Commission believes this information is currently
being reported to SDRs. Six of these data elements are consistent with
the CDE Technical Guidance.
—————————————————————————

    248 In appendix 1, these data elements are: Allocation
indicator (81); Non-standardized term indicator (82); Block trade
election indicator (83); Effective date (84); Expiration date (85);
Execution timestamp (86); Reporting timestamp (87); Platform
identifier (88); Prime brokerage transaction identifier (89); Prime
brokerage transaction indicator (90); Prior USI (for one-to-one and
one-to-many relations between transactions) (91); Prior UTI (for
one-to-one and one-to-many relations between transactions) (92);
Unique swap identifier (USI) (93); Unique transaction identifier
(UTI) (94); and Jurisdiction indicator (95).
—————————————————————————

    The Commission requests specific comment on the following
transaction-related data elements:
    (25) Should the Commission include the additional swap data
elements related to transaction included in the CDE Technical Guidance?
Are there additional transaction-related data elements the Commission
should include beyond the CDE Technical Guidance?
    (26) Should the Commission expand the Non-standardized term
indicator (82) data element to apply to any non-standard term,
regardless of impact on price? Should the Commission instead create a
part 45-specific data element for non-standard terms that would not be
publicly disseminated, and still have Non-standardized term indicator
(82) for real-time public reporting?
    (27) The Commission is considering including a data element called
“Trade execution requirement indicator” to indicate whether a swap is
subject to the Commission’s trade execution mandate. The Commission
requests specific comment on whether commenters believe this data
element could be reported.
11. Category: Transfer
    The Commission is proposing to require reporting counterparties to
report one data element related to changing SDRs.249 This data
element would be necessary if the Commission adopts proposed Sec. 
45.10(d) permitting reporting counterparties to change the SDR to which
they report data for a given swap. Without this data element, the
Commission is concerned there would be swaps in the SDR that would
appear open but not updated because the reporting counterparty reports
to a different SDR.
—————————————————————————

    249 In appendix 1, this data element is: New SDR identifier
(96).
—————————————————————————

12. Category: Valuation
    The Commission is proposing to require reporting counterparties
report six valuation data elements.250 Nearly all of this information
is currently being reported to SDRs. Four data elements are consistent
with the CDE Technical Guidance. Valuation information is critical for,
and currently used by, the Commission to monitor risk in the swaps
market.
—————————————————————————

    250 In appendix 1, these data elements are: Last floating
reference value (97); Last floating reference reset date (98);
Valuation amount (99); Valuation currency (100); Valuation method
(101); and Valuation timestamp (102).
—————————————————————————

    The Commission requests specific comment on the following related
to the valuation data elements:
    (28) The Commission is considering including the following
valuation data elements that were not included in the CDE Technical
Guidance: Discount index; discount index tenor period; discount index
tenor period multiplier; next floating reference reset date; underlying
spot or reference rate. Would reporting counterparties be able to
report this information to SDRs each day? Could the Commission obtain
this information from different source? Could the Commission require
this information less frequently? Is reporting reset dates more
efficient than reporting the full calendar generation logic (including
business day calendars and reset lookback terms) of swaps?
    (29) The CFTC intends to collect information to independently
validate individual swap values (also known as “mark-to-market” or
“fair value”), portfolio aggregated values, and the value of
collateral posted to meet initial and variation margin requirements.
One method is to require parties to report the aggregate valuations of
all financial instruments (including swaps and other cross margined
products) associated with a Collateral Portfolio Code. What other
validation and cross referencing information should the Commission
collect in addition to the proposed data elements? Is there a more
efficient way to collect data on the value of individual swaps,
portfolios, and the margin posted and collected against these
positions?
13. Category: Collateral and Margins
    The Commission is proposing to require reporting counterparties
report fourteen collateral and margins data elements.251 This
information is not currently being reported to SDRs. Twelve of these
data elements are consistent with the CDE Technical Guidance. One data
element, Affiliated counterparty for margin and capital indicator
(103), will help the Commission monitor compliance with the uncleared
margin requirements. The two remaining CFTC-specific data elements are
indicators and codes that will help the Commission understand how the
margin and collateral data is being reported by reporting
counterparties. Margin and collateral information is critical for the
Commission to monitor risk in the swaps market. When other
jurisdictions implement the CDE Technical Guidance, sharing this
information with other regulators will permit regulators to create a
global picture of swaps risk.
—————————————————————————

    251 In appendix 1, these data elements are: Affiliated
counterparty for margin and capital indicator (103);
Collateralisation category (104); Collateral portfolio code (105);
Portfolio containing non-reportable component indicator (106);
Initial margin posted by the reporting counterparty (post-haircut)
(107); Initial margin posted by the reporting counterparty (pre-
haircut) (108); Currency of initial margin posted (109); Initial
margin collected by the reporting counterparty (post-haircut) (110);
Initial margin collected by the reporting counterparty (pre-haircut)
(111); Currency of initial margin collected (112); Variation margin
posted by the reporting counterparty (pre-haircut) (113); Currency
of variation margin posted (114); Variation margin collected by the
reporting counterparty (pre-haircut) (115); and Currency of
variation margin collected (116).
—————————————————————————

    The Commission requests specific comment on the following related
to the collateral and margin data elements:
    (30) The Commission is interested in determining the quality of
collateral posted. Comparing pre- and post-haircut values is one way to
gain this information. Should the Commission consider other ways, such
as collecting specific information on the contents of the collateral
portfolio?
    (31) The proposed swap data elements allow for single collateral
portfolio ID for both initial margin and variation margin. Should the
Commission consider other approaches to collecting this information to
account for when variation margin cash flows are separated between
swaps that may not all be subject to initial margin?
    (32) The Commission is proposing to collect new margin and
collateral information from reporting counterparties that are SDs,
MSPs, and DCOs. Some of this information could be reported at the
portfolio level, rather than the transaction level. Do reporting
counterparties or SDRs have feedback for the Commission on how
portfolio level, as opposed to transaction level, reporting would work
in practice? Are

[[Page 21614]]

there challenges the Commission should consider? What are alternatives
or solutions for collecting this information?
Request for Comment
    The Commission additionally requests comment on all aspects of the
proposed swap data elements in appendix 1. The Commission requests
specific comment on the following:
    (33) Are there any data elements not included in appendix 1 that
commenters feel should be prioritized for standardization? Please
explain why and provide relevant information that would assist with
standardizing any suggested data elements.
    (34) The Commission is not proposing data elements by leg for
multi-leg products where some data elements are reported more than once
per leg. The Commission thinks that it is best to leave the
implementation details to market conventions and SDR requirements.
Should the Commission consider another approach for leg-level
reporting? If so, please provide details on the suggested approach.
    (35) The Commission has not proposed any specific implementation
requirement to report multiple values for the same data element when
applicable. The Commission thinks that it is best to leave the
implementation details to market conventions and SDR requirements.
Should the Commission consider a set approach to report multiple
values? If so, please provide details on the suggested approach.
    (36) The Commission is considering requiring reporting
counterparties to indicate whether a specific swap: (1) Was entered
into for dealing purposes (as opposed to hedging, investing, or
proprietary trading); and/or (2) need not be considered in determining
whether a person is a swap dealer or need not be counted towards a
person’s de minimis threshold, as described in paragraph (4) of the
“swap dealer” definition in Sec.  1.3 of the Commission’s
regulations, pursuant to one of the exclusions or exceptions in the
swap dealer definition (e.g., the insured depository institution
provision in paragraph (4)(C) or exclusion in paragraph (5) of the
“swap dealer” definition in Sec.  1.3, the inter-affiliate exclusion
in paragraph (6)(i) of the “swap dealer” definition, etc.). In the
past, the Commission staff has identified the lack of these data
elements as limiting constraints on the usefulness of SDR data to
identify which swaps should be counted towards a person’s de minimis
threshold, and the ability to precisely assess the current de minimis
threshold or the impact of potential changes to current
exclusions.252 Given the Commission’s ongoing surveillance for
compliance with the swap dealer registration requirements, the
Commission requests comment on this potential field.
—————————————————————————

    252 See De Minimis Exception to the Swap Dealer Definition, 83
FR 27444, 27449 (proposed June 12, 2018); Swap Dealer De Minimis
Exception Final Staff Report at 19 (Aug. 15, 2016) available at
https://www.cftc.gov/sites/default/files/idc/groups/public/@swaps/documents/file/dfreport_sddeminis081516.pdf; Swap Dealer De Minimis
Exception Preliminary Report at 15 (Nov. 18, 2015), available at
https://www.cftc.gov/sites/default/files/idc/groups/public/@swaps/documents/file/dfreport_sddeminis_1115.pdf.
—————————————————————————

VI. Compliance Date

    Market participants raised questions in the Roadmap comment letters
about the compliance schedules for the Commission’s proposed reporting
rules amendments. 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.253 Others suggested phasing in any SDR obligations before
requiring reporting counterparty changes.254 Multiple market
participants requested that the rulemakings take place simultaneously
to inform one another.255 Commenters also cautioned against
artificial deadlines,256 requested avoiding compliance dates at the
end of the calendar year during holidays and code freezes,257 and
requested that the Commission consider deadlines for changes in foreign
jurisdictions when setting compliance dates.258
—————————————————————————

    253 Joint SDR Letter at 12.
    254 Letter from Chatham at 5-6; Joint NRECA-APPA Letter at 3.
    255 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.
    256 Letter from Chatham at 5.
    257 Joint SDR Letter at 12.
    258 Id.
—————————————————————————

    The Commission understands that market participants will need a
sufficient implementation period to accommodate any of the changes
proposed in the three NPRMs that are adopted by the Commission. The
Commission expects to finalize all rules at the same time, even though
the proposals were approved separately. The Commission also expects
that the compliance date for the Roadmap rules that the Commission
adopts other than the rules on UTIs in Sec.  45.5 would be one year
from the date the final rulemakings are published in the Federal
Register.
    The Commission expects that the compliance date for the rules on
UTIs in Sec.  45.5 would be December 31, 2020, in accordance with the
UTI implementation deadline recommended by the FSB.259 As a
participant in the international swaps data harmonization initiatives
described in section 1.C above, the Commission fully supports the
adoption of UTIs and its role in facilitating the aggregation of swaps
data reported to SDRs. While the Commission recognizes that the
expected compliance date of December 31, 2020 for Sec.  45.5 will be
sooner than the other changes proposed in the three NPRMs, the
Commission believes that this earlier compliance date will not pose any
substantial difficulties due to the limited nature of the proposed
changes in Sec.  45.5.260
—————————————————————————

    259 See Financial Stability Board, Governance Arrangements for
the Unique Transaction Identifier (UTI), Conclusions and
Implementation Plan (Dec. 2017), Section 5.2.
    260 The Commission recognizes commenters’ concerns about end-
of-year code freezes. The Commission encourages market participants
to make the necessary code changes to comply with Sec.  45.5 earlier
than the end-of-year deadline.
—————————————————————————

    The Commission requests comment on all aspects of the proposed
compliance data. The Commission requests specific comment on the
following:
    (37) Part 20 of the Commission’s regulations (“Large Trader
Reporting for Physical Commodity Swaps”) contains a “sunset
provision” in Sec.  20.9 that would take effect upon “a Commission
finding that, through the issuance of an order, operating [SDRs] are
processing positional data and that such processing will enable the
Commission to effectively surveil trading in paired swaps and swaptions
and paired swap and swaption markets.” 261 The Commission can now
analyze swap data from the SDRs for various purposes, such as re-
evaluating the current swap categories and determine appropriate
minimum block and cap sizes in part 43. In addition, the same physical
commodity swaps reported to the Commission directly through part 20
reporting are being reported to SDRs under part 45. In conjunction with
the Commission’s proposals to update its swap reporting regulations,
should the Commission review part 20 to determine whether it would be
appropriate to sunset part 20 reporting according to the Sec.  20.9?
—————————————————————————

    261 17 CFR 20.9.
—————————————————————————

VII. 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.262 The Commission has

[[Page 21615]]

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.263 The amendments to parts 45,
46, and 49 proposed herein would have a direct effect on the operations
of DCMs, DCOs, MSPs, reporting counterparties, SDs, SDRs, and SEFs. The
Commission has previously certified that DCMs,264 DCOs,265
MSPs,266 SDs,267 SDRs,268 and SEFs 269 are not small entities
for purpose of the RFA.
—————————————————————————

    262 See 5 U.S.C. 601 et seq.
    263 See Policy Statement and Establishment of “Small
Entities” for purposes of the Regulatory Flexibility Act, 47 FR
18618 (Apr. 30, 1982).
    264 See id.
    265 See Derivatives Clearing Organization General Provisions
and Core Principles, 76 FR 69334, 69428 (Nov. 8, 2011).
    266 See Swap Dealer and Major Swap Participant Recordkeeping,
Reporting, and Duties Rules, 77 FR 20128, 20194 (Apr. 3, 2012)
(basing determination in part on minimum capital requirements).
    267 See Swap Trading Relationship Documentation Requirements
for Swap Dealers and Major Swap Participants 76 FR 6715 (Feb. 8,
2011).
    268 See Swap Data Repositories; Proposed Rule, 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).
    269 Core Principles and Other Requirements for Swap Execution
Facilities, 78 FR 33476, 33548 (June 4, 2013).
—————————————————————————

    Various proposed amendments to parts 45, 46, and 49 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 CEA section 2(e) 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 a DCM.270
The Commission has previously certified that ECPs are not small
entities for purposes of the RFA.271
—————————————————————————

    270 See 7 U.S.C. 2(e).
    271 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 as to 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 higher than was in place
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 than when the Commission first made the
determination.
—————————————————————————

    The Commission has analyzed swap data reported to each SDR 272
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.
—————————————————————————

    272 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, 98,145
credit swaps, 357,851 commodities swaps, 603,864 equities swaps, and
276,052 interest rate 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 Paperwork Reduction Act (“PRA”) 273 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 the collection of information within the meaning of the PRA,
as discussed below. The proposed rulemaking contains collections of
information for which the Commission has previously received control
numbers from the Office of Management and Budget (“OMB”): OMB Control
Numbers 3038-0096 (relating to swap data recordkeeping and reporting);
3038-0089 (relating to pre-enactment swaps and transition swaps); and
3038-0086 (relating to SDRs).
—————————————————————————

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

    The Commission is proposing to amend the above information
collections 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 parts 45 and 46. The Commission proposed
amendments to the annual burden for complying with certain requirements
of part 49 in the 2019 Part 49 NPRM. As discussed below, the Commission
believes the estimates for the regulations in part 49 proposed to be
amended in this NPRM accurately estimate the burdens and do not require
updates based on what is proposed in this NPRM.
    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,
CEA section 8(a)(1) 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.” 274 The Commission is also required to protect certain
information contained in a government system of records according to
the Privacy Act of 1974.275
—————————————————————————

    274 7 U.S.C. 12(a)(1).
    275 5 U.S.C. 552a.
—————————————————————————

1. Revisions to Collection 3038-0096 (Swap Data Recordkeeping and
Reporting Requirements)
    The Commission proposes to revise collection 3038-0096 to account
for changes proposed to the requirements in part 45 for reporting swap
data to SDRs. Most of the estimated hours burdens and costs provided
below would be in addition to or subtracted from the existing hours
burdens and costs in collection 3038-0096, with the exception that the
proposed Sec.  45.10(d) notification requirements for changing SDRs
would be a new burden within collection 3038-0096. As discussed in this
section as well, the Commission is also proposing to update and correct
some estimates in collection 3038-0096.
a. Swap Creation Data Reporting Amendments
    The Commission is proposing to amend Sec.  45.3, which requires
SEFs, DCMs, and reporting counterparties to report swap data to SDRs
when entering into new swaps. Some of these amendments will result in
changes to the burden calculations. As an initial matter, the
Commission is proposing to correct the “total annual burden hour cost
of all responses” in the supporting

[[Page 21616]]

statement from $7,248 (which was the total average hour burden cost per
respondent) to $12,553,536.
    The Commission estimates that SDRs, SEFs, DCMs, and reporting
counterparties would incur a one-time initial burden of 10 hours per
entity to modify their systems to adopt the changes described below,
for a total estimated hours burden of 17,320 hours. This burden should
be mitigated by the fact that these entities currently have systems in
place to provide this information to the Commission. The Commission
additionally estimates 5 hours per entity annually to perform any
needed maintenance or adjustments to reporting systems.
    Currently, Sec.  45.3 requires SEFs, DCMs, and reporting
counterparties to report confirmation data reports and PET data reports
when entering into new swaps. The Commission is proposing to remove the
requirement for SEFs, DCMs, and reporting counterparties to report
confirmation data reports. These entities would report a single swap
creation data report instead of separate PET data reports and
confirmation data reports. As described above in section II.C.a, the
Commission anticipates removing this requirement will reduce the number
of swap creation data reports being sent to SDRs. Commission staff
estimates that across the range of entities, the change could result in
a 30% reduction in the number of swap creation data reports being sent
to SDRs.
    This change would not decrease the hourly burden, but would
decrease the number of reports from 10,000 reports per 1,732
respondents to 7,000 reports per respondent, or a reduction of
5,196,000 reports in the aggregate.
    The Commission is also proposing to remove the requirement for
SEFs, DCMs, and reporting counterparties to report TR identifiers and
swap identifiers for international swaps. This proposed amendment would
remove the requirement to report two pieces of information within a
required swap creation data report, without impacting the number of
reports themselves. The requirement to report swap identifiers is
duplicative, and would not change the burden estimate, as SEFs, DCMs,
and reporting counterparties are required to report swap identifiers
for all swap pursuant to Sec.  45.5. However, the removal of the
requirement to report TR identifiers would slightly reduce the amount
of time required to make each report, as SEFs, DCMs, and reporting
counterparties would not need to report this information anymore.
Therefore, the Commission estimates the removal of this requirement
would lower the burden hours by .01 hour per report.
    However, at the same time, the Commission is proposing to require
the reporting of UTIs instead of USIs, which are currently being
reported in every required swap creation data report. As described
below in the section discussing amendments to Sec.  45.5, as this
information is reported in required swap creation data reports, the
Commission estimates the new rules requiring SEFs, DCMs, SDRs, and
reporting counterparties to change from reporting USIs to UTIs would
impact the burden calculations for Sec.  45.3 by increasing the burden
hours by .01 hour per report. As a result, the Commission estimates
there will be no change to the burden hours for Sec.  45.3 required
swap creation data reporting.
    The new aggregate proposed estimate for Sec.  45.3, as amended by
the proposal is as follows:
    Estimated number of respondents: 1,732.
    Estimated number of reports per respondent: 7,000.
    Average number of hours per report: .01.
    Estimated gross annual reporting burden: 121,240.
b. Swap Continuation Data Reporting Amendments
    The Commission is proposing to amend Sec.  45.4, which requires
reporting counterparties to report data to SDRs when swap terms change
and daily swap valuation data. As an initial matter, the Commission is
proposing to correct the estimated number of respondents in the
supporting statement from 1,732 to 1,705, to reflect the fact that SEFs
and DCMs do not report required swap continuation data under Sec. 
45.4.
    The Commission estimates that SDRs and reporting counterparties
would incur a one-time initial burden of 10 hours per entity to modify
their systems to adopt the changes described below, for a total
estimated hours burden of 17,050 hours. This burden should be mitigated
by the fact that these entities currently have systems in place to
provide this information to the Commission. The Commission additionally
estimates 5 hours per entity annually to perform any needed maintenance
or adjustments to reporting systems.
    Currently, Sec.  45.4 permits reporting counterparties to report
changes to swap terms when they occur (life cycle reporting), or to
provide a daily report of all of the swap terms (state data reporting).
The Commission is proposing to remove the option for state data
reporting. Reporting counterparties would report data to SDRs only when
swap terms change. As discussed above in section II.D, the Commission
believes this would significantly reduce the number of required swap
continuation data reports being sent to SDRs. Commission staff
estimates that across asset class for each respondent, the number of
reports would decrease by approximately 50%, reducing the number of
reports from 207,543 reports per respondent to 103,772 reports per
respondent, and a decrease of 176,930,408 reports in the aggregate.
    Currently, Sec.  45.4 requires SD/MSP/DCO reporting counterparties
to report valuation data for swaps daily, and non-SD/MSP/DCO reporting
counterparties to report valuation data quarterly. The Commission is
proposing to remove the requirement for non-SD/MSP/DCO reporting
counterparties to report quarterly valuation data. For the 1,585 non-
SD/MSP/DCO reporting counterparties, the Commission believes this
change would further reduce the number of required swap continuation
data reports being sent by 4 quarterly reports per 1,585 non-SD/MSP/DCO
reporting counterparties, from 107,772 reports per respondent to 97,431
reports per respondent, and a decrease of 6,340 reports in the
aggregate.
    Separately, the Commission is proposing to expand the daily
valuation data reporting requirement for SD/MSP/DCO reporting
counterparties to report margin and collateral data in addition to
valuation data. The frequency of the report would not change, but the
Commission expects SD/MSP/DCO reporting counterparties would require
more time to prepare each report. However, since all of this
information is reported electronically, the Commission expects the
increase per report to be small. The burden associated with these
changes is anticipated to result in an increase from .003 to .004 hours
per report, or 166,119 hours in the aggregate.
    The estimated aggregate burden for swap continuation data, as
amended by the proposal is as follows:
    Estimated number of respondents: 1,705.
    Estimated number of reports per respondent: 97,431.
    Average number of hours per report: .004.
    Estimated gross annual reporting burden: 664,479.
c. Unique Swap Identifiers
    The Commission is proposing to amend Sec.  45.5, which requires
SEFs, DCMs, reporting counterparties, and SDRs to generate and transmit
USIs. As

[[Page 21617]]

an initial matter, the Commission is proposing to correct the estimated
number of respondents and the estimated number of reports per each
respondent. Currently, SDRs, SDs, MSPs, SEFs, and DCMs are required to
generate USIs, but the Commission inadvertently had included the 1,585
non-SD/MSP/DCO reporting counterparties. The Commission is proposing to
therefore update the number or respondents to 147 SDs, MSPs, SEFs,
DCMs, DCOs, and SDRs. However, these entities generate USIs on behalf
of non-SD/MSP/DCO reporting counterparties for all swaps, so the
estimated number of reports per each respondents would increase to
115,646 reports per 147 respondents to account for the 17,000,000 new
swaps reported each year with USIs.
    The Commission estimates that SDRs and reporting counterparties
required to generate UTIs would incur a one-time initial burden of 1
hour per entity to modify their systems to adopt the changes described
below, for a total estimated hours burden of 940 hours. This burden
should be mitigated by the fact that these entities currently have
systems in place to provide this information to the Commission, and
UTIs are, in most cases, less burdensome to generate than USIs. The
Commission additionally estimates 1 hour per entity annually to perform
any needed maintenance or adjustments to reporting systems.
    Currently, Sec.  45.5 requires SDRs to generate and transmit USIs
for off-facility swaps with a non-SD/MSP reporting counterparty. The
Commission is proposing to amend Sec.  45.5 to require non-SD/MSP/DCO
reporting counterparties that are financial entities to generate and
transmit UTIs for off-facility swaps. The Commission estimates that
approximately half of non-SD/MSP/DCO reporting counterparties are
financial entities. Therefore, the Commission estimates that the number
of respondents would increase from 147 SDs, MSPs, SEFs, DCMs, DCOs, and
SDRs to 940 with the addition of financial entities.
    At the same time, however, this would lower the number of UTIs
generated per respondent to account for the increase in the number of
respondents generating UTIs. The Commission estimates the estimated
number of reports per respondent would decrease from 115,646 reports
from 147 respondents to 18,085 reports from 940 respondents.
    The estimated aggregate burden for unique transaction identifiers,
as amended by the proposal is as follows:
    Estimated number of respondents: 940.
    Estimated number of reports per respondent: 18,085.
    Average number of hours per report: .01.
    Estimated gross annual reporting burden: 169,999.
d. Legal Entity Identifier Amendments
    The Commission is proposing to amend Sec.  45.6, which requires
reporting entities to have LEIs. As an initial matter, the Commission
is proposing to revise the burden estimate for Sec.  45.6. LEIs are
reported in required swap creation data and required swap continuation
data reports, which are separately accounted for in the estimates for
Sec. Sec.  45.3 and 45.4. The current estimate for Sec.  45.6 double-
counts the estimates for Sec. Sec.  45.3 and 45.4 by calculating the
burden per data report. Instead, the burden for Sec.  45.6 should be
based on the requirement for each counterparty to obtain an LEI. The
Commission is proposing to revise the estimate to state that there are
1,732 entities required to have one LEI per respondent, and revise the
burden hours based on this change.276
—————————————————————————

    276 The Commission is similarly revising the estimate for
Sec.  45.7, which requires reporting counterparties to use UPIs.
Until the Commission designates a UPI, reporting counterparties use
the product fields unique to each SDR. As a result, until the
Commission designates a UPI, the burden estimates for the product
fields are accounted for in Sec. Sec.  45.3 and 45.4. To avoid
double-counting until there is a UPI, the Commission is proposing to
remove the burden estimate for Sec.  45.7 until the Commission
designates a UPI.
—————————————————————————

    Currently, Sec.  45.6 requires all entities to have LEIs. The
Commission is proposing to amend Sec.  45.6 to require SDs, MSPs, SEFs,
DCMs, DCOs, and SDRs to renew their LEIs annually. The proposed change
would increase the hour burden for these entities, but would not affect
the burden for the majority of entities required to have LEIs.
Nonetheless, the Commission expects the burden associated with these
changes is anticipated to result in an increase from .01 to .02 hours
per report, and 17 hours in the aggregate.
    The estimated aggregate burden for LEIs, as amended by the proposal
is as follows:
    Estimated number of respondents: 1,732.
    Estimated number of reports per respondent: 1.
    Average number of hours per report: .02.
    Estimated gross annual reporting burden: 35.
e. New Notifications for Changing SDRs
    The Commission is proposing amendments to Sec.  49.10(d) to require
reporting counterparties to notify SDRs and non-reporting
counterparties if they change the SDR to which they report swap data
and swap transaction and pricing data. This is a new burden that is not
covered in the collection. Reporting counterparties would be required
to send notifications to non-reporting counterparties and SDRs if they
elect to change the SDR to which they report data pursuant to parts 43
and 45.
    The Commission believes this would not require reporting
counterparties or SDRs to build any new systems or update technology.
Reporting counterparties would continue to report, and SDRs would
continue to accept, swap data according to current processes and
infrastructures. The Commission estimates that no more than 15
reporting counterparties would choose to change the SDR to which they
report data.
    The burden applicable to reporting counterparties is estimated as
follows:
    Estimated number of respondents: 15.
    Estimated number of reports per respondent: 1.
    Average number of hours per report: .01.
    Estimated gross annual reporting burden: .15.
2. Revisions to Collection 3038-0086 (Swap Data Access Provisions of
Part 49 and Certain Other Matters)
a. SDR Withdrawal From Registration Amendments
    The Commission is proposing to amend Sec.  49.4, which requires
SDRs to follow certain requirements when withdrawing from registration
with the Commission. These requirements involve filing paperwork with
the Commission. The Commission does not believe these changes would
require any one-time or ongoing system updates for SDRs.
    Currently, Sec.  49.4 requires that a request to withdraw specify,
among other items, a statement that the custodial SDR is authorized to
make such data and records available in accordance with Sec.  1.44 of
the Commission’s regulations. The Commission is proposing to remove
this requirement from Sec.  49.4 because Sec.  1.44 does not apply to
SDRs or swap data. Currently, Sec.  49.4(a)(2) requires that prior to
filing a request to withdraw, a registered SDR shall file an amended
Form SDR to update any inaccurate information. The proposal would
eliminate the requirement for SDRs to file an amended Form SDR prior to
filing a request to withdraw. The burden associated with these changes
to the

[[Page 21618]]

paperwork requirements for an SDR withdrawing from registration would
result in a decrease of 5 hours per report.
    However, separately, the Commission is proposing amendments to
Sec.  49.4(a)(2) to require SDRs to execute an agreement with the
custodial SDR governing the custody of the withdrawing SDR’s data and
records prior to filing a request to withdraw with the Commission. The
Commission believes this is current practice for SDRs, yet it would
nonetheless be a new requirement. As a result, the Commission believes
this would result in an increase of 5 hours per report for a
withdrawing SDR.
    Overall, the proposed amendments to Sec.  49.4 result in no change
to the estimated burdens for Sec.  49.4.
    The estimated aggregate burden for requirements for withdrawing
from SDR registration, remains as follows:
    Estimated number of respondents: 1.
    Estimated number of reports per respondent: 1.
    Average number of hours per report: 40.
    Estimated gross annual reporting burden: 40.
b. SDR Data Validation Requirement Amendments
    The Commission is proposing to amend Sec.  49.10, which provides
the requirements for SDRs in accepting SDR Data. As an initial matter,
the Commission notes that the burden estimate for Sec.  49.10 already
accounts for the messages SDRs send and receive in accepting swap data.
    The Commission estimates that SDRs would incur a one-time initial
burden of 100 hours per entity to modify their systems to adopt the
changes described below, for a total estimated hours burden of 300
hours. This burden should be mitigated by the fact that these entities
currently have systems in place to validate data that each SDR takes
in. The Commission additionally estimates 100 hours per entity annually
to perform any needed maintenance or adjustments to reporting systems.
    Currently, Sec.  49.10(a) requires SDRs to accept and promptly
record all swap data. In the 2019 Part 49 NPRM, the Commission proposed
amending the requirements in Sec.  49.10 by detailing separate Sec. 
49.10(e) requirements for correcting swap errors. In this release, the
Commission is proposing separate Sec.  49.10(c) requirements for
validating swap messages. This proposal would further specify that SDRs
must send validation acceptance and rejection messages after validating
SDR data. The Commission believes this would increase the number of
reports SDRs would need to send reporting entities. The current burden
estimate for Sec.  49.10, which right now includes Sec.  49.10(a),
estimates each SDR sends 5,652,000 messages, for a total of almost
17,000,000. This estimate includes the 2,626,000 messages the
Commission estimates SDRs would be required to send to process swap
corrections. The Commission believes this burden was estimated
correctly in the 2019 Part 49 NPRM and already accurately accounts for
the validation messages proposed in Sec.  49.10(c).
    The estimated aggregate burden for requirements for validating SDR
Data, remains as follows:
    Estimated number of respondents: 3.
    Estimated number of reports per respondent: 5,652,000.
    Average number of hours per report: .00055.
    Estimated gross annual reporting burden: 9,750.
3. Revisions to Collection 3038-0089 (Pre-Enactment Swaps and
Transition Swaps)
    Current Sec.  46.11 provides that for pre-enactment or transition
swaps for which part 46 requires reporting of continuation data,
reporting counterparties reporting state data as provided in part 45
may fulfill the requirement to report errors or omissions by making
appropriate corrections in their next daily report of state data
pursuant to part 45. Since the Commission is proposing to remove this
requirement from Sec.  45.4, the Commission is also proposing to remove
the option for state data reporting from Sec.  46.11.
    The Commission does not believe this proposed amendment would
require any system updates by SDRs or reporting counterparties. To the
extent they did, these updates would be covered under the estimates
above for entities making updates to comply with the change proposed in
Sec.  45.4.
    The Commission believes the proposed change would reduce the number
of continuation data reports reporting counterparties send SDRs for
historical swaps by 50%. The Commission has not previously calculated
the burden estimates for part 46 by regulatory requirement. As such,
the Commission now estimates that to comply with proposed amended Sec. 
46.11, the 500 SD, MSP, and non-SD/MSP reporting counterparties that
the Commission estimates are reporting historical swaps would each
report 200 reports with an average burden of .01 hours per report, for
a burden of 2 hours per respondent or 1,000 burden hours in the
aggregate.
    The estimated aggregate burden for requirements for reporting
continuation data for historical swaps would be as follows:
    Estimated number of respondents: 500.
    Estimated number of reports per respondent: 200.
    Average number of hours per report: .01.
    Estimated gross annual reporting burden: 1,000.
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. Minimizing 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

[[Page 21619]]

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. Introduction
    Since issuing the first swap reporting rules in 2012, the
Commission has gained a significant amount of experience with swaps
markets and products based on studying and monitoring data reported to
SDRs.277 As a result of this work, the Commission has also identified
areas for improvement in the current swap data reporting rules. Current
limitations with the regulations have, in some cases, encouraged the
reporting of swap data in a way that has made it difficult for the
Commission to aggregate and analyze. As a result, the Commission is
proposing a number of rule amendments intended to improve data quality
and standardization to achieve the G20 goal for trade reporting to
improve transparency, mitigate systemic risk, and prevent market
abuse.278
—————————————————————————

    277 The Commission has used swap data in various rulemakings,
research, and reports. See, e.g., “Introducing ENNS: A Measure of
the Size of Interest Rate Swap Markets,” Haynes R., Roberts J.
Sharma R., and Tuckman B., January 2018; CFTC Weekly Swaps Report,
available at www.cftc.gov/MarketReports/SwapsReports/index.htm.
    278 See https://www.treasury.gov/resource-center/international/g7-g20/Documents/pittsburgh_summit_leaders_statement_250909.pdf.
—————————————————————————

    While the Commission believes the proposed amendments would create
meaningful benefits for market participants, SDRs, and the public,
these changes could also result in costs. Section 15(a) of the CEA
requires the Commission to consider the costs and benefits of its
actions before promulgating a regulation under the CEA or issuing
certain orders.279 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) the efficiency, competitiveness and financial integrity of markets;
(3) price discovery; (4) sound risk management practices; and (5) other
public interest considerations.280 The Commission considers the costs
and benefits resulting from its discretionary determinations with
respect to the section 15(a) factors.
—————————————————————————

    279 7 U.S.C. 19(a)(1).
    280 7 U.S.C. 19(a)(2).
—————————————————————————

    In this release, the Commission is proposing revisions to existing
regulations in parts 45, 46, and 49. The Commission also is proposing
new requirements in parts 45, 46, and 49. Together, these proposed
revisions and additions are intended to further specify and streamline
swap data reporting workflows and to improve the quality of data
reporting generally. It is important to note that most of these
regulatory changes are being made to existing systems and processes,
therefore nearly all costs considered are incremental additions or
updates to systems already in place. Some of the proposed amendments
are substantive. A number of amendments, however, are non-substantive
or technical, and therefore are not expected to have material cost-
benefits implications.281
—————————————————————————

    281 The Commission believes there are no cost-benefit
implications for amendments proposed to Sec. Sec.  45.1, 45.2, 45.7,
45.8, 45.9, 45.11, 45.15, 46.1, 46.2, 46.4, 46.5, 46.8, 46.9, and
49.2.
—————————————————————————

    The changes proposed in this release that would result in costs to
implement are in many cases intended to harmonize the Commission’s
reporting regulations with those of other regulators where doing so
will not impact the Commission’s ability to fulfill its regulatory
mandates. As the FSB and CPMI-IOSCO harmonization efforts have
incorporated many rounds of industry feedback and the Commission has
been vocal about its support and participation,282 the Commission
expects that many market participants have, to the extent possible,
been planning and preparing for system updates to accommodate these
important changes in the most efficient, cost-effective manner.
—————————————————————————

    282 See, e.g., https://www.cftc.gov/PressRoom/SpeechesTestimony/opagiancarlo50 (“I believe the CFTC needs to be a
leading participant in IOSCO and other international bodies. The
CFTC currently chairs the following international committees and
groups and serves as a member of many other ones: . . . Co-Chair,
CPMI-IOSCO Data Harmonization Group[, and] Co-Chair, FSB Working
Group on UTI and UPI Governance”).
—————————————————————————

    The Commission notes that many jurisdictions have committed to
these harmonization efforts for which the Commission is proposing
adopting standards in this NPRM. If the Commission did not adopt these
standards, but other jurisdictions do according to the implementation
deadlines recommended by the FSB, unnecessary costs could be created by
SDRs and reporting entities having to maintain unharmonized reporting
infrastructures for CFTC reporting while other jurisdictions harmonize
and recognize efficiencies from harmonization.
    To the extent costs and benefits are reasonably quantifiable, they
are discussed below in this section; where they are not, they are
discussed qualitatively. Throughout this release, the Commission has
used the swap data currently available to estimate the expected
quantifiable cost-benefit impact of proposed changes on certain types
of registrants, such as the extent of state data reporting and
duplicative creation data reports. Most of the changes proposed in this
release alter reporting requirements for reporting counterparties,
SDRs, SEFs, and DCMs. As a result, there will likely be some
quantifiable costs related to either: (a) Creating new data reporting
systems; (b) re-programming data reporting systems to meet the new
reporting requirements; or (c) cancelling data streams, which might
lead to archiving data and maintaining legacy systems.
    These costs are quantifiable to the extent reporting entities
covered by the proposed regulations are able to price-out the changes
to the IT architecture to meet the reporting requirement changes. These
quantifiable costs, however, will likely vary because reporting
entities vary in terms of the sophistication of their data reporting
systems. For example, some reporting entities operate their own data
reporting systems where they employ in-house developers and analysts to
plan, design, code, test, establish, and monitor systems. Other
reporting entities pay fees to third-party vendors who handle reporting
obligations. Because reporting systems differ, the Commission
recognizes that the quantitative costs associated with these proposed
reporting rules in this release will vary depending on the reporting
entities’ operations and number of swaps that they execute.
    Given this understanding, the Commission has tried to provide a
monetary range for quantifiable costs as they relate to each proposed
reporting change discussed below. The Commission also specifically
requests comments to help quantify the costs of changes to reporting
systems and infrastructures that would be required to comply with the
regulatory changes proposed in this rulemaking.
    This consideration of costs and benefits is based on the
understanding that the swaps market functions internationally. Many
swaps transactions involving U.S. firms occur across international
borders, and some Commission registrants are organized

[[Page 21620]]

outside of the U.S., including many SDs. Many of the largest market
entities often conduct operations both within and outside the U.S.
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 U.S. or by virtue of the activity’s
connection with or effect on U.S. commerce under CEA section 2(i).283
—————————————————————————

    283 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
regulations under part 45 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. Background
    The Commission has issued several rulemakings related to swaps
reporting and, in those, considered the benefits and costs.284 Among
others, the Commission has generally identified benefits such as
increased transparency to both the marketplace and to regulators;
improved regulatory understanding of risk distributions and
concentrations in derivatives markets; more effective monitoring of
risk profiles by regulators and regulated entities through the use of
unique identifiers; improved regulatory oversight, and more robust data
management systems.285 The Commission also identified two main areas
where costs may be incurred: Recordkeeping and reporting.286
—————————————————————————

    284 In 2021, the Commission provided a detailed cost-benefit
discussion on its final swap reporting rules to ensure that market
participants reported cleared and uncleared swaps to SDRs. See 77 FR
at 2176-2193. In 2012, the Commission also issued final rules for
reporting pre-enactment and transition swaps. See generally Swap
Data Recordkeeping and Reporting Requirements: Pre-Enactment and
Transition Swaps, 77 FR 35200 (June 12, 2012). In 2016, the
Commission amended its regulations to clarify the reporting
obligations for DCOs and swap counterparties with respect to cleared
swaps. See generally Amendments to Swap Data Recordkeeping and
Reporting Requirements for Cleared Swaps, 81 FR 41736 (June 27,
2016).
    285 See, e.g., 77 FR at 2176-2193; 77 FR at 35217-35225; 81 FR
at 41758-41770.
    286 See, e.g., id.
—————————————————————————

    Since establishing swap data reporting requirements, the Commission
gained experience with swap data reported to, and held by, SDRs. Based
on this experience, along with extensive feedback received from market
participants, the Commission believes that improving data quality would
significantly enhance the data’s usefulness, allow the Commission to
realize the objectives of the original rule (e.g., market risk
monitoring in furtherance of the G20 commitments discussed above), but
also reduce the burden on reporting entities and SDRs through
harmonizing, streamlining and clarifying data requirements. In this
release, the Commission has focused on the swap data reporting
workflows, the swap data elements reporting counterparties report to
SDRs, and the validations SDRs apply to help ensure the swap data they
receive is accurate. The Commission is also proposing to modify a
number of other regulations for clarity and consistency.
    Prior to discussing the proposed rule changes, the Commission
describes below the current environment that would be impacted by these
changes. Three SDRs are currently provisionally registered with the
Commission: CME, DDR, and ICE. The changes proposed should apply
equally to all three SDRs.
    The current reporting environment also involves third-party service
providers. These entities assist market participants with fulfilling
the applicable data reporting requirements, though the reporting
requirements do not apply to third-party service providers directly.
From looking at current data, the Commission estimates that third-party
service providers do not account for a large portion of the overall
record submissions to SDRs, but provide an important service for firms
that choose to outsource their reporting needs.
    Finally, the current reporting environment depends on reporting
counterparties that report swap data to SDRs. The Commission currently
estimates reporting counterparties include 107 provisionally-registered
SDs, 24 SEFs, 3 DCMs, 14 DCOs, and 1,585 non-SD/MSP/DCO reporting
counterparties. There is considerable variation within each of these
reporting counterparty types as to size and swaps market activity. The
Commission understands that most SDs and nearly all SEFs, DCMs, DCOs,
and SDRs have sophisticated technology dedicated to data reporting
because of the frequency with which they either enter into or
facilitate the execution of swaps, or accept swap data from reporting
entities. The Commission also believes that these entities have greater
access to resources to update these systems as regulatory requirements
change. Further, the Commission’s data analysis implies that much of
the cost and benefit of the proposed changes will be incurred by SDs–
the most sophisticated participants in the market with the most
experience reporting under the E.U. and U.S. reporting regimes–that
accounted for over 70% of records submitted to SDRs in December
2019.287
—————————————————————————

    287 Analyzing SDR data from December 2019, CFTC staff found
over 70% of all records submitted to the SDRs came from SDs. Between
15% and 20% came from DCOs, 4% came from SEFs, and the remaining
came from non-SD reporting counterparties.
—————————————————————————

    As to non-SD/MSP/DCO reporting counterparties–a category
accounting for a small fraction of SDR reports–the Commission believes
there is wide variation in the reporting systems maintained by and
resources available to them. Many of these reporting counterparties are
large, sophisticated financial entities, including banks, hedge funds,
and asset management firms that the Commission believes have devoted
resources and systems similar to those available to SDs, SEFs, DCMs,
DCOs, and SDRs. However, the Commission recognizes that a significant
number of these reporting counterparties are smaller, less-
sophisticated swap end-users entering into swaps less frequently to
hedge commercial risk.
    For these entities, for which the Commission has a significant
interest in ensuring access to the U.S. swaps market without
unnecessary costs or burdens, the Commission has difficulty accurately
estimating the cost impact of the changes to its regulations proposed
in this NPRM. The challenge stems from the wide range of complexity
firms in this group face in their reporting burdens–a large asset
manager with billions of dollars in assets under management and a large
swaps portfolio could have a reporting system as complex and
sophisticated as an SD while a small hedge fund with a limited swaps
portfolio might rely on third-party providers to handle its reporting
obligations.
    As discussed in the Roadmap, the Commission is in the process of
improving data reporting requirements, including modifying the
requirements to be more specific and more consistent with other
regulators’ requirements. The amendments proposed in this rulemaking
are one part of this larger effort to ensure that better-quality data
is available to market participants and the Commission.
    Current regulations have led to swap data reports that do not fully
meet the Commission’s needs for data quality. For example, the current
appendix to part 45 provides no standards, formats, or allowable values
for the swap data

[[Page 21621]]

that reporting counterparties report to SDRs and there is no technical
specification or other guidance associated with the current rule. Since
the industry has not identified a standard for all market participants
to use, market participants have reported information in many different
ways, often creating difficulties in data harmonization, or even
identification, within and across SDRs.
    It is not uncommon for Commission staff to find discrepancies
between open swaps information available to the Commission and swap
transaction data reported for the same swaps. In the processing of swap
data to generate the CFTC’s Weekly Swaps Report,288 for example,
there are instances when the notional amount differs between the
Commission’s open swaps information and the swap transaction data
reported for the same swap. While infrequent errors can be expected,
the wide variation in standards among SDRs has increased the challenge
of swap data analysis and often has required significant data cleaning
and data validation prior to any data analysis effort. This has meant
that the Commission has, in some but not all cases, determined that
certain data analyses were not feasible, harming its ability to oversee
market activity.
—————————————————————————

    288 See CFTC’s Weekly Swaps Report, available at https://www.cftc.gov/MarketReports/SwapsReports/index.htm.
—————————————————————————

    In addition to the lack of standardization across SDRs, the
Commission is concerned that the current timeframes for reporting swap
data may have contributed to the prevalence of errors. Common examples
of errors include incorrect references to underlying currencies, such
as a notional value incorrectly linked to U.S. dollars instead of
Japanese Yen. Among others, these examples strongly suggest a need for
standardized, validated swap data as well as additional time to review
the accuracy of the data report.
    Based on its experience with data reporting, the Commission
believes that certain regulations, particularly in parts 45, 46, and
49, should be amended to improve swap data accuracy and completeness.
This release also includes one amendment to part 49 to improve the
process for an SDR’s withdrawal from registration. Many of the proposed
regulations have costs and benefits that must be considered. These will
be discussed individually below.
    For each proposed amendment discussed below, the Commission
summarizes the changes,289 and identifies and discusses the costs and
benefits attributable to the proposed changes. Since many of the
changes 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.290 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 matter experts
(“SMEs”) in the Commission’s Office of Data and Technology;
amendments where this type of cost estimate is not relevant will not.
Finally, the Commission considers the costs and benefits of all of the
proposed rules jointly in light of the five public interest
considerations in CEA section 15(a).
—————————————————————————

    289 As described throughout this release, the Commission is
also proposing a number of non-substantive, conforming rule
amendments in this release, such as renumbering certain provisions
and modifying the wording of existing provisions. Non-substantive
amendments of this nature may be described in the cost-benefit
portion of this release, but the Commission will note that there are
no costs or benefits to consider.
    290 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.
—————————————————————————

3. Baselines
    There are multiple baselines for the costs and benefits that might
arise from the proposed regulations in this release. The Commission
believes that the baseline for the proposed amendments to Sec. Sec. 
45.3, 45.4, 45.5, 45.6, 45.10, 45.12, 45.13, 46.3, 46.10, 46.11, and
49.4 are the current regulations, as discussed above in sections II,
III, and IV. The baseline for proposed Sec.  49.10 is current practice,
which is that SDRs may be performing validations according to their own
specifications, as discussed above in section IV.C.
4. Costs and Benefits of Proposed Amendments to Part 45
a. Sec.  45.3–Swap Data Reporting: Creation Data
    The Commission is proposing to amend Sec.  45.3 to: (i) Remove the
requirement for SEFs, DCMs, and reporting counterparties to report
separate PET and confirmation data reports; (ii) extend the deadline
for reporting required swap creation data and allocations to T+1 or
T+2, depending on the reporting counterparty; (iii) remove the
requirement for SDRs to map allocations; and (iv) remove the
international swap reporting requirements.
    The Commission believes: (i) Reporting a single required creation
data report would reduce complexity for reporting counterparties, as
well as for the Commission; (ii) extending the deadline to report
required swap creation data and allocations would improve data quality
without impacting the Commission’s ability to perform its regulatory
responsibilities; (iii) the requirements for SDRs to map allocations
and the international swap requirements are unnecessary.
(A) Costs and Benefits
    Requiring a single confirmation data report for SEFs, DCMs, and
reporting counterparties would benefit SDRs, SEFs, DCMs, and reporting
counterparties by reducing the number of swap data reports being sent
to and stored by SDRs. Extending the deadline to report required swap
creation data would benefit SDRs, SEFs, DCMs, and reporting
counterparties by giving SEFs, DCMs, and reporting counterparties more
time to report swap data to SDRs, likely reducing the number of errors
SDRs would need to follow-up on with reporting entities. Since
reporting data ASATP requires reporting systems to monitor activity and
report in real-time, the proposed time will also benefit SDRs, SEFs,
DCMs, and reporting counterparties by allowing them to implement a
simpler data reporting workflow that assembles and submits data once
per day.
    Removing the requirements to map allocations and international
swaps would benefit SDRs by removing the need to manage separate
processes to maintain this information. In addition, SEFs, DCMs, and
reporting counterparties would benefit from reporting allocations
directly via swap data reporting, and would no longer have to report
information about international swaps that would be

[[Page 21622]]

rendered unnecessary given the UTI standards.
    The initial cost of updating systems to adopt the changes proposed
in Sec.  45.3, as well as reporting-related changes that will be
discussed below, are expected to be small. The Commission expects that
many SEFs, DCMs, and reporting counterparties have systems designed to
report swap data to SDRs ASATP after execution, as well as systems that
report separate PET and confirmation swap reports as well as
information about international swaps. SDRs likewise have systems to
accept both PET and confirmation swap data reports, possibly separate
or combined, as well as systems to map allocations and intake
information about international swaps.
    In both cases, this is a reduction in complexity and software
functionality. Reporting counterparties no longer have to generate and
submit multiple messages, which will require limited cost and effort to
implement. SDRs will also require few, if any, updates to ingest fewer
messages.
    The Commission expects costs associated with the changes proposed
in this release would be further mitigated by the fact that they
involve updates to current systems, rather than having to create new
reporting systems as most firms had to do when ESMA and the CFTC first
required swaps reporting. CFTC SMEs estimate the cost of these changes
to be small, but not zero for large reporting entities and SDRs due to
the reduction in complexity and system features. However, over time,
after these one-time system updates are implemented, the Commission
expects SDRs, SEFs, DCMs, and reporting counterparties would recognize
significant benefits through reduced costs and complexity associated
with reporting streamlined data to SDRs over an extended time frame.
    The Commission preliminarily believes that on balance the expected
benefits justify the proposed rule amendments notwithstanding their
expected mitigated costs.
(B) Request for Comment
    The Commission requests comment on its considerations of the costs
and benefits of the proposed amendments to Sec.  45.3. Are there
additional costs or benefits that the Commission should consider that
have not yet been highlighted? Commenters are encouraged to include
both qualitative and quantitative assessments of these benefits.
    Are there any other alternatives that may provide preferable costs
or benefits than the costs and benefits related to the proposed
amendments? Specific areas of interest include the following:
    (38) The Commission has noted benefits of providing extended
timeframes for regulatory reporting, including improved data quality
and reduced number of reports for SDRs to maintain. Are there
additional benefits the Commission has not identified given the revised
structure? Are these benefits likely to be especially notable for
certain types of reporting entities?
    (39) The Commission has noted that the revised reporting framework
should, over time and after initial outlays, reduce costs for all
reporting entities, given the ability of an entity to retain but update
their current reporting systems. Are there costs the Commission has not
anticipated in these revisions? Are there specific types of reporters
that are more likely to adjust their current reporting systems? What
would be the reason for these adjustments, and the costs/benefits
associated with these adjustments?
    (40) The Commission has outlined two revised reporting frameworks,
depending on the type of the reporting entity (e.g., T+1 for SDs, MSPs
and DCOs). Does this division into two reporting categories make sense
given the current or anticipated reporting systems of the entities?
Would reporting be improved if any entity types were moved from one to
the other category?
    (41) The Commission requests comment on the range of costs SDRs,
SEFs, DCMs, DCOs, SDs, MSPs, and non-SD/MSP/DCO reporting
counterparties would have to spend to comply with the amendments
proposed in Sec.  45.3.
b. Sec.  45.4–Swap Data Reporting: Continuation Data
    The Commission is proposing to amend Sec.  45.4 to: (i) Remove the
option for reporting counterparties to report state data as required
swap continuation data; (ii) extend the deadline for reporting required
swap continuation data to T+1 or T+2, depending on the reporting
counterparty; (iii) remove the requirement for non-SD/MSP/DCO reporting
counterparties to report valuation data quarterly; and (iv) require SD/
MSP/DCO reporting counterparties to report margin and collateral data
daily.
    The Commission believes: (i) Removing the option for state data
reporting would reduce the number of messages being sent to and stored
by SDRs; (ii) extending the deadline to report required swap
continuation data would improve data quality without impacting the
Commission’s ability to perform its regulatory responsibilities; (iii)
removing the valuation requirement for non-SD/MSP/DCO reporting
counterparties would reduce burdens for these counterparties, which
tend to be smaller and less-active in the swaps market, without
sacrificing any important information; and (iv) requiring SD/MSP/DCO
reporting counterparties to report margin and collateral daily is
essential for the Commission to monitor risk in the swaps market.
(A) Costs and Benefits
    Removing state data reporting would benefit reporting
counterparties by significantly reducing the number of messages they
report to SDRs. Relatedly, this would benefit SDRs by significantly
reducing the number of messages they need to ingest, validate, process,
and store In 2019, CFTC staff estimates that the Commission received
over 557,000,000 swap messages from CME, DDR, and ICE. Staff analysis
from December 2019 showed over 50% of all records submitted were state
data messages.
    Extending the deadline to report required swap continuation data
would benefit SDRs and reporting counterparties by likely reducing the
number of errors SDRs would need to notify reporting counterparties
about. Removing the requirement for non-SD/MSP/DCO reporting
counterparties to report quarterly valuation data would reduce
reporting costs for these estimated 1,585 counterparties, which tend to
be smaller and less-active in the swaps market. Because these entities
are small relative to the swaps market as a whole, the lack of
quarterly valuation data is not anticipated to greatly inhibit the
market oversight responsibilities of the Commission. Requiring SD/MSP/
DCO reporting counterparties to report margin and collateral daily
would benefit the swaps market by improving the Commission’s ability to
monitor risk in the swaps market, particularly for uncleared swaps.
Because current part 45 reports do not include collateral information,
the Commission is often able to identify the level of risk inherent to
a swap (or set of swaps), but not fully understand the amount of
collateral protection a counterparty holds to mitigate this risk.
    The initial costs of updating systems to adopt the changes proposed
in Sec.  45.4 are expected to range from low for many impacted parties
to moderate for others, and would be offset by the lessened reporting
burden. For instance, the Commission understands that many reporting
counterparties already have systems designed to report swap data,
including snapshot data, to SDRs

[[Page 21623]]

according the current timelines–extending the timeline for reporting
reduces the complexity of the reporting system and removing a message
type that accounts for over 50% of the existing message traffic is a
significant reduction in reporting burden. SDRs likewise have systems
to accept snapshot data which would require minimal updates (based on
the experience of CFTC SMEs with similar systems) and reduced data
storage costs.
    Non-SD/MSP/DCO reporting counterparties would need to update their
systems to stop sending valuation data to SDRs. In contrast, SD/MSP/DCO
reporting counterparties would need to program systems to begin
reporting margin and collateral data in addition to current valuation
data. The T+1 reporting timeline greatly mitigates this cost by
allowing end-of-day data integration and validation processes, which
according to CFTC SMEs and staff conversations with industry
participants provides flexibility in exactly how and when system
resources are used to produce the reports and better aligns trade and
collateral and margin data reporting streams.
    Additionally, over time, after these one-time system updates, the
Commission expects SDRs, SEFs, DCMs, and reporting counterparties would
recognize the full benefits of the reduced costs associated with
reporting streamlined data to SDRs in a more reasonable time frame.
While the Commission understands reporting margin and collateral data
to SDRs could involve considerable expense for the estimated 121 SD/
MSP/DCO reporting counterparties, the Commission notes that ESMA
currently requires the reporting of much of the same information to
E.U.-registered TRs. The Commission expects this to mitigate the costs
for SDRs that serve multiple jurisdictions.
    The Commission expects this could also mitigate the costs for most
of the 121 SD/MSP/DCO reporting counterparties given that they are
likely active in the European swap markets and thus already fall under
similar requirements. The Commission also expects that, for the other
relevant reporting entities, collateral and margin information is
already known by the entity. The primary cost would be in integrating
existing collateral data streams into SDR reporting workflows. CFTC
SMEs estimate the cost of these changes to be small to moderate for
large reporting entities and SDRs due to the reduction in complexity
and system features, as well as the extended timeline to integrate
potentially disparate data streams.
    The Commission preliminarily believes that on balance the expected
benefits justify the proposed rule amendments notwithstanding their
expected mitigated costs.
(B) Request for Comment
    The Commission requests comment on its considerations of the costs
and benefits of the proposed amendments to Sec.  45.4, given that there
might be different transaction reporting and risk reporting systems.
Are there additional costs or benefits that the Commission should
consider? Commenters are encouraged to include both qualitative and
quantitative assessments of these benefits.
    Are there any other alternatives that may provide preferable costs
or benefits than the costs and benefits related to the proposed
amendments? Specific areas of interest include the following:
    (42) The Commission requests comment on the range of costs SDRs,
SEFs, DCMs, DCOs, SDs, MSPs, and non-SD/MSP/DCO reporting
counterparties would have to spend to comply with the amendments
proposed in Sec.  45.4.
c. Sec.  45.5–Unique Swap Identifiers
    The Commission is proposing to amend Sec.  45.5 to: (i) Require
reporting counterparties use UTIs instead of USIs for new swaps; (ii)
require SD/MSP entities that are financial entities to generate UTIs
for off-facility swaps; and (iii) permit non-SD/MSP/DCO reporting
counterparties that are not financial entities to ask their SDR to
generate UTIs for swaps.
    In general, as described in section II.E, the Commission believes
transitioning to the globally-standardized UTI system will benefit
SDRs, SEFs, DCMs, and reporting counterparties by reducing the
complexity associated with reporting swaps to or in multiple
jurisdictions.
(A) Costs and Benefits
    The Commission believes that proposed Sec.  45.5 would benefit SDRs
by providing one standard that multiple regulators should adopt to
reduce the burdens associated with multiple jurisdictions with
different, and possibly conflicting, standards. The Commission believes
that requiring SD/MSP and financial entity reporting counterparties to
generate UTIs for off-facility swaps would benefit non-financial
entities by reducing the frequency with which they would be responsible
for UTI generation, as compared to the current frequency with which
they generate USIs.
    The Commission believes permitting non-SD/MSP/DCO reporting
counterparties that are not financial entities to ask their SDR to
generate UTIs for swaps would benefit smaller, less-active swaps market
participants by relieving them of the burden to create UTIs. While non-
financial entities account for a small portion of total swaps traded as
noted above, this group is mostly comprised of end-users that often
don’t maintain systems that automatically generate UTIs. Therefore,
this group will benefit proportionally more from this change.
    Permitting these reporting counterparties to ask the SDRs to
generate UTIs would maintain, but lower, an ancillary cost for the
three SDRs that are currently required to generate USIs for non-SD/MSP/
DCO reporting counterparties. The Commission believes that giving these
reporting counterparties, which should be a minority of the 1,585 non-
SD/MSP reporting counterparties, the option, rather than a mandate,
strikes the appropriate balance between avoiding undue costs for SDRs
and significant burdens for the least-sophisticated market
participants.
    In general, the Commission expects the initial costs of updating
systems to adopt UTIs could be significant. For instance, the
Commission expects that reporting counterparties and SDRs have systems
that create, report, accept, validate, process, and store USIs. CFTC
SMEs estimate the cost of these changes to be small for large reporting
entities and small to moderate for SDRs. However, over time, after
these one-time system updates, the Commission expects market
participants would recognize the full benefits of the reduced costs
associated with reporting a globally-standardized UTI.
    In addition, the Commission understands that ESMA already mandates
UTIs. The Commission expects that this should mitigate burdens for SDRs
serving multiple jurisdictions as well as reporting counterparties
active in the European markets since they have likely already updated
their systems to meet the European standards.
    The Commission preliminarily believes that on balance the expected
benefits justify the proposed rule amendments notwithstanding their
expected mitigated costs.
(B) Request for Comment
    The Commission requests comment on its considerations of the costs
and benefits of the proposed amendments to Sec.  45.5. Are there
additional costs or benefits that the Commission should consider?
Commenters are encouraged to include both qualitative and

[[Page 21624]]

quantitative assessments of these benefits.
    Are there any other alternatives that may provide preferable costs
or benefits than the costs and benefits related to the proposed
amendments?
d. Sec.  45.6–Legal Entity Identifiers
    The Commission is proposing to amend Sec.  45.6 to: (i) Require
SDs, MSPs, DCOs, SEFs, DCMs, and SDRs to maintain and renew LEIs; (ii)
required registered entities and financial entities to obtain LEIs for
swap counterparties that do not have one; and (iii) update unnecessary
and outdated regulatory text. The Commission believes accurate LEIs are
essential for the Commission to use swap data to fulfill its regulatory
responsibilities.
(A) Costs and Benefits
    Mandating LEI renewal will benefit the swaps market by improving
the Commission’s ability to analyze activity in the swaps market.
Reference data provides valuable identification and relationship
information about swap counterparties. Accurate reference data allows
for robust analysis of swaps risk concentration within and across
entities, as well as a way to identify the distribution or transfer of
risk across different legal entities under the same parent. The
Commission also believes accurate reference data is essential for it to
satisfy its regulatory responsibilities because it clearly identifies
entities involved in the swaps market, as well as how these entities
relate to one another–both key requirements for monitoring systemic
risk and promoting fair and efficient markets. In addition, LEIs have
already been broadly adopted in swaps markets and their widespread use
has shown promise by reducing ambiguity engendered by market
participants previously using a variety of non-standard reporting
identifiers.
    However, the Commission recognizes LEI renewals impose some costs.
Currently, the Commission understands that LEI renewals cost each
holder $50 per year. To limit burdens for counterparties that are
smaller or less-active in the swaps market, the Commission has proposed
limiting the renewal requirement to the estimated 151 SDs, MSPs, SEFs,
DCMs, DCOs, and SDRs, resulting in an aggregate cost of approximately
$7,550 for this requirement. The Commission believes the activities of
these entities have the most systemic impact on the Commission’s
ability to fulfill its regulatory mandates and thus warrant this small
additional cost.
    Requiring each DCO and financial entity reporting counterparty to
obtain an LEI for their counterparties that do not have LEIs would both
further the Commission’s objective of monitoring risk in the swaps
market and incentivize LEI registration for counterparties that have
not yet obtained LEIs. However, the Commission recognizes this
requirement imposes some costs either on the entity obtaining an LEI
for its counterparty, or the entity incentivized to register on its
own.
    The number of current swap counterparties without LEIs is difficult
to estimate because of the lack of standardization of non-LEI
identifiers. The Commission cannot therefore determine whether non-LEI
identifiers represent an entity that has already been assigned an LEI
or whether two non-LEI identifiers are two different representations of
the same entity. However, the Commission expects the number of
counterparties currently without LEIs to be small, given the results of
an analysis of swap data from December 2019 that showed 90% of all
records reported had LEIs for both counterparties. More generally, any
swap data that does not identify eligible counterparties with an LEI
hinders the Commission’s fulfillment of its regulatory mandates,
including systemic risk monitoring.
    The Commission preliminarily believes that on balance the expected
benefits justify the proposed rule amendments notwithstanding their
expected mitigated costs.
(B) Request for Comment
    The Commission requests comment on its considerations of the costs
and benefits of the proposed amendments to Sec.  45.6. Are there
additional costs or benefits that the Commission should consider?
Commenters are encouraged to include both qualitative and quantitative
assessments of these benefits.
    Are there any other alternatives that may provide preferable costs
or benefits than the costs and benefits related to the proposed
amendments? Specific areas of interest include the following:
    (43) The Commission requests comment on the range of costs for DCO
and financial entity reporting counterparties to obtain LEIs via third-
party registration for counterparties that have not obtained LEIs to
comply with proposed Sec.  45.6(d)(3).
e. Sec.  45.10–Reporting to a Single SDR
    The Commission is proposing to amend Sec.  45.10 to permit
reporting counterparties to transfer swap data and swap transaction and
pricing data between SDRs in revised Sec.  45.10(d). To do so,
reporting counterparties would need to notify the current SDR, new SDR,
and non-reporting counterparty of the UTIs for the swaps being
transferred and the date of transfer at least five business days before
the transfer. Reporting counterparties would then need to report the
change of SDR to the current SDR and the new SDR, and then begin
reporting to the new SDR.
    The Commission believes the ability to change SDRs will benefit
reporting counterparties by permitting them to choose the SDR that best
fits their business needs.
(A) Costs and Benefits
    Proposed Sec.  45.10(d) would benefit reporting counterparties by
giving them the freedom to select the SDR that provides the best
services, pricing, and functionality to serve their business needs
instead of having to use the same SDR for the entire life of the swap.
The Commission believes reporting counterparties could benefit through
reduced costs if they had the ability to change to an SDR that provided
services better calibrated to their business needs.
    The Commission recognizes the proposal would impose costs on the
three SDRs. SDRs would need to update their systems to permit reporting
counterparties to transfer swap data and swap transaction pricing data
in the middle of a swap’s lifecycle, rather than at the point of swap
initiation. However, the Commission believes that after the initial
system updates, SDRs should be able to accommodate these changes since
they are only slightly more burdensome than most of the current on-
boarding practices for new clients in place at each SDR. In addition,
SDRs would benefit from attracting new clients that choose to move
their reporting to their SDR.
    The Commission preliminarily believes that on balance the expected
benefits justify the proposed rule amendments notwithstanding their
expected mitigated costs.
(B) Request for Comment
    The Commission requests comment on its considerations of the costs
and benefits of the proposed amendments to Sec.  49.10. Are there
additional costs and benefits that the Commission should consider?
Commenters are encouraged to include both qualitative and quantitative
assessments of these costs and benefits.
    Are there any other alternatives that may provide preferable costs
or benefits than the costs and benefits related to the proposed
amendments?

[[Page 21625]]

f. Sec.  45.12–Data Reporting for Swaps in a Swap Asset Class Not
Accepted by Any SDR
    The Commission is proposing to remove the Sec.  45.12 regulations
that permit voluntary supplemental reporting. Current Sec.  45.12
permits voluntary supplemental reporting to SDRs and specifies
counterparties must report USIs, LEIs, and an indication of
jurisdiction as part of the supplementary report. Section 45.12 also
requires counterparties correct errors in voluntary supplemental
reports.
    The Commission believes removing voluntary supplemental swap
reports will reduce unnecessary messages in the SDR that do not provide
a clear regulatory benefit to the Commission.
(A) Costs and Benefits
    Removing the option for voluntary supplemental reporting would
benefit SDRs to the extent that they would no longer need to take in,
process, validate, and store the reports. This should reduce costs and
any unnecessary complexities for SDRs with respect to these reports
that provide little benefit to the Commission.
    The Commission recognizes the proposal would impose initial costs
on SDRs. The three SDRs would need to update their systems to stop
accepting these reports. However, the Commission expects these costs
would be minimal and after the initial system updates, SDRs should see
reduced costs by not having to accommodate these reports. CFTC SMEs
estimate the cost of these changes to be small for large reporting
entities and SDRs.
    The Commission preliminarily believes that on balance the expected
benefits justify the proposed rule amendments notwithstanding their
expected mitigated costs.
(B) Request for Comment
    The Commission requests comment on its considerations of the costs
and benefits of the proposed amendments to Sec.  45.12. Are there
additional costs and benefits that the Commission should consider?
Commenters are encouraged to include both qualitative and quantitative
assessments of these costs and benefits.
    Are there any other alternatives that may provide preferable costs
or benefits than the costs and benefits related to the proposed
amendments?
g. Sec.  45.13–Required Data Standards
    The Commission is proposing to amend Sec.  45.13 to (i) require
reporting counterparties, SEFs, DCMs, and DCOs to report required swap
creation and continuation data to SDRs using the technical standards,
as instructed by the Commission, for each swap data element required to
be reported; (ii) require reporting counterparties, SEFs, DCMs, and
DCOs to satisfy SDR validation rules; and (iii) require SDRs to send
reporting counterparties, SEFs, DCMs, DCOs, and third party service
providers validation messages.
(A) Costs and Benefits
    Through updating and further specifying the swap data elements
required to be reported to SDRs, the Commission would benefit from
having swap data that is more standardized, accurate, and complete
across SDRs. As discussed in section V above, the Commission’s use of
the data to fulfill its regulatory responsibilities has been
complicated by varying compliance with swap data standards both within
and across SDRs.
    The Commission recognizes that the changes proposed in Sec.  45.13
would require SDRs, SEFs, DCMs, and reporting counterparties to update
their reporting systems. The three SDRs would need to update their
systems to accept swap data according to new technical standards and
validation conditions. SEFs, DCMs, and reporting counterparties would
need to update their systems as well to report swap data to SDRs
according to the technical standards. These entities would also need to
update systems to validate swap data. The costs of these updates are
likely to differ from entity to entity but, depending on current
systems, could be high.
    However, if the Commission believes some factors would mitigate the
costs to these entities. First, most of the swap data the Commission is
proposing to further standardize with the updates in appendix 1 is
currently being reported to SDRs. Commission staff recognize that data
quality has improved over the past years as SDRs adopted more technical
standards on their own. However, for certain assets classes, the
Commission expects the changes could be more pronounced. Costs to
standardize data elements that had not been standardized, in certain
asset classes like commodities, or adding new data elements would be
more costly but could be mitigated if the reporting entity already
saves this information but does not currently then send it to the SDR.
    Second, to the extent SDRs operate in multiple jurisdictions, ESMA
already requires many of the swap data elements and many of the
technical standards and validation conditions the Commission is
proposing. An SDR may have to spend fewer resources updating its
systems for the proposed changes in Sec.  45.13 if it has already made
these changes for European market participants. Similarly, SEFs, DCMs,
and reporting counterparties reporting to European TRs may have to
spend fewer resources.
    Additionally, after the updates would be made, the Commission
expects SDRs, SEFs, DCMs, and reporting counterparties would see a
reduction in costs through reporting a more streamlined data set than
what is currently being reported to SDRs. In addition, entities
reporting in multiple jurisdictions would be able to report more
efficiently as jurisdictions adopt the CDE Technical Guidance data
elements.
    Finally, this NPRM is proposed to have the part 43 swap transaction
and pricing data be a subset of the part 45 swap data. This means
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 45
will likely also allow it to comply with part 43, the Commission
anticipates significantly lower aggregate costs relative to the costs
for parts 43 and 45 separately. For this reason, the costs 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
$500,000.291 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 1 and the technical standards.292 These
numbers assume

[[Page 21626]]

that each SDR will spend approximately 3,000-5,000 hours to establish
ETL into a relational database on such a data stream.293
—————————————————————————

    291 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.
    292 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.
    293 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 $72,500.294 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.295 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
conversions would add another 300 to 400 hours, resulting in an
estimated total of 500 to 725 hours per reporting entity.296 The
Commission preliminarily believes that on balance the expected benefits
justify the proposed rule amendments notwithstanding their expected
mitigated costs.
—————————————————————————

    294 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.
    295 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.
    296 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.
—————————————————————————

(B) Request for Comment
    The Commission requests comment on its considerations of the costs
and benefits of the proposed amendments to Sec.  45.13. Are there
additional costs and benefits that the Commission should consider?
Commenters are encouraged to include both qualitative and quantitative
assessments of these costs and benefits.
    Are there any other alternatives that may provide preferable costs
or benefits than the costs and benefits related to the proposed
amendments?
5. Costs and Benefits of Proposed Amendments to Part 46
a. Sec.  46.3–Swap Data Reporting for Pre-Enactment Swaps and
Transition Swaps
    The Commission is proposing to amend Sec.  46.3 to remove an
exception for required swap continuation data reporting for pre-
enactment and transition swaps. Currently, Sec.  46.3(a)(2) provides
that reporting counterparties need to report only a subset of part 45
swap data fields when reporting updates to pre-enactment and transition
swaps. The Commission is removing that exception to specify that
reporting counterparties would report updates to pre-enactment and
transition swaps according to part 45.
(A) Costs and Benefits
    The Commission believes that this should be current practice for
SDRs and reporting counterparties, and should therefore not impact
costs or benefits to SDRs and reporting counterparties.
(B) Request for Comment
    Is the Commission’s understanding correct that the proposed change
to Sec.  46.3(a)(2) would have no practical impact on reporting
counterparties and SDRs for pre-enactment and transition swap
continuation data reporting? Are there additional costs and benefits
that the Commission should consider? Commenters are encouraged to
include both qualitative and quantitative assessments of these costs
and benefits.
    Are there any other alternatives that may provide preferable costs
or benefits than the costs and benefits related to the proposed
amendments?
b. Sec.  46.10–Required Data Standards
    The Commission is proposing to update Sec.  46.10 to require
reporting counterparties to use the required data standards set forth
in Sec.  45.13(a) for reporting historical swaps to SDRs. The
Commission believes reporting counterparties currently use the same
data standards for both parts 45 and 46 reporting. This change would
ensure that reporting counterparties continue to do so under the
proposed updated list of swap data elements in appendix 1 and the new
technical standards.
(A) Costs and Benefits
    SDRs and reporting counterparties would both incur costs in
updating their part 46 reporting systems to report according to any of
the proposed changes to part 45 reporting. However, given the
diminishing number of historical swaps that have not yet matured or
been terminated, the Commission expects that these costs would be
negligible compared to the costs associated with complying with new
Sec.  45.13.
(B) Request for Comment
    The Commission requests comment on its considerations of the costs
and benefits of the proposed amendments to Sec.  46.10. Are there
additional costs and benefits that the Commission should consider? Are
there factors that would raise costs for reporting historical swaps
according to the standards in Sec.  45.13? Commenters are encouraged to
include both qualitative and quantitative assessments of these costs
and benefits.
    Are there any other alternatives that may provide preferable costs
or benefits than the costs and benefits related to the proposed
amendments?
c. Sec.  46.11–Reporting of Errors and Omissions in Previously Omitted
Data
    The Commission is proposing to remove Sec.  46.11(b) to remove the
option for state data reporting. This would be consistent with the
Commission’s proposal to eliminate state data reporting in Sec.  45.4.
(A) Costs and Benefits
    SDRs and reporting counterparties would both incur costs in
updating their part 46 reporting systems to eliminate state data
reporting. However, given the dwindling number of historical swaps that
have not yet matured or been terminated, the Commission expects that
these costs would be negligible.297
—————————————————————————

    297 For instance, in reviewing credit default swap data, the
Commission found that there were 153,563 open pre-enactment swaps
and transition swaps in 2013. In 2019, that number had decreased to
2,048.

—————————————————————————

[[Page 21627]]

(B) Request for Comment
    The Commission requests comment on its considerations of the costs
and benefits of the proposed amendments to Sec.  46.11. Are there
additional costs and benefits that the Commission should consider?
Commenters are encouraged to include both qualitative and quantitative
assessments of these costs and benefits.
    Are there any other alternatives that may provide preferable costs
or benefits than the costs and benefits related to the proposed
amendments?
6. Costs and Benefits of Proposed Amendments to Part 49
a. Sec.  49.4–Withdrawal From Registration
    The Commission is proposing to amend Sec.  49.4 to: (i) Remove the
erroneous requirement for SDRs to submit a statement to the Commission
that the custodial SDR is authorized to make the withdrawing SDR’s data
and records available in accordance with Sec.  1.44; and (ii) remove
the Sec.  49.4(a)(2) requirement that prior to filing a request to
withdraw, a registered SDR file an amended Form SDR to update any
inaccurate information and replace it with a new requirement for SDRs
to execute an agreement with the custodial SDR governing the custody of
the withdrawing SDR’s data and records prior to filing a request to
withdraw with the Commission.
    The Commission believes the amendments would simplify the
regulations and help ensure that swap data is properly transferred to a
different SDR when one SDR withdraws from registration.
(A) Costs and Benefits
    The Commission believes SDRs would benefit from the removal of the
unnecessary requirement to update Form SDR prior to withdrawing from
registration. The Commission would benefit from having a clear
regulatory requirement for an SDR withdrawing from registration to have
an agreement with the custodial SDR regarding the withdrawing SDR’s
data and records.
    The Commission believes SDRs would not incur any material costs
associated with the proposed changes. SDRs would execute a custodial
agreement to transfer the data as a matter of due course. The changes
concerning timing and removing the erroneous reference would not result
in costs for the SDRs.
(B) Request for Comment
    The Commission requests comment on its considerations of the costs
and benefits of the proposed amendments to Sec.  46.11. Are there
additional costs and benefits that the Commission should consider?
Commenters are encouraged to include both qualitative and quantitative
assessments of these costs and benefits.
    Are there any other alternatives that may provide preferable costs
or benefits than the costs and benefits related to the proposed
amendments?
b. Sec.  49.10–Acceptance of Data
    Most of the amendments the Commission is proposing to Sec.  49.10
are non-substantive minor technical amendments. However, the Commission
is proposing to add a new requirement in Sec.  49.10(c) to require SDRs
to validate SDR data. Proposed Sec.  49.10(c) would require that SDRs
establish data validations. SDRs would also be required to send SEFs,
DCMs, and reporting counterparties data validation acceptance and error
messages that identify the validation errors. The Commission is also
proposing to require that SDRs cannot reject a swap transaction and
pricing data message if it was submitted jointly with a swap data
message that contained a validation error.
(A) Costs and Benefits
    SDRs, SEFs, DCMs, and reporting counterparties would benefit by
having a single set of validation rules in the technical standards
instead of each SDR applying different validations.
    SDRs, SEFs, DCMs, and reporting counterparties would incur costs in
updating their reporting systems apply these validation rules. To the
extent SDRs operate in multiple jurisdictions, ESMA is already
requiring many of the data validations that DMO is proposing in the
technical standards to be published on cftc.gov. An SDR may have to
spend fewer resources updating its systems for the proposed changes in
Sec.  49.10(c) if it has already made these changes for European market
participants. Similarly, SEFs, DCMs, and reporting counterparties
reporting to European TRs may have to spend fewer resources making
these updates.
(B) Request for Comment
    The Commission requests comment on its considerations of the costs
and benefits of the proposed amendments to Sec.  49.10(c). Are there
additional costs and benefits that the Commission should consider?
Commenters are encouraged to include both qualitative and quantitative
assessments of these costs and benefits.
    Are there any other alternatives that may provide preferable costs
or benefits than the costs and benefits related to the proposed
amendments?
7. Reporting in Light of CEA Section 15(a)
    The Dodd-Frank Act sought to promote the financial stability of the
U.S., in part, by improving financial system accountability and
transparency. More specifically, Title VII of the Dodd-Frank Act
directs the Commission to promulgate regulations to increase swaps
markets’ transparency and thereby reduce the potential for counterparty
and systemic risk.298 Transaction-based reporting is a fundamental
component of the legislation’s objectives to increase transparency,
reduce risk, and promote market integrity within the financial system
generally, and the swaps market in particular. The SDRs and the SEFs,
DCMs, and other reporting entities that submit data to SDRs are central
to achieving the legislation’s objectives related to swap reporting.
—————————————————————————

    298 See Congressional Research Service Report for Congress,
The Dodd-Frank Wall Street Reform and Consumer Protection Act: Title
VII, Derivatives, by Mark Jickling and Kathleen Ann Ruane (August
30, 2010); Department of the Treasury, Financial Regulatory Reform:
A New Foundation: Rebuilding Financial Supervision and Regulation
(June 17, 2009) at 47-48.
—————————————————————————

    CEA section 15(a) requires the Commission to consider the costs and
benefits of the proposed amendments to parts 23, 43, 45, and 49 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.
    A discussion of these proposed amendments in light of CEA section
15(a) factors is set out immediately below.
a. Protection of Market Participants and the Public
    The Commission believes that the reporting changes under parts 45,
46, and 49 would enhance protections already in place for market
participants and the public. By lengthening reporting timeframes and
standardizing data formats, the Commission believes that it would be
provided a more cohesive, more standardized, and, ultimately, more
accurate data without sacrificing

[[Page 21628]]

the ability to oversee the markets in a robust fashion. Higher-quality
swap data would improve the Commission’s oversight and enforcement
capabilities, and, in turn, would aid it in protecting markets,
participants, and the public in general.
b. Efficiency, Competitiveness, and Financial Integrity
    The Commission believes the proposed rules would streamline
reporting and improve efficiencies given the improved data
standardization. By identifying reporting entities and by making DCO
reporting duties clearer, the proposed rules strive to improve
reliability and consistency of swap data. This reliability might
further lead to bolstering the financial integrity of swaps markets.
Finally, the validation of swap data would improve the accuracy and
completeness of swap data available to the Commission and would assist
the Commission with, among other things, improved monitoring of risk
exposures of individual counterparties, monitoring concentrations of
risk exposure, and evaluating systemic risk.
c. Price Discovery
    The Commission does not believe the proposed rules would have a
significant impact on price discovery.
d. Risk Management Practices
    The Commission believes that the proposed rules would improve the
quality of swap data reported to SDRs and, hence, improve the
Commission’s ability to monitor the swaps market, react to changes in
market conditions, and fulfill its regulatory responsibilities
generally. The Commission believes that regulator access to high-
quality swap data is essential for regulators’ to monitor the swaps
market for systemic risk, or unusually large concentrations of risk in
individual swaps markets or asset classes.
e. Other Public Interest Considerations
    The Commission believes that the increased accuracy resulting from
improvements to data entry by market participants and validation
efforts by SDRs via the proposed rules has other public interest
considerations including:
     Increased understanding for the public, market
participants, and the Commission of the interaction between the swaps
market, other financial markets, and the overall economy;
     Improved regulatory oversight and enforcement
capabilities; and
     Enhanced information for the Commission and other
regulators so that they may establish more effective public policies to
monitor and, where necessary, reduce overall systemic risk.
8. General Request for Comment
    The Commission requests comment on all aspects of the proposed
rules. Beyond specific questions interspersed throughout this
discussion, the Commission generally requests comment on all aspects of
its consideration of costs and benefits, including: Identification and
assessment of any costs and benefits not discussed therein; the
potential costs and benefits of alternatives; data and any other
information (including proposed methodology) to assist or otherwise
inform the Commission’s ability to quantify or qualitatively describe
the benefits and costs of the proposed rules; and substantiating data,
statistics, and any other information to support statements by
commenters with respect to the Commission’s consideration of costs and
benefits. Commenters also may suggest other alternatives to the
proposed approach where the commenters believe that the alternatives
would be appropriate under the CEA and provide a superior cost-benefit
profile. Commenters are encouraged to include both qualitative and
quantitative assessments of these benefits and costs.

D. Antitrust Considerations

    CEA section 15(b) 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 45 would result in anti-competitive behavior. The Commission
expects the proposed amendments to Sec.  45.10(d) that would permit
reporting counterparties to change SDRs would promote competition by
encouraging SDRs to offer competitive pricing and services to encourage
reporting counterparties to either stay customers or come to their SDR.
The Commission encourages comments from the public on any aspect of the
proposal that may have the potential to be inconsistent with the
antitrust laws or anti-competitive in nature.

List of Subjects

17 CFR Part 45

    Data recordkeeping requirements, Data reporting requirements,
Swaps.

17 CFR Part 46

    Data recordkeeping requirements, Data reporting requirements,
Swaps.

17 CFR Part 49

    Registration and regulatory requirements, Swap data repositories.

    For the reasons stated in the preamble, the Commodity Futures
Trading Commission proposes to amend 17 CFR chapter I as follows:

PART 45–SWAP DATA RECORDKEEPING AND REPORTING REQUIREMENTS

0
1. The authority citation for part 45 continues to read as follows:

    Authority:  7 U.S.C. 6r, 7, 7a-1, 7b-3, 12a, and 24a, as amended
by Title VII of the Wall Street Reform and Consumer Protection Act
of 2010, Pub. L. 111-203, 124 Stat. 1376 (Jul. 21, 2010), unless
otherwise noted.

0
2. In part 45, revise all references to “unique swap identifier” to
read “unique transaction identifier” and revise all references to
“non-SD/MSP” to read “non-SD/MSP/DCO”.

Sec.  Sec.  45.2, 45.5, 45.7, 45.8, and 45.9  [Amended]

0
3. In the table below, for each section and paragraph indicated in the
left column, remove the term indicated in the middle column from
wherever it appears in the section or paragraph, and add in its place
the term indicated in the right column:

—————————————————————————————————————-
      Section/paragraph                             Remove                                      Add
—————————————————————————————————————-
45.2(a)…………………  major swap participant subject to the jurisdiction  major swap participant
                               of the Commission
45.2(b)…………………  counterparties subject to the jurisdiction of the   counterparties
                               Commission
45.2(b)…………………  the clearing requirement exception                  any clearing requirement
                                                                                   exception or exemption
45.2(b)…………………  in CEA section 2(h)(7)                              pursuant to section 2(h)(7) of
                                                                                   the Act or part 50 of this
                                                                                   chapter
45.2(h)…………………  counterparty subject to the jurisdiction of the     counterparty
                               Commission

[[Page 21629]]

 
45.5 (introductory text)….  swap subject to the jurisdiction of the Commission  swap
45.5 (introductory text)….  (f)                                                 (h)
45.5(a)(1)………………  single data field                                   single data element with a
                                                                                   maximum length of 52
                                                                                   characters
45.5(b)…………………  swap dealer or major swap participant               financial entity
45.5(b)(1)………………  transmission of data                                transmission of swap data
45.5(b)(1)………………  single data field                                   single data element with a
                                                                                   maximum length of 52
                                                                                   characters
45.5(b)(1)(ii)…………..  swap dealer or major swap participant               reporting counterparty
45.5(d)(1)………………  single data field                                   single data element with a
                                                                                   maximum length of 52
                                                                                   characters
45.5(e)(1)………………  (c)                                                 (d)
45.5(e)(1)………………  of this section                                     of this section, as applicable
45.5(e)(2)(i)……………  question.                                           question;
45.5(e)(2)(ii)…………..  agent.                                              agent; and
45.7 (introductory text)….  swap subject to the jurisdiction of the Commission  swap
45.8(h)…………………  swap creation data                                  required swap creation data
45.8(h)(1)………………  achieve this                                        comply with paragraph (h) of
                                                                                   this section
45.8(h)(2)………………  achieve this                                        comply with paragraph (h) of
                                                                                   this section
45.9……………………  swap counterparties                                 reporting counterparties
—————————————————————————————————————-

0
4. Revise Sec.  45.1 to read as follows:

Sec.  45.1  Definitions.

    (a) As used in this part:
    Allocation means the process by which an agent, having facilitated
a single swap transaction on behalf of several clients, allocates a
portion of the executed swap to the clients.
    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.
    Business day means each twenty-four hour day, on all days except
Saturdays, Sundays, and Federal holidays.
    Business hours means consecutive hours during one or more
consecutive business days.
    Clearing swap means a swap created pursuant to the rules of a
derivatives clearing organization that has a derivatives clearing
organization as a counterparty, including any swap that replaces an
original swap that was extinguished upon acceptance of such original
swap by the derivatives clearing organization for clearing.
    Collateral data means the data elements necessary to report
information about the money, securities, or other property posted or
received by a swap counterparty to margin, guarantee, or secure a swap,
as specified in appendix 1 to this part.
    Derivatives clearing organization means a derivatives clearing
organization, as defined by Sec.  1.3 of this chapter, that is
registered with the Commission.
    Electronic reporting (“report electronically”) means the
reporting of data normalized in data elements as required by the data
standard or standards used by the swap data repository to which the
data is reported. Except where specifically otherwise provided in this
chapter, electronic reporting does not include submission of an image
of a document or text file.
    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 occurred. The execution date for a
clearing swap that replaces an original swap is the date, determined by
reference to eastern time, on which the original swap has been accepted
for clearing.
    Financial entity has the meaning set forth in CEA section
2(h)(7)(C).
    Global Legal Entity Identifier System means the system established
and overseen by the Legal Entity Identifier Regulatory Oversight
Committee for the unique identification of legal entities and
individuals.
    Legal entity identifier or LEI means a unique code assigned to swap
counterparties and entities in accordance with the standards set by the
Global Legal Entity Identifier System.
    Legal Entity Identifier Regulatory Oversight Committee means the
group charged with the oversight of the Global Legal Entity Identifier
System that was established by the Finance Ministers and the Central
Bank Governors of the Group of Twenty nations and the Financial
Stability Board, under the Charter of the Regulatory Oversight
Committee for the Global Legal Entity Identifier System dated November
5, 2012, or any successor thereof.
    Life cycle event means any event that would result in a change to
required swap creation data previously reported to a swap data
repository in connection with a swap. Examples of such events include,
without limitation, a counterparty change resulting from an assignment
or novation; a partial or full termination of the swap; a change to the
end date for the swap; a change in the cash flows or rates originally
reported; availability of a legal entity identifier for a swap
counterparty previously identified by some other identifier; or a
corporate action affecting a security or securities on which the swap
is based (e.g., a merger, dividend, stock split, or bankruptcy).
    Life cycle event data means all of the data elements necessary to
fully report any life cycle event.
    Mixed swap has the meaning set forth in CEA section 1a(47)(D), and
refers to an instrument that is in part a swap subject to the
jurisdiction of the Commission, and in part a security-based swap
subject to the jurisdiction of the SEC.
    Multi-asset swap means a swap that does not have one easily
identifiable primary underlying notional item, but instead involves
multiple underlying notional items within the Commission’s jurisdiction
that belong to different asset classes.
    Non-SD/MSP/DCO counterparty means a swap counterparty that is not a
swap dealer, major swap participant, or derivatives clearing
organization.

[[Page 21630]]

    Non-SD/MSP/DCO reporting counterparty means a reporting
counterparty that is not a swap dealer, major swap participant, or
derivatives clearing organization.
    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.
    Original swap means a swap that has been accepted for clearing by a
derivatives clearing organization.
    Reporting counterparty means the counterparty required to report
swap data pursuant to this part, selected as provided in Sec.  45.8.
    Required swap continuation data means all of the data elements that
must be reported during the existence of a swap to ensure that all swap
data concerning the swap in the swap data repository remains current
and accurate, and includes all changes to the required swap creation
data occurring during the existence of the swap. For this purpose,
required swap continuation data includes:
    (i) All life cycle event data for the swap; and
    (ii) All swap valuation, margin, and collateral data for the swap.
    Required swap creation data means all data for a swap required to
be reported pursuant to Sec.  45.3 for the swap data elements in
appendix 1 to this part.
    Swap means any swap, as defined by Sec.  1.3 of this chapter, as
well as any foreign exchange forward, as defined by section 1a(24) of
the Act, or foreign exchange swap, as defined by section 1a(25) of the
Act.
    Swap data means the specific data elements and information in
appendix 1 to this part required to be reported to a swap data
repository pursuant to this part or made available to the Commission
pursuant to part 49 of this chapter, as applicable.
    Swap data validation procedures means procedures established by a
swap data repository pursuant to Sec.  49.10 of this chapter to accept,
validate, and process swap data reported to the swap data repository
pursuant to part 45 of this chapter.
    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 for a swap in
appendix C to part 43 of this chapter required to be reported or
publicly disseminated pursuant to part 43 of this chapter.
    Unique transaction identifier means a unique alphanumeric
identifier with a maximum length of 52 characters constructed solely
from the upper-case alphabetic characters A to Z or the digits 0 to 9,
inclusive in both cases, generated for each swap pursuant to Sec. 
45.5.
    Valuation data means the data elements necessary to report
information about the daily mark of the transaction, pursuant to
section 4s(h)(3)(B)(iii) of the Act, and to Sec.  23.431 of this
chapter, if applicable, as specified in appendix 1 to this part.
    (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
5. Revise Sec.  45.3 to read as follows:

Sec.  45.3  Swap data reporting: Creation data.

    (a) Swaps executed on or pursuant to the rules of a swap execution
facility or designated contract market. For each swap executed on or
pursuant to the rules of a swap execution facility or designated
contract market, the swap execution facility or designated contract
market shall report required swap creation data electronically to a
swap data repository in the manner provided in Sec.  45.13(a) not later
than 11:59 p.m. eastern time on the next business day following the
execution date.
    (b) Off-facility swaps. For each off-facility swap, the reporting
counterparty shall report required swap creation data electronically to
a swap data repository as provided by paragraph (b)(1) or (2) of this
section, as applicable.
    (1) If the reporting counterparty is a swap dealer, major swap
participant, or derivatives clearing organization, the reporting
counterparty shall report required swap creation data electronically to
a swap data repository in the manner provided in Sec.  45.13(a) not
later than 11:59 p.m. eastern time on the next business day following
the execution date.
    (2) If the reporting counterparty is a non-SD/MSP/DCO counterparty,
the reporting counterparty shall report required swap creation data
electronically to a swap data repository in the manner provided in
Sec.  45.13(a) not later than 11:59 p.m. eastern time on the second
business day following the execution date.
    (c) Allocations. For swaps involving allocation, required swap
creation data shall be reported electronically to a single swap data
repository as follows.
    (1) Initial swap between reporting counterparty and agent. The
initial swap transaction between the reporting counterparty and the
agent shall be reported as required by paragraphs (a) or (b) of this
section, as applicable. A unique transaction identifier for the initial
swap transaction shall be created as provided in Sec.  45.5.
    (2) Post-allocation swaps–(i) Duties of the agent. In accordance
with this section, the agent shall inform the reporting counterparty of
the identities of the reporting counterparty’s actual counterparties
resulting from allocation, as soon as technologically practicable after
execution, but not later than eight business hours after execution.
    (ii) Duties of the reporting counterparty. The reporting
counterparty shall report required swap creation data, as required by
paragraph (b) of this section, for each swap resulting from allocation
to the same swap data repository to which the initial swap transaction
is reported. The reporting counterparty shall create a unique
transaction identifier for each such swap as required in Sec.  45.5.
    (d) Multi-asset swaps. For each multi-asset swap, required swap
creation data and required swap continuation data shall be reported to
a single swap data repository that accepts swaps in the asset class
treated as the primary asset class involved in the swap by the swap
execution facility, designated contract market, or reporting
counterparty reporting required swap creation data pursuant to this
section.
    (e) Mixed swaps. (1) For each mixed swap, required swap creation
data and required swap continuation data shall be reported to a swap
data repository and to a security-based swap data repository registered
with the Securities and Exchange Commission. This requirement may be
satisfied by reporting the mixed swap to a swap data repository or
security-based swap data repository registered with both Commissions.
    (2) The registered entity or reporting counterparty reporting
required swap creation data pursuant to this section shall ensure that
the same unique transaction identifier is recorded for the swap in both
the swap data repository and the security-based swap data repository.
    (f) Choice of swap data repository. The entity with the obligation
to choose the swap data repository to which all required swap creation
data for the swap is reported shall be the entity that is required to
make the first report of all data pursuant to this section, as follows:
    (1) For swaps executed on or pursuant to the rules of a swap
execution facility

[[Page 21631]]

or designated contract market, the swap execution facility or
designated contract market shall choose the swap data repository;
    (2) For all other swaps, the reporting counterparty, as determined
in Sec.  45.8, shall choose the swap data repository.
0
6. Revise Sec.  45.4 to read as follows:

Sec.  45.4  Swap data reporting: Continuation data.

    (a) Continuation data reporting method generally. For each swap,
regardless of asset class, reporting counterparties and derivatives
clearing organizations required to report required swap continuation
data shall report life cycle event data for the swap electronically to
a swap data repository in the manner provided in Sec.  45.13(a) within
the applicable deadlines set forth in this section.
    (b) Continuation data reporting for original swaps. For each
original swap, the derivatives clearing organization shall report
required swap continuation data, including terminations, electronically
to the swap data repository to which the swap that was accepted for
clearing was reported pursuant to Sec.  45.3 in the manner provided in
Sec.  45.13(a) and in this section, and such required swap continuation
data shall be accepted and recorded by such swap data repository as
provided in Sec.  49.10 of this chapter.
    (1) The derivatives clearing organization that accepted the swap
for clearing shall report all life cycle event data electronically to a
swap data repository in the manner provided in Sec.  45.13(a) not later
than 11:59 p.m. eastern time on the next business day following the
day, as determined according to eastern time, that any life cycle event
occurs with respect to the swap.
    (2) In addition to all other required swap continuation data, life
cycle event data shall include all of the following:
    (i) The legal entity identifier of the swap data repository to
which all required swap creation data for each clearing swap was
reported by the derivatives clearing organization pursuant to Sec. 
45.3(b);
    (ii) The unique transaction identifier of the original swap that
was replaced by the clearing swaps; and
    (iii) The unique transaction identifier of each clearing swap that
replaces a particular original swap.
    (c) Continuation data reporting for swaps other than original
swaps. For each swap that is not an original swap, including clearing
swaps and swaps not cleared by a derivatives clearing organization, the
reporting counterparty shall report all required swap continuation data
electronically to a swap data repository in the manner provided in
Sec.  45.13(a) as provided in this paragraph (c).
    (1) Life cycle event data reporting. (i) If the reporting
counterparty is a swap dealer, major swap participant, or derivatives
clearing organization, the reporting counterparty shall report life
cycle event data electronically to a swap data repository in the manner
provided in Sec.  45.13(a) not later than 11:59 p.m. eastern time on
the next business day following the day, as determined according to
eastern time, that any life cycle event occurred, with the sole
exception that life cycle event data relating to a corporate event of
the non-reporting counterparty shall be reported in the manner provided
in Sec.  45.13(a) not later than 11:59 p.m. eastern time on the second
business day following the day, as determined according to eastern
time, that such corporate event occurred.
    (ii) If the reporting counterparty is a non-SD/MSP/DCO
counterparty, the reporting counterparty shall report life cycle event
data electronically to a swap data repository in the manner provided in
Sec.  45.13(a) not later than 11:59 p.m. eastern time on the second
business day following the day, as determined according to eastern
time, that any life cycle event occurred.
    (2) Valuation, margin, and collateral data reporting. If the
reporting counterparty is a swap dealer, major swap participant, or
derivatives clearing organization, swap valuation data and collateral
data shall be reported electronically to a swap data repository in the
manner provided in Sec.  45.13(b) each business day.
0
7. Amend Sec.  45.5 by revising paragraphs (a)(1)(i); (b)(1)(i); (c)
introductory text; (c)(1) introductory text; (c)(1)(i); (d)
introductory text; (d)(1)(i) and (f); and adding paragraphs (g) and (h)
to read as follows:

Sec.  45.5  Unique transaction identifiers.

* * * * *
    (a) * * *
    (1) * * *
    (i) The legal entity identifier of the swap execution facility or
designated contract market; and
* * * * *
    (b) * * *
    (1) * * *
    (i) The legal entity identifier of the reporting counterparty; and
* * * * *
    (c) Off-facility swaps with a non-SD/MSP/DCO reporting counterparty
that is not a financial entity. For each off-facility swap for which
the reporting counterparty is a non-SD/MSP/DCO counterparty that is not
a financial entity, the reporting counterparty shall either: create and
transmit a unique transaction identifier as provided in paragraphs
(b)(1) and (2) of this section; or request that the swap data
repository to which required swap creation data will be reported create
and transmit a unique transaction identifier as provided in paragraphs
(c)(1) and (2) of this section.
    (1) Creation. The swap data repository shall generate and assign a
unique transaction identifier as soon as technologically practicable
following receipt of the request from the reporting counterparty. The
unique transaction identifier shall consist of a single data element
with a maximum length of 52 characters that contains two components:
    (i) The legal entity identifier of the swap data repository; and
* * * * *
    (d) Off-facility swaps with a derivatives clearing organization
reporting counterparty. For each off-facility swap where the reporting
counterparty is a derivatives clearing organization, the reporting
counterparty shall create and transmit a unique transaction identifier
as provided in paragraphs (d)(1) and (2) of this section.
    (1) * * *
    (i) The legal entity identifier of the derivatives clearing
organization; and
* * * * *
    (f) Use. Each registered entity and swap counterparty shall include
the unique transaction identifier for a swap in all of its records and
all of its swap data reporting concerning that swap, from the time it
creates or receives the unique transaction identifier as provided in
this section, throughout the existence of the swap and for as long as
any records are required by the Act or Commission regulations to be
kept concerning the swap, regardless of any life cycle events
concerning the swap, including, without limitation, any changes with
respect to the counterparties to the swap.
    (g) Third-party service provider. If a registered entity or
reporting counterparty required by this part to report required swap
creation data or required swap continuation data contracts with a
third-party service provider to facilitate reporting pursuant to Sec. 
45.9, the registered entity or reporting counterparty shall ensure that
such third-party service provider creates and transmits the unique
transaction identifier as otherwise required for such category of swap
by paragraphs (a) through (e) of this section. The unique transaction
identifier shall consist of a

[[Page 21632]]

single data element with a maximum length of 52 characters that
contains two components:
    (1) The legal entity identifier of the third-party service
provider; and
    (2) An alphanumeric code generated and assigned to that swap by the
automated systems of the third-party service provider, which shall be
unique with respect to all such codes generated and assigned by that
third-party service provider.
    (h) Cross-jurisdictional swaps. Notwithstanding the provisions of
paragraphs (a) through (g) of this section, if a swap is also
reportable to one or more other jurisdictions with a regulatory
reporting deadline earlier than the deadline set forth in Sec.  45.3,
the same unique transaction identifier generated according to the rules
of the jurisdiction with the earliest regulatory reporting deadline
shall be transmitted pursuant to paragraphs (a) through (g) of this
section and used in all recordkeeping and all swap data reporting
pursuant to this part.

0
8. Revise Sec.  45.6 to read as follows:

Sec.  45.6  Legal entity identifiers.

    Each swap execution facility, designated contract market,
derivatives clearing organization, swap data repository, entity
reporting pursuant to Sec.  45.9, and counterparty to any swap that is
eligible to receive a legal entity identifier shall obtain and be
identified in all recordkeeping and all swap data reporting pursuant to
this part by a single legal entity identifier as specified in this
section.
    (a) Definitions. As used in this section:
    Local operating unit means an entity authorized under the standards
of the Global Legal Entity Identifier System to issue legal entity
identifiers.
    Reference data means all identification and relationship
information, as set forth in the standards of the Global Legal Entity
Identifier System, of the legal entity or individual to which a legal
entity identifier is assigned.
    Self-registration means submission by a legal entity or individual
of its own reference data.
    Third-party registration means submission of reference data for a
legal entity or individual that is or may become a swap counterparty,
made by an entity or organization other than the legal entity or
individual identified by the submitted reference data. Examples of
third-party registration include, without limitation, submission by a
swap dealer or major swap participant of reference data for its swap
counterparties, and submission by a national numbering agency, national
registration agency, or data service provider of reference data
concerning legal entities or individuals with respect to which the
agency or service provider maintains information.
    (b) International standard for the legal entity identifier. The
legal entity identifier used in all recordkeeping and all swap data
reporting required by this part shall be issued under, and shall
conform to, ISO Standard 17442, Legal Entity Identifier (LEI), issued
by the International Organization for Standardization.
    (c) Reference data reporting. Reference data for each swap
execution facility, designated contract market, derivatives clearing
organization, swap data repository, entity reporting pursuant to Sec. 
45.9, and counterparty to any swap shall be reported, by means of self-
registration, third-party registration, or both, to a local operating
unit in accordance with the standards set by the Global Legal Entity
Identifier System. All subsequent changes and corrections to reference
data previously reported shall be reported, by means of self-
registration, third-party registration, or both, to a local operating
unit as soon as technologically practicable following occurrence of any
such change or discovery of the need for a correction.
    (d) Use of the legal entity identifier. (1) Each swap execution
facility, designated contract market, derivatives clearing
organization, swap data repository, entity reporting pursuant to Sec. 
45.9, and swap counterparty shall use legal entity identifiers to
identify itself and swap counterparties in all recordkeeping and all
swap data reporting pursuant to this part. If a swap counterparty is
not eligible to receive a legal entity identifier as determined by the
Global Legal Entity Identifier System, such counterparty shall be
identified in all recordkeeping and all swap data reporting pursuant to
this part with an alternate identifier as prescribed by the Commission
pursuant to Sec.  45.13(a) of this chapter.
    (2) Each swap dealer, major swap participant, swap execution
facility, designated contract market, derivatives clearing
organization, and swap data repository shall maintain and renew its
legal identity identifier in accordance with the standards set by the
Global Legal Entity Identifier System.
    (3) Each derivatives clearing organization and each financial
entity reporting counterparty executing a swap with a counterparty that
is eligible to receive a legal entity identifier, but has not been
assigned a legal entity identifier, shall, prior to reporting any
required swap creation data for such swap, cause a legal entity
identifier to be assigned to the counterparty, including if necessary,
through third-party registration.
    (4) For swaps previously reported pursuant to this part using
substitute counterparty identifiers assigned by a swap data repository
prior to Commission designation of a legal entity identifier system,
each swap data repository shall map the legal entity identifiers for
the counterparties to the substitute counterparty identifiers in the
record for each such swap.
0
9. In Sec.  45.8, revise the introductory text to read as follows:

Sec.  45.8  Determination of which counterparty shall report.

    The determination of which counterparty is the reporting
counterparty for each swap shall be made as provided in this section.
* * * * *
0
10. Revise Sec.  45.10 to read as follows:

Sec.  45.10  Reporting to a single swap data repository.

    All swap transaction and pricing data and swap data for a given
swap shall be reported to a single swap data repository, which shall be
the swap data repository to which the first report of such data is
made, unless the reporting counterparty changes the swap data
repository to which such data is reported pursuant to paragraph (d) of
this section.
    (a) Swaps executed on or pursuant to the rules of a swap execution
facility or designated contract market. To ensure that all swap
transaction and pricing data and swap data for a swap executed on or
pursuant to the rules of a swap execution facility or designated
contract market is reported to a single swap data repository:
    (1) The swap execution facility or designated contract market shall
report all swap transaction and pricing data and required swap creation
data for a swap to a single swap data repository. As soon as
technologically practicable after execution of the swap, the swap
execution facility or designated contract market shall transmit to both
counterparties to the swap, and to the derivatives clearing
organization, if any, that will clear the swap, the identity of the
swap data repository to which such data is reported.
    (2) Thereafter, all swap transaction and pricing data, required
swap creation data, and required swap continuation data for the swap
shall be reported to that same swap data repository, unless the
reporting counterparty changes the swap data repository to which such
data

[[Page 21633]]

is reported pursuant to paragraph (d) of this section.
    (b) Off-facility swaps that are not clearing swaps. To ensure that
all swap transaction and pricing data and swap data for an off-facility
swap that is not a clearing swap is reported to a single swap data
repository:
    (1) The reporting counterparty shall report all swap transaction
and pricing data and required swap creation data to a single swap data
repository. As soon as technologically practicable after execution, the
reporting counterparty shall transmit to the other counterparty to the
swap, and to the derivatives clearing organization, if any, that will
clear the swap, the identity of the swap data repository to which such
data is reported.
    (2) Thereafter, all swap transaction and pricing data, required
swap creation data, and required swap continuation data for the swap
shall be reported to the same swap data repository, unless the
reporting counterparty changes the swap data repository to which such
data is reported pursuant to paragraph (d) of this section.
    (c) Clearing swaps. To ensure that all swap transaction and pricing
data and swap data for a given clearing swap, including clearing swaps
that replace a particular original swap or that are created upon
execution of the same transaction and that do not replace an original
swap, is reported to a single swap data repository:
    (1) The derivatives clearing organization that is a counterparty to
such clearing swap shall report all swap transaction and pricing data
and required swap creation data for that clearing swap to a single swap
data repository. As soon as technologically practicable after
acceptance of an original swap for clearing, or execution of a clearing
swap that does not replace an original swap, the derivatives clearing
organization shall transmit to the counterparty to each clearing swap
the identity of the swap data repository to which such data is
reported.
    (2) Thereafter, all swap transaction and pricing data, required
swap creation data and required swap continuation data for that
clearing swap shall be reported by the derivatives clearing
organization to the same swap data repository to which swap data has
been reported pursuant to paragraph (c)(1) of this section, unless the
reporting counterparty changes the swap data repository to which such
data is reported pursuant to paragraph (d) of this section.
    (3) For clearing swaps that replace a particular original swap, and
for equal and opposite clearing swaps that are created upon execution
of the same transaction and that do not replace an original swap, the
derivatives clearing organization shall report all swap transaction and
pricing data, required swap creation data, and required swap
continuation data for such clearing swaps to a single swap data
repository.
    (d) Change of swap data repository for swap transaction and pricing
data and swap data reporting. A reporting counterparty may change the
swap data repository to which swap transaction and pricing data and
swap data is reported as set forth in this paragraph.
    (1) Notifications. At least five business days prior to changing
the swap data repository to which the reporting counterparty reports
swap transaction and pricing data and swap data for a swap, the
reporting counterparty shall provide notice of such change to the other
counterparty to the swap, the swap data repository to which swap
transaction and pricing data and swap data is currently reported, and
the swap data repository to which swap transaction and pricing data and
swap data will be reported going forward. Such notification shall
include the unique transaction identifier of the swap and the date on
which the reporting counterparty will begin reporting such swap
transaction and pricing data and swap data to a different swap data
repository.
    (2) Procedure. After providing the notifications required in
paragraph (d)(1) of this section, the reporting counterparty shall
follow paragraphs (d)(2)(i) through (iii) of this section to complete
the change of swap data repository.
    (i) The reporting counterparty shall report the change of swap data
repository to the swap data repository to which the reporting
counterparty is currently reporting swap transaction and pricing data
and swap data as a life cycle event for such swap pursuant to Sec. 
45.4.
    (ii) On the same day that the reporting counterparty reports
required swap continuation data as required by paragraph (d)(2)(i) of
this section, the reporting counterparty shall also report the change
of swap data repository to the swap data repository to which swap
transaction and pricing data and swap data will be reported going
forward, as a life cycle event for such swap pursuant to Sec.  45.4.
The required swap continuation data report shall identify the swap
using the same unique transaction identifier used to identify the swap
at the previous swap data repository.
    (iii) Thereafter, all swap transaction and pricing data, required
swap creation data, and required swap continuation data for the swap
shall be reported to the same swap data repository, unless the
reporting counterparty for the swap makes another change to the swap
data repository to which such data is reported pursuant to paragraph
(d) of this section.
0
11. Revise Sec.  45.11 to read as follows:

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

    (a) Should there be a swap asset class for which no swap data
repository currently accepts swap data, each swap execution facility,
designated contract market, derivatives clearing organization, or
reporting counterparty required by this part to report any required
swap creation data or required swap continuation data with respect to a
swap in that asset class must report that same data to the Commission.
    (b) Data reported to the Commission pursuant to this section shall
be reported at times announced by the Commission and in an electronic
file in a format acceptable to the Commission.

Sec.  45.12  [Removed and Reserved]

0
12. Remove and reserve Sec.  45.12.
0
13. Revise Sec.  45.13 to read as follows:

Sec.  45.13  Required data standards.

    (a) Data reported to swap data repositories. (1) In reporting
required swap creation data and required swap continuation data to a
swap data repository, each reporting counterparty, swap execution
facility, designated contract market, and derivatives clearing
organization, shall report the swap data elements in appendix 1 to this
part in the form and manner provided in the technical specifications
published by the Commission pursuant to Sec.  45.15.
    (2) In reporting required swap creation data and required swap
continuation data to a swap data repository, each reporting
counterparty, swap execution facility, designated contract market, and
derivatives clearing organization making such report shall satisfy the
swap data validation procedures of the swap data repository.
    (3) In reporting swap data to a swap data repository as required by
this part, each reporting counterparty, swap execution facility,
designated contract market, and derivatives clearing organization shall
use the facilities, methods, or data standards provided or required by
the swap data repository to which the entity or counterparty reports
the data.
    (b) Data Validation Acceptance Message. (1) For each required swap

[[Page 21634]]

creation data or required swap continuation data report submitted to a
swap data repository, a swap data repository shall notify the reporting
counterparty, swap execution facility, designated contract market,
derivatives clearing organization, or third-party service provider
submitting the report whether the report satisfied the swap data
validation procedures of the swap data repository. The swap data
repository shall provide such notification as soon as technologically
practicable after accepting the required swap creation data or required
swap continuation 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.
    (2) If a required swap creation data or required swap continuation
data report to a swap data repository does not satisfy the data
validation procedures of the swap data repository, the reporting
counterparty, swap execution facility, designated contract market, or
derivatives clearing organization, required to submit the report has
not yet satisfied its obligation to report required swap creation or
continuation data in the manner provided by paragraph (a) of this
section within the timelines set forth in Sec. Sec.  45.3 and 45.4. The
reporting counterparty, swap execution facility, designated contract
market, or derivatives clearing organization has not satisfied its
obligation until it submits the required swap data report in the manner
provided by paragraph (a) of this section, which includes the
requirement to satisfy the data validation procedures of the swap data
repository, within the applicable time deadline set forth in Sec. Sec. 
45.3 and 45.4.

0
14. Add Sec.  45.15 to read as follows:

Sec.  45.15  Delegation of authority.

    (a) Delegation of authority to the Chief Information Officer. The
Commission hereby delegates to its chief information officer, until the
Commission orders otherwise, the authority set forth in paragraph (a)
of this section, to be exercised by the chief information officer or by
such other employee or employees of the Commission as may be designated
from time to time by the chief information officer. The chief
information officer may submit to the Commission for its consideration
any matter which has been delegated in this paragraph. Nothing in this
paragraph prohibits the Commission, at its election, from exercising
the authority delegated in this paragraph. The authority delegated to
the chief information officer by this paragraph (a) shall include:
    (1) The authority to determine the manner, format, coding
structure, and electronic data transmission standards and procedures
acceptable to the Commission for the purposes of Sec.  45.11;
    (2) The authority to determine whether the Commission may permit or
require use by swap execution facilities, designated contract markets,
derivatives clearing organizations, or reporting counterparties in
reporting pursuant to Sec.  45.11 of one or more particular data
standards (such as FIX, FpML, ISO 20022, or some other standard), in
order to accommodate the needs of different communities of users;
    (3) The dates and times at which required swap creation data or
required swap continuation data shall be reported pursuant to Sec. 
45.11; and
    (4) The chief information officer shall publish from time to time
in the Federal Register and on the website of the Commission the
format, data schema, electronic data transmission methods and
procedures, and dates and times for reporting acceptable to the
Commission with respect to swap data reporting pursuant to Sec.  45.11.
    (b) Delegation of authority to the Director of the Division of
Market Oversight. The Commission hereby delegates to the Director of
the Division of Market Oversight, until the Commission orders
otherwise, the authority set forth in Sec.  45.13(a)(1), to be
exercised by the Director of the Division of Market Oversight or by
such other employee or employees of the Commission as may be designated
from time to time by the Director of the Division of Market Oversight.
The Director of the Division of Market Oversight may submit to the
Commission for its consideration any matter which has been delegated
pursuant to this paragraph. Nothing in this paragraph prohibits the
Commission, at its election, from exercising the authority delegated in
this paragraph. The authority delegated to the Director of the Division
of Market Oversight by this paragraph (b) shall include:
    (1) The authority to publish the technical specifications providing
the form and manner for reporting the swap data elements in appendix 1
to this part to swap data repositories as provided in Sec. 
45.13(a)(1);
    (2) The authority to determine whether the Commission may permit or
require use by swap execution facilities, designated contract markets,
derivatives clearing organizations, or reporting counterparties in
reporting pursuant to Sec.  45.13(a)(1) of one or more particular data
standards (such as FIX, FpML, ISO 20022, or some other standard), in
order to accommodate the needs of different communities of users;
    (3) The dates and times at which required swap creation data or
required swap continuation data shall be reported pursuant to Sec. 
45.13(a)(1); and
    (4) The Director of the Division of Market Oversight shall publish
from time to time in the Federal Register and on the website of the
Commission the technical specifications for swap data reporting
pursuant to Sec.  45.13(a)(1).
0
15. Revise appendix 1 to part 45 to read as follows:
BILLING CODE 6351-01-P

[[Page 21635]]

[GRAPHIC] [TIFF OMITTED] TP17AP20.008

[[Page 21636]]

[GRAPHIC] [TIFF OMITTED] TP17AP20.009

[[Page 21637]]

[GRAPHIC] [TIFF OMITTED] TP17AP20.010

[[Page 21638]]

[GRAPHIC] [TIFF OMITTED] TP17AP20.011

[[Page 21639]]

[GRAPHIC] [TIFF OMITTED] TP17AP20.012

[[Page 21640]]

[GRAPHIC] [TIFF OMITTED] TP17AP20.013

[[Page 21641]]

[GRAPHIC] [TIFF OMITTED] TP17AP20.014

[[Page 21642]]

[GRAPHIC] [TIFF OMITTED] TP17AP20.015

[[Page 21643]]

[GRAPHIC] [TIFF OMITTED] TP17AP20.016

[[Page 21644]]

[GRAPHIC] [TIFF OMITTED] TP17AP20.017

[[Page 21645]]

[GRAPHIC] [TIFF OMITTED] TP17AP20.018

[[Page 21646]]

[GRAPHIC] [TIFF OMITTED] TP17AP20.019

[[Page 21647]]

[GRAPHIC] [TIFF OMITTED] TP17AP20.020

[[Page 21648]]

[GRAPHIC] [TIFF OMITTED] TP17AP20.021

[[Page 21649]]

[GRAPHIC] [TIFF OMITTED] TP17AP20.022

[[Page 21650]]

[GRAPHIC] [TIFF OMITTED] TP17AP20.023

[[Page 21651]]

[GRAPHIC] [TIFF OMITTED] TP17AP20.024

[[Page 21652]]

[GRAPHIC] [TIFF OMITTED] TP17AP20.025

BILLING CODE 6351-01-C

PART 46–SWAP DATA RECORDKEEPING AND REPORTING REQUIREMENTS: PRE-
ENACTMENT AND TRANSITION SWAPS

0
16. The authority citation for part 46 continues to read as follows:

    Authority:  Title VII, sections 723 and 729, Pub. L. 111-203,
124 Stat. 1738.

0
17. In part 46, revise all references to “non-SD/MSP” to read “non-
SD/MSP/DCO”.

Sec.  Sec.  46.3, 46.4, 46.5, 46.6, 46.8, 46.9, 46.10, and
46.11  [Amended]

0
18. In the table below, for each section and paragraph indicated in the
left column, remove the term indicated in the middle column from
wherever it appears in the section or paragraph, and add in its place
the term indicated in the right column:

—————————————————————————————————————-
      Section/Paragraph                             Remove                                      Add
—————————————————————————————————————-
46.3(a)(1)(iii)(A)……….  counterparty; and                                   counterparty.
46.3(a)(3)………………  first report of required swap creation data         first report of such data.
46.4 (introductory text)….  swap data reporting                                 data reporting.
46.4(a)…………………  substitute counterparty identifier as provided in   substitute counterparty
                               Sec.   45.6(f) of this chapter                      identifier.
46.4(d)…………………  unique swap identifier and unique product           unique swap identifier, unique
                               identifier                                          transaction identifier, and
                                                                                   unique product identifier.
46.5(a)…………………  swap data                                           data.
46.6 (introductory text)….  report swap data                                    report data.
46.8(a)…………………  accepts swap data                                   accepts data for pre-enactment
                                                                                   and transition swaps.
46.8(a)…………………  required swap creation data or required swap        such data.
                               continuation data
46.8(c)(2)(ii)…………..  reporting entities                                  registered entities.
46.8(d)…………………  swap data reporting                                 reporting data for pre-
                                                                                   enactment and transition
                                                                                   swaps.
46.9(a)…………………  any report of swap data                             any report of data.
46.9(f)…………………  errors in the swap data                             errors in the data for a pre-
                                                                                   enactment or a transition
                                                                                   swap.
46.10…………………..  reporting swap data                                 reporting data for a pre-
                                                                                   enactment or a transition
                                                                                   swap.
46.11(a)………………..  report swap data                                    report data for a pre-
                                                                                   enactment or a transition
                                                                                   swap.
—————————————————————————————————————-

0
19. Amend Sec.  46.1 by:
0
a. Revising the introductory text and redesignating it as paragraph
(a);
0
b. Removing the definitions of “credit swap”; “foreign exchange
forward”; “foreign exchange instrument”; “foreign exchange swap”;
“interest rate swap”; “international swap”; “major swap
participant”; “other commodity swap”; “swap data repository”; and
“swap dealer”;
0
c. Revising the definitions of “asset class”; “non-SD/MSP
counterparty”; “reporting counterparty”; “required swap
continuation data”;
0
d. Adding, in alphabetical order, definitions for “historical swaps”
and “substitute counterparty identifier”; and
0
e. Adding paragraph (b).
    The revisions and additions read as follows:

Sec.  46.1  Definitions.

    (a) As used in this part:
    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.
* * * * *
    Historical swap means pre-enactment swaps and transition swaps.
* * * * *
    Non-SD/MSP/DCO counterparty means a swap counterparty that is not a
swap dealer, major swap participant, or derivatives clearing
organization.
* * * * *
    Reporting counterparty means the counterparty required to report
data for a pre-enactment swap or a transition swap pursuant to this
part, selected as provided in Sec.  46.5.
    Required swap continuation data means all of the data elements that
shall be reported during the existence of a swap as required by part 45
of this chapter.
    Substitute counterparty identifier means a unique alphanumeric code
assigned by a swap data repository to a swap counterparty prior to the
Commission designation of a legal entity identifier system on July 23,
2012.
* * * * *
    (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
20. In Sec.  46.3, revise paragraph (a)(2)(i) to read as follows:

Sec.  46.3  Data reporting for pre-enactment swaps and transition
swaps.

    (a) * * *
    (2) * * *
    (i) For each uncleared pre-enactment or transition swap in
existence on or after April 25, 2011, throughout the existence of the
swap following the compliance date, the reporting counterparty must
report all required swap continuation data as required by part 45 of
this chapter.
* * * * *
0
21. In Sec.  46.10, add a second sentence to read as follows:

Sec.  46.10  Required data standards.

    * * * In reporting required swap continuation data as required by
this part, each reporting counterparty shall

[[Page 21653]]

comply with the required data standards set forth in part 45 of this
chapter, including those set forth in Sec.  45.13(a) of this chapter.
0
22. Amend Sec.  46.11 by:
0
a. Removing paragraph (b);
0
b. Redesignating paragraph (c) as paragraph (b) and revising it; and
0
c. Redesignating paragraph (d) as paragraph (c).
    The revision reads as follows:

Sec.  46.11  Reporting of errors and omissions in previously reported
data.

* * * * *
    (b) Each counterparty to a pre-enactment or transition swap that is
not the reporting counterparty as determined pursuant to Sec.  46.5,
and that discovers any error or omission with respect to any data for a
pre-enactment or transition swap reported to a swap data repository for
that swap, shall promptly notify the reporting counterparty of each
such error or omission. As soon as technologically practicable after
receiving such notice, the reporting counterparty shall report a
correction of each such error or omission to the swap data repository.
* * * * *

PART 49–SWAP DATA REPOSITORIES

0
23. The authority citation for part 49 is revised to read as follows:

    Authority:  7 U.S.C. 1a, 2(a), 6r, 12a, and 24a, as amended by
Title VII of the Wall Street Reform and Consumer Protection Act,
Pub. L. 111-203, 124 Stat. 1376 (Jul. 21, 2010), unless otherwise
noted.

Sec.  49.4  [Amended]

0
24. In the table below, for each section and paragraph indicated in the
left column, remove the term indicated in the middle column from
wherever it appears in the section or paragraph, and add in its place
the term indicated in the right column:

—————————————————————————————————————-
         Section/paragraph                           Remove                                  Add
—————————————————————————————————————-
49.4(a)(1)…………………….  registered swap data repository……  swap data repository.
49.4(a)(1)…………………….  registrant………………………  swap data repository.
49.4(a)(1)…………………….  withdrawn, which notice…………..  withdrawn. Such.
49.4(a)(1)…………………….  sixty…………………………..  60.
49.4(a)(1)(i)………………….  registrant………………………  swap data repository.
49.4(a)(1)(ii)…………………  registrant;……………………..  swap data repository; and.
49.4(a)(1)(iii)………………..  located; and…………………….  located.
49.4(c)……………………….  registered swap data repository……  swap data repository.
—————————————————————————————————————-

0
25. In Sec.  49.2(a), remove the paragraph designations and arrange the
definitions, in alphabetical order, and add, in alphabetical order,
definitions for the terms “data validation acceptance message”;
“data validation error”; “data validation error message”; and
“data validation procedures” to read as follows:

Sec.  49.2  Definitions.

    (a) * * *
    Data validation acceptance message. The term “data validation
acceptance message” means a notification that SDR data satisfied the
data validation procedures applied by a swap data repository.
    Data validation error. The term “data validation error” means
that a specific data element of SDR data did not satisfy the data
validation procedures applied by a swap data repository.
    Data validation error message. The term “data validation error
message” means a notification that SDR data contained one or more data
validation error(s).
    Data validation procedures. The term “data validation procedures”
means procedures established by a swap data repository pursuant to
Sec.  49.10 to validate SDR data reported to the swap data repository.
* * * * *
0
26. In Sec.  49.4, remove paragraph (a)(1)(iv) and revise paragraph
(a)(2).
    The revision reads as follows:

Sec.  49.4  Withdrawal from registration.

* * * * *
    (a) * * *
    (2) Prior to filing a request to withdraw, a swap data repository
shall execute an agreement with the custodial swap data repository
governing the custody of the withdrawing swap data repository’s data
and records. The custodial swap data repository shall retain such
records for at least as long as the remaining period of time the swap
data repository withdrawing from registration would have been required
to retain such records pursuant to this part.
* * * * *
0
27. In Sec.  49.10, revise paragraphs (a) through (d) and add reserved
paragraph (e) and paragraph (f) to read as follows:

Sec.  49.10  Acceptance and validation of data.

    (a) General requirements. (1) Generally. A swap data repository
shall establish, maintain, and enforce policies and procedures
reasonably designed to facilitate the complete and accurate reporting
of SDR data. A swap data repository shall promptly accept, validate,
and record SDR data.
    (2) Electronic connectivity. For the purpose of accepting SDR data,
the swap data repository shall adopt policies and procedures, including
technological protocols, which provide for electronic connectivity
between the swap data repository and designated contract markets,
derivatives clearing organizations, swap execution facilities, swap
dealers, major swap participants and non-SD/MSP/DCO reporting
counterparties who report such data. The technological protocols
established by a swap data repository shall provide for the receipt of
SDR data. The swap data repository shall ensure that its mechanisms for
SDR data acceptance are reliable and secure.
    (b) Duty to accept SDR data. A swap data repository shall set forth
in its application for registration as described in Sec.  49.3 the
specific asset class or classes for which it will accept SDR data. If a
swap data repository accepts SDR data of a particular asset class, then
it shall accept SDR data from all swaps of that asset class, unless
otherwise prescribed by the Commission.
    (c) Duty to validate SDR data. A swap data repository shall
validate SDR data as soon as technologically practicable after such
data is accepted according to the validation conditions approved in
writing by the Commission. A swap data repository shall validate SDR
data by providing data validation acceptance messages, data validation
messages, as provided below.
    (1) Data validation acceptance message. A swap data repository
shall validate each SDR data report submitted to the swap data
repository and notify the reporting counterparty, swap execution
facility, designated contract market, or third party service provider
submitting the report whether the report

[[Page 21654]]

satisfied the data validation procedures of the swap data repository as
soon as technologically practicable after accepting the SDR data
report.
    (2) Data validation error message. If SDR data contains one or more
data validation errors, the swap data repository shall distribute a
data validation error message to the designated contract market, swap
execution facility, reporting counterparty, or third-party service
provider that submitted such SDR data as soon as technologically
practicable after acceptance of such data. Each data validation error
message shall indicate which specific data validation error(s) was
identified in the SDR data.
    (3) Swap transaction and pricing data submitted with swap data. If
a swap data repository allows for the joint submission of swap
transaction and pricing data and swap data, the swap data repository
shall validate the swap transaction and pricing data and swap data
separately. Swap transaction and pricing data that satisfies the data
validation procedures applied by a swap data repository shall not be
deemed to contain a data validation error because it was submitted to
the swap data repository jointly with swap data that contained a data
validation error.
    (d) Policies and procedures to prevent invalidation or
modification. A swap data repository shall establish policies and
procedures reasonably designed to prevent any provision in a valid swap
from being invalidated or modified through the verification or
recording process of the swap data repository. The policies and
procedures shall ensure that the swap data repository’s user agreements
are designed to prevent any such invalidation or modification.
    (e) [Reserved].
    (f) Policies and procedures for resolving disputes regarding data
accuracy. A swap data repository shall establish procedures and provide
facilities for effectively resolving disputes over the accuracy of the
SDR data and positions that are recorded in the swap data repository.

    Issued in Washington, DC, on February 27, 2020, by the
Commission.
Christopher Kirkpatrick,
Secretary of the Commission.

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

Appendices to Swap Data Recordkeeping and Reporting Requirements–
Commission Voting Summary, Chairman’s Statement, 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 Support 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 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

[[Page 21655]]

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
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

[[Page 21656]]

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–Statement of Support of Commissioner Brian D. Quintenz

    I am pleased to support the data proposals before the Commission
today. These proposed amendments to part 45 regulatory reporting and
part 43 real-time reporting hopefully represent the beginning of the
end of this agency’s longstanding efforts to collect and utilize
accurate, reliable swap data to further its regulatory mandates.
    There is frequently a trade-off between being first and being
right. That is especially true when it comes to regulation and
specifically true when it comes to the CFTC’s historical approach to
uncleared swap data reporting. Although the CFTC was the first
regulator in the world to implement swap data reporting
requirements, it did so only in a partial, non-descriptive, and non-
technical fashion, which has led to the fact that, even today, the
Commission has great difficulty aggregating and analyzing data for
uncleared swaps across swap data repositories (SDRs).
    However, I’m very pleased that over the past few years, the CFTC
continued to lead global efforts to reach international consensus on
reporting requirements so that derivatives regulators can finally
get a clear picture of the uncleared landscape.
    I wish we could have arrived at this stage sooner. Nevertheless,
I would like to recognize the diligent efforts of DMO staff to
finally get us over the finish line. The proposals before us today
seek to provide the Commission with the homogeneous data it needs to
readily analyze swap data for both cleared and uncleared swaps,
across jurisdictions. The proposals would eliminate unnecessary
reporting fields, implement internationally agreed to “critical
data elements,” or CDE fields, and revisit aspects of our current
reporting regimes that can be further perfected.
    It is important to note the differentiation between the poor
usability of current uncleared swaps data and the significant
usability of swaps data produced by clearinghouses for cleared swaps
trades. In fact, the swap data for cleared swap transactions is
regularly used by the Commission to monitor risk in real time at the
client portfolio level.

Part 45 Regulatory Reporting

    The proposal would provide reporting counterparties with a
longer time to report trades accurately to an SDR by moving to a
“T+1” reporting timeframe for swap dealer (SD) and derivatives
clearing organization (DCO) reporting parties, and a “T+2”
reporting timeframe for non-SD/DCO reporting counterparties. I
support providing additional time for market participants to meet
their regulatory reporting obligations. A later regulatory reporting
deadline should help counterparties report the trade correctly the
first time, instead of reporting an erroneous trade that then needs
to be corrected later. This proposed change would also more closely
harmonize the CFTC’s and ESMA’s reporting deadlines.
    The proposal would also implement a number of CDE fields
consistently with the detailed technical standards put forth by
CPMI-IOSCO.1 Importantly, the proposal would remove the current
“catch-all” reporting requirement to report “any other term(s) of
the swap matched or affirmed” by the counterparties. It would also
require, for the first time, certain reporting counterparties to
report valuation, margin, and collateral information daily to the
Commission. Significantly, in order to alleviate burdens on small
reporting counterparties, non-SD/MSP reporting counterparties would
not be subject to these new requirements. With respect to swaps on
physical commodities, the proposal seeks input from market
participants about how certain data elements should be reported,
including quantity unit of measure and price unit of measure. The
CDE technical guidance did not harmonize many fields that are
relevant to the physical commodity asset class. I know DMO will
continue to play an active role through CPMI-IOSCO’s CDE governance
process to ensure that additional guidance and specificity are
provided regarding the data elements for this asset class. I hope
that commenters use this as an opportunity to help inform the
additional steps that must be taken at the international level to
ensure the effective reporting of commodity swaps.
—————————————————————————

    1 See CPMI-IOSCO, Technical Guidance, Harmonization of
Critical OTC Derivatives Data Elements (other than UTI and UPI)
(Apr. 2018), available at https://www.bis.org/cpmi/publ/d175.pdf.
—————————————————————————

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

Part 43 Real-Time Reporting

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

    2 CEA section 2(a)(13)(E).
    3 See, e.g., Comment Letter from SIFMA Asset Management Group
(Aug. 18, 2017) and Comment Letter from the ACLI (Aug. 21, 2017).
—————————————————————————

Conclusion

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

Appendix 4–Statement of Concurrence of Commissioner Rostin Behnam

    I respectfully concur in the Commission’s proposal to amend
certain swap data and recordkeeping and reporting requirements. The
proposed amendments reflect a multi-year effort to streamline,
simplify, and internationally harmonize the requirements associated
with reporting swaps. As a whole, the proposed amendments should
improve data quality by eliminating duplication, removing
alternative or adjunct reporting options, and utilizing universal
data elements and identifiers. Along those lines, I am especially
pleased that the Commission is proposing to require consistent
application of rules across SDRs for the validation of both part 43
and part 45 data submitted by

[[Page 21657]]

reporting counterparties. I believe the proposed amendments to part
49 set forth a practical approach to ensuring SDRs can meet the
statutory requirement to confirm the accuracy of swap data set forth
in CEA section 21(c) 1 without incurring unreasonable burdens.
—————————————————————————

    1 7 U.S.C. 24a(c)(2).
—————————————————————————

    I am also pleased that the Commission is considering requiring
reporting counterparties to indicate whether a specific swap: (1)
Was entered into for dealing purposes (as opposed to hedging,
investing, or proprietary trading); and/or (2) needs not be
considered in determining whether a person is a swap dealer or need
not be counted towards a person’s de minimis threshold as described
in paragraph (4) of the “swap dealer” definition in regulation 1.3
pursuant to one of the exclusions or exceptions in the swap dealer
definition. In the past, the Commission staff has identified the
lack of these fields as limiting constraints on the usefulness of
SDR data to identify which swaps should be counted towards a
person’s de minimis threshold, and the ability to precisely assess
the current de minimis threshold or the impact of potential changes
to current exclusions.2 As I have noted, where Congress has
dictated that the Commission be the primary regulator for certain
swap dealing activities, it should utilize resources efficiently to
accomplish its duties.3 It seems that the Commission’s ongoing
surveillance for compliance with the swap dealer registration
requirements would be greatly enhanced by data fields identifying
the relationship of a particular swap to its participant’s business
or purpose–even where the data might only be reasonably available
via the reporting counterparty. Moreover, it would afford the
Commission greater insight into the use and usefulness of current
exclusions and exceptions, as well as provide important data to
support further consideration of relief. I look forward to hearing
from commenters on this question.
—————————————————————————

    2 See De Minimis Exception to the Swap Dealer Definition, 83
FR 27444, 27449 (proposed June 12, 2018); Swap Dealer De Minimis
Exception Final Staff Report at 19 (Aug. 15, 2016); (Nov. 18, 2015),
available at https://www.cftc.gov/sites/default/files/idc/groups/public/@swaps/documents/file/dfreport_sddeminis081516.pdf; Swap
Dealer De Minimis Exception Preliminary Report at 15 (Nov. 18,
2015), available at https://www.cftc.gov/sites/default/files/idc/groups/public/@swaps/documents/file/dfreport_sddeminis_1115.pdf.
    3 See De Minimis Exception to the Swap Dealer Definition–
Swaps Entered Into by Insured Depository Institutions in Connection
with Loans to Customers, 84 FR 12450, 12470-71 (Apr. 1, 2019).
—————————————————————————

Appendix 5–Statement of Commissioner Dan M. Berkovitz

Introduction

    Collecting swap data is crucial to fulfilling the purposes of
the Commodity Exchange Act (“CEA”), including “insur[ing] the
financial integrity of all transactions subject to this Act and the
avoidance of systemic risk.” 1 The 2008 financial crisis showed
how a lack of transparency in swap trading, and regulators’
inability to monitor risk, can create fertile ground for the
accumulation of excessive risks.
—————————————————————————

    1 CEA section 3(b).
—————————————————————————

    The Commission must collect appropriate swap data to fulfill its
statutory mandate. The data must be accurate and sufficiently
standardized so that the Commission can easily aggregate and analyze
the data reported to different swap data repositories (“SDRs”).
The Commission must be able to determine how different derivatives
categories and products are being traded, as well as the positions
and risks that different market participants are taking across the
entire swaps market. I support today’s Proposal to amend the Part
45, 46, and 49 2 reporting requirements because it would improve
the standardization and accuracy of swap data reported to SDRs, and
would thereby strengthen the Commission’s ability to oversee swap
markets. I commend the many CFTC staff members who have spent years
reviewing swap data and helped improve the data reporting framework.
—————————————————————————

    2 The Proposal is one of three notices of proposed rulemaking
developed from the Commission’s 2017 “Roadmap to Achieve High
Quality Swaps Data.” The Commission previously proposed revisions
to its rules for SDRs (part 49) in 2019. The present proposal
addresses regulatory reporting of swaps (part 45), reporting of
transition and pre-enactment swaps (part 46), and certain additional
amendments to part 49. Through separate actions today, the
Commission is also proposing significant amendments to its real-time
public reporting rules (part 43) and reopening the comment period on
its 2019 proposal for SDRs.
—————————————————————————

    In addition to obtaining accurate data, the Commission must also
develop the tools and resources to analyze that data. The Proposal,
which focuses on the quality and reporting of data, does not address
in any detail the actual use cases for the data that would be
collected or the analytical needs for swap risk management
oversight. Regrettably, the Commission has yet to set forth with any
specificity how it intends to use this swap data to evaluate or
address systemic risk. More generally, the Commission has not
devoted enough attention to the important task of building a risk
monitoring system for swaps. In my view, this effort should be a
high priority. I encourage market participants and members of the
public to comment on the Proposal and on the particular questions
noted below.

The Proposal

    In 2010, Congress enacted the Dodd-Frank Act and codified swap
reporting reforms consistent with international goals of ensuring
that swap reporting and review is “sufficient to improve
transparency in the derivatives markets, mitigate systemic risk, and
protect against market abuse.” 3 In 2012, the Commission was the
first major jurisdiction to adopt swap data reporting rules.4
—————————————————————————

    3 See G20, Leaders’ Statement: The Pittsburgh Summit (Sept.
24-25, 2009), paragraph 13, available at https://www.treasury.gov/resource-center/international/g7-g20/Documents/pittsburgh_summit_leaders_statement_250909.pdf.
    4 The Commission initially published its part 45 rules in
January 2012. See Swap Data Recordkeeping and Reporting
Requirements, 77 FR 2136 (Jan. 13, 2012).
—————————————————————————

    The Proposal would amend those existing rules to simplify
reporting obligations, increase data quality, and partially
harmonize specific data elements and taxonomies with new
international standards. It would reduce the number of potentially
duplicative reports sent to SDRs by condensing basic reporting
obligations into “creation” and “continuation” reports for all
swaps and eliminate repetitive daily “state” data reporting of the
same data for most existing transactions. SDRs would also be
required to validate the data they receive. I support these efforts
to improve swap data reporting.
    The Proposal would also extend swap data reporting deadlines to
T+1 (reporting required one day after the day the trade is executed)
for swap dealers, major swap participants, swap execution
facilities, designated contract markets, and derivatives clearing
organizations (“DCOs”). Other reporting counterparties would be
required to report no later than T+2. This change is expected to
increase data accuracy, as it would allow time for reporting parties
to verify their data before submission to an SDR. The tradeoff is
that the Commission will not receive data nearly instantaneously,
which could constrain the Commission’s ability to undertake real
time monitoring of risks in times of market stress. It is my
understanding, however, that to date such monitoring has not been
possible. I encourage public comments on these proposed reporting
deadlines, including whether the full amount of T+1 or T+2 is
necessary to achieve accurate reporting and is compatible with the
Commission’s market and systemic risk oversight responsibilities.
    The Proposal also would impose a new requirement for swap
dealers, major swap participants, and DCOs to report margin and
collateral data each business day.5 It would specify certain
margin and collateral data elements, including the value of initial
margin posted and received by the reporting counterparty, the value
of variation margin posted and received, and the currency of posted
margin.6 The uncleared swaps margin rules are one of the most
important risk-mitigation requirements added after the 2008
financial crisis and collecting margin data is important for the
Commission to monitor risks and check compliance with the rules.
—————————————————————————

    5 See proposed Sec.  45.4(c)(2).
    6 See proposed appendix 1 to part 45.
—————————————————————————

    However, it is not clear whether the collateral data to be
collected would be sufficient for the Commission’s purposes. Without
exposure data, the Commission may not be able to assess whether the
amount of collateral collected offsets the risks posed by swaps or
verify compliance with the uncleared swap margin rules. For these
reasons, I ask that commenters address whether reporting of
exposures or other data elements related to margin should be
included in this rule or in other reporting requirements, or
alternatively, whether the CFTC should be able to undertake the
appropriate analysis with other data it already collects.

More Focus Needed on Data Analysis

    As a CFTC Commissioner, I am often asked how we use SDR data,
and whether the

[[Page 21658]]

Commission has the institutional focus to leverage the unprecedented
amounts of information at its disposal. The Commission requires that
every swap subject to its jurisdiction be reported to an SDR, and
that the data be updated throughout the entire swap lifecycle. Tens
of millions of swap data records are received by SDRs monthly.
Market participants are justified in asking what the Commission does
with so much data.
    Systemic risk monitoring, market integrity, and the protection
of market participants are fundamental purposes of the CEA.
Comprehensive data sets and sophisticated data analysis are
indispensable to the Commission and indeed to any modern financial
regulatory agency. For decades the CFTC has been analyzing futures
and options data on a daily basis to monitor risk and margin
sufficiency in those markets.
    The Commission needs to identify and articulate how it will use
swap data to meet its mandates. While general goals are often
stated, the Commission needs to identify the specific risks it is
measuring and monitoring and the information that should be made
available to the public to improve market transparency. The
Commission should be able to identify which data elements allow the
Commission to specifically monitor for market risk, liquidity risk,
and credit risk, for example, and how those elements are used for
that purpose. We should describe how specific data elements will
improve the accuracy of the weekly swaps report and bring greater
transparency for market participants. The Commission should map the
data elements in the Proposal to these uses and others to explain in
a comprehensive manner 7 how they will be used and why they are
needed.
—————————————————————————

    7 Staff has provided information about a particular use for
each data element. However, we have not seen how the data elements
together allow for a more comprehensive entity level or market level
analysis of specific risks.
—————————————————————————

    I urge the Commission to focus more resources on swap data
analysis so that we can maximize our use of the reported data to
help mitigate risks before they become a full blown crisis. While
data is the necessary foundation of any good risk monitoring
program, more must be done. The Commission must also develop a more
comprehensive capacity to measure and monitor risk. It must identify
how it will achieve specific swap analysis objectives, the data
needed for such objectives, and the information technology and human
resources needed to execute its vision.

Conclusion

    Part 45 and the proposal’s swap data elements are generally
focused on the reporting of individual swap transactions, as
specified in CEA section 2a(13)(G). I support the Proposal because
it will standardize and improve the reporting of quality swap data.
This is both necessary and appropriate; high quality data is the
foundation upon which needed data analysis for risk monitoring and
greater transparency are built. I encourage public comment on
whether the 116 data elements in the proposal are sufficient to
understand the market, counterparty, and systemic risks associated
with individual swaps and with each market participant’s swap book
and aggregate exposures.
    I thank the staff of the Commission, and particularly the
Division of Market Oversight, for their work on the Proposal and for
their constructive engagement with my office. I look forward to
public comments, and to a more complete articulation by the
Commission of how it will use the swap data that would be collected
to fulfill its congressionally mandated mission.

[FR Doc. 2020-04407 Filed 4-16-20; 8:45 am]
BILLING CODE 6351-01-P