Federal Register, Volume 80 Issue 168 (Monday, August 31, 2015)

[Federal Register Volume 80, Number 168 (Monday, August 31, 2015)]

[Proposed Rules]

[Pages 52543-52586]

From the Federal Register Online via the Government Publishing Office [www.gpo.gov]

[FR Doc No: 2015-21030]

[[Page 52543]]

Vol. 80

Monday,

No. 168

August 31, 2015

Part II

Commodity Futures Trading Commission

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17 CFR Part 45

Amendments to Swap Data Recordkeeping and Reporting Requirements for

Cleared Swaps; Proposed Rule

Federal Register / Vol. 80 , No. 168 / Monday, August 31, 2015 /

Proposed Rules

[[Page 52544]]

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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 45

RIN 3038-AE12

Amendments to Swap Data Recordkeeping and Reporting Requirements

for Cleared Swaps

AGENCY: Commodity Futures Trading Commission.

ACTION: Notice of proposed rulemaking.

———————————————————————–

SUMMARY: The Commodity Futures Trading Commission (“Commission” or

“CFTC”) is proposing amendments to rules relating to swap data

reporting in connection with cleared swaps for swap data repositories

(“SDRs”), derivatives clearing organizations (“DCOs”), designated

contract markets (“DCMs”), swap execution facilities (“SEFs”), swap

dealers (“SDs”), major swap participants (“MSPs”), and swap

counterparties who are neither SDs nor MSPs. Commodity Exchange Act

(“CEA” or “Act”) provisions relating to swap data recordkeeping and

reporting were added by the Dodd-Frank Wall Street Reform and Consumer

Protection Act (“Dodd-Frank Act”). The proposed amendments to the

rules further the goals of the Dodd-Frank Act to reduce systemic risk,

increase transparency and promote market integrity within the financial

system.

DATES: Comments must be received on or before October 30, 2015.

ADDRESSES: You may submit comments, identified by “Amendments to Swap

Data Recordkeeping and Reporting Requirements for Cleared Swaps” and

RIN 3038-AE12, by any of the following methods:

CFTC Web site: http://comments.cftc.gov. Follow the

instructions for submitting comments through the Comments Online

process on the Web site.

Mail: Send to Christopher Kirkpatrick, Secretary of the

Commission, Commodity Futures Trading Commission, Three Lafayette

Centre, 1155 21st Street NW., Washington, DC 20581.

Hand Delivery/Courier: Same as Mail, above.

Federal eRulemaking Portal: http://www.regulations.gov.

Follow the instructions for submitting comments.

Please submit your comments using only one of these methods.

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, a petition for confidential treatment of the exempt

information may be submitted according to the procedures established in

Sec. 145.9 of the Commission’s regulations.1

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1 17 CFR 145.9.

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The Commission reserves the right, but shall have no obligation, to

review, pre-screen, filter, redact, refuse or remove any or all of your

submission from 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 Freedom of Information

Act.

FOR FURTHER INFORMATION CONTACT: Dan Bucsa, Deputy Director, Division

of Market Oversight, 202-418-5435, [email protected]; Aaron Brodsky,

Special Counsel, Division of Market Oversight, 202-418-5349,

[email protected]; Ben DeMaria, Special Counsel, Division of Market

Oversight, 202-418-5988, [email protected]; Esen Onur, Economist,

Office of the Chief Economist, 202-418-6146, [email protected]; or Mike

Penick, Economist, Office of the Chief Economist, 202-418-5279,

[email protected]; Commodity Futures Trading Commission, Three Lafayette

Centre, 1151 21st Street NW., Washington, DC 20581.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background

A. Introduction

B. Statutory Authority

C. Regulatory History–Part 45 Final Rulemaking

D. Consultation With Other U.S. Financial Regulators

E. Summary of Proposed Revisions to Part 45

II. Proposed Regulations

A. Definitions–Proposed Amendments to Sec. 45.1

B. Swap Data Reporting: Creation Data–Proposed Amendments to

Sec. 45.3

C. Swap Data Reporting: Continuation Data–Proposed Amendments

to Sec. 45.4

D. Unique Swap Identifiers–Proposed Amendments to Sec. 45.5

E. Determination of Which Counterparty Must Report–Proposed

Amendments to Sec. 45.8

F. Reporting to a Single Swap Data Repository–Proposed

Amendments to Sec. 45.10

G. Examples of Cleared Swap Reporting Workflows Under the

Proposed Revisions

H. Primary Economic Terms Data–Proposed Amendments to Appendix

1 to Part 45–Tables of Minimum Primary Economic Terms

III. Request for Comments

IV. Related Matters

A. Regulatory Flexibility Act

B. Paperwork Reduction Act

C. Cost-Benefit Considerations

D. Antitrust Considerations

I. Background

A. Introduction

On July 21, 2010, President Obama signed into law the Dodd-Frank

Act.2 Title VII of the Dodd-Frank Act amended the CEA 3 to

establish a comprehensive new regulatory framework for swaps and

security-based swaps. The legislation was enacted to reduce systemic

risk, increase transparency, and promote market integrity within the

financial system by, among other things: providing for the registration

and comprehensive regulation of SDs and MSPs; imposing clearing and

trade execution requirements on standardized derivative products;

creating rigorous recordkeeping and data reporting regimes with respect

to swaps, including real time reporting; and enhancing the Commission’s

rulemaking and enforcement authorities with respect to, among others,

all registered entities, intermediaries, and swap counterparties

subject to the Commission’s oversight.

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2 See Dodd-Frank Wall Street Reform and Consumer Protection

Act, Public Law 111-203, 124 Stat. 1376 (2010). The text of the

Dodd-Frank Act may be accessed at http://www.cftc.gov/LawRegulation/DoddFrankAct/index.htm.

3 7 U.S.C. 1, et seq.

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B. Statutory Authority

To enhance transparency, promote standardization, and reduce

systemic risk, section 727 of the Dodd-Frank Act added to the CEA

section 2(a)(13)(G), which requires all swaps, whether cleared or

uncleared, to be reported to SDRs, which are registered entities 4

created by section 728 of the Dodd-Frank Act to collect and maintain

data related to swap transactions as prescribed by the Commission, and

to make such data available to the Commission and other regulators.5

Section 21(b) of the CEA, added by section 728 of the Dodd-Frank Act,

directs the Commission to prescribe standards for swap data

recordkeeping

[[Page 52545]]

and reporting, which are to apply to both registered entities and

counterparties involved with swaps 6 and which are to be comparable

to those for clearing organizations in connection with their clearing

of swaps.7

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4 See also CEA sections 1a(40)(E) and 1a(48).

5 Regulations governing core principles and registration

requirements for, and the duties of, SDRs are the subject of part 49

of this chapter.

6 CEA section 21(b)(1)(A).

7 CEA section 21(b)(3).

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C. Regulatory History–Part 45 Final Rulemaking

On December 20, 2011, the Commission adopted part 45 of the

Commission’s regulations (“Final Part 45 Rulemaking”).8 Part 45

implements the requirements of section 21 of the CEA by setting forth

the manner and contents of reporting to SDRs, and requires electronic

reporting both when a swap is initially executed, referred to as

“creation” data,9 and over the course of the swap’s existence,

referred to as “continuation” data.10 The part 45 regulations set

forth varying reporting timeframes depending on the type of reporting,

counterparty, execution, or product.

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8 See “Swap Data Recordkeeping and Reporting Requirements,”

77 FR 2136, Jan. 13, 2012.

9 See 17 CFR 45.1 (defining “required swap creation data” as

“all primary economic terms data for a swap in the swap asset class

in question, and all confirmation data for the swap.”) “Primary

economic terms data” is defined as “all of the data elements

necessary to fully report all of the primary economic terms of a

swap in the swap asset class of the swap in question,” while

“confirmation data” is defined as “all of the terms of a swap

matched and agreed upon by the counterparties in confirming the

swap. For cleared swaps, confirmation data also includes the

internal identifiers assigned by the automated systems of the [DCO]

to the two transactions resulting from novation to the clearing

house.” Id. See also 17 CFR 45.3.

10 See 17 CFR 45.1 (defining “required swap continuation

data” as “all of the data elements that must be reported during

the existence of a swap to ensure that all data concerning the swap

in the swap data repository remains current and accurate, and

includes all changes to the primary economic terms of the swap

occurring during the existence of the swap. . . . ” See also 17 CFR

45.4.

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As part of the Commission’s ongoing efforts to improve swap

transaction data quality and to improve the Commission’s ability to

utilize the data for regulatory purposes, Commission staff has

continued to evaluate reporting issues relating to the operation of

part 45, and cleared swaps in particular. Commission staff’s efforts

included the formation of an interdivisional staff working group to

identify, and make recommendations to resolve, reporting challenges

associated with certain swaps transaction data recordkeeping and

reporting provisions, including the provisions adopted in the Final

Part 45 Rulemaking.11

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11 See Press Release, CFTC to Form an Interdivisional Working

Group to Review Regulatory Reporting, Jan. 21, 2014, available at

http://www.cftc.gov/PressRoom/PressReleases/pr6837-14.

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Based in large part on those efforts, the Commission ultimately

requested comment on a variety of swap data reporting and recordkeeping

provisions to help determine how such provisions were being applied and

to determine whether or what clarifications or enhancements may be

appropriate.12 One of the subjects of the request for comment was the

reporting of cleared swaps, and, in particular, the manner in which the

swap data reporting rules should address cleared swaps.13 In response

to this request, the Commission received a number of comment letters

addressing reporting of cleared swaps.14 References to “commenters”

throughout this release refer to those who submitted such comment

letters, and summaries and a discussion of the general themes raised by

those commenters appear in the relevant sections throughout this

release.

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12 See “Review of Swap Data Recordkeeping and Reporting

Requirements,” Request for Comment, 79 FR 16689, Mar. 26, 2014.

13 Id. at 16694.

14 Commenters included: The American Gas Association, May 27,

2014; American Petroleum Institute, May 27, 2014; Americans for

Financial Reform, May 27, 2014 (“AFR”); Australian Bankers’

Association, May 27, 2014 (“ABA”); Better Markets, Inc., May 27,

2014, (“Better Markets”); B&F Capital Markets, Inc., May 27, 2014;

CME Group, May 27, 2014 (“CME”); Coalition for Derivatives End-

Users, May 27, 2014 (“CDEU”); Coalition of Physical Energy

Companies, May 27, 2014; Commercial Energy Working Group, May 27,

2014 (“CEWG”); Commodity Markets Council, May 27, 2014 (“CMC”);

The Depository Trust & Clearing Corporation, May 27, 2014

(“DTCC”); EDF Trading North America, LLC, May 27, 2014; Edison

Electric Institute, May 27, 2014 (“EEI”); Financial InterGroup

Holdings Ltd, May 27, 2014; Financial Services Roundtable, May 27,

2014; Fix Trading Community, May 27, 2014; The Global Foreign

Exchange Division of the Global Financial Markets Association, May

27, 2014 (“GFMA”); HSBC, May 27, 2014; Interactive Data

Corporation, May 27, 2014; Intercontinental Exchange, May 27, 2014

(“ICE”); International Energy Credit Association, May 27, 2014;

International Swaps and Derivatives Association, Inc., May 23, 2014

(“ISDA”); Japanese Bankers Association, May 27, 2014 (“JBA”);

Just Energy Group Inc., May 27, 2014; LCH.Clearnet Group Limited,

May 29, 2014 (“LCH”); Managed Funds Association, May 27, 2014

(“MFA”); Markit, May 27, 2014; Natural Gas Supply Association, May

27, 2014 (“NGSA”); NFP Electric Associations (National Rural

Electric Cooperative Association, American Public Power Association,

and Large Public Power Council), May 27, 2014 (“NFPEA”); OTC

Clearing Hong Kong Limited, May 27, 2014 (“OTC Hong Kong”);

Securities Industry and Financial Markets Association Asset

Management Group, May 27, 2014 (“SIFMA”); SWIFT, May 27, 2014;

Swiss Re, May 27, 2014; Thomson Reuters (SEF) LLC, May 27, 2014

(“TR SEF”); and TriOptima, May 27, 2014.

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The swap data reporting framework adopted in the Final Part 45

Rulemaking was largely based on the mechanisms for the trading and

execution of uncleared swaps. Under such a regime, swap data reporting

was premised upon the existence of one continuous swap for reporting

and data representation purposes. The Commission has since had

additional opportunities to consult with industry and to observe how

the part 45 regulations function in practice with respect to swaps that

are cleared, including how the implementation of part 45 interacts with

the implementation of part 39 of the Commission’s regulations, which

contains provisions applicable to DCOs.

In particular, Sec. 39.12(b)(6) provides that upon acceptance of a

swap by a DCO for clearing, the original swap is extinguished and

replaced by equal and opposite swaps, with the DCO as the counterparty

to each such swap.15 The original swap that is extinguished upon

acceptance for clearing is commonly referred to as the “alpha” swap

and the equal and opposite swaps that replace the original swap are

commonly referred to as “beta” and “gamma” swaps. The Commission

has observed that certain provisions of part 45 could better

accommodate the cleared swap framework set forth in Sec. 39.12(b)(6).

The revisions and additions proposed in this release are intended to

provide clarity to swap counterparties and registered entities of their

part 45 reporting obligations with respect to the swaps involved in a

cleared swap transaction. This proposal is also intended to improve the

efficiency of data collection and maintenance associated with the

reporting of the swaps involved in a cleared swap transaction.

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15 See 17 CFR 39.12(b)(6) (requiring a DCO that clears swaps

to “have rules providing that, upon acceptance of a swap by the

[DCO] for clearing: (i) The original swap is extinguished; (ii) the

original swap is replaced by an equal and opposite swap between the

[DCO] and each clearing member acting as principal for a house

trading or acting as agent for a customer trade . . .”). The

Commission reaffirmed its position regarding the composition of a

cleared swap in a statement regarding Chicago Mercantile Exchange

(“CME”) Rule 1001. See Statement of the Commission on the Approval

of CME Rule 1001 at 6, Mar. 6, 2013, available at http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/statementofthecommission.pdf.

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Where possible, the Commission has endeavored to harmonize the

rules proposed in this release with the approach proposed by the

Securities and Exchange Commission (“SEC”) in its release proposing

certain new rules and rule amendments to Regulation SBSR–Reporting and

Dissemination of Security-Based Swap Information (“Regulation

SBSR”).16 The SEC release proposed new rules and rule amendments to

Regulation SBSR,

[[Page 52546]]

which, in pertinent part, address the reporting to a registered

security-based swap data repository of security-based swaps that will

be submitted to clearing. The SEC received a number of comments on its

release,17 and, given the similarities between the reporting

framework set forth in the proposed new rules and rule amendments to

Regulation SBSR and the proposed amendments to part 45 that are the

subject of this release, the Commission also includes in this release

the following discussion of the general themes raised in the Regulation

SBSR comment letters: 18

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16 See “Regulation SBSR–Reporting and Dissemination of

Security-Based Swap Information,” 80 FR 14740, Mar. 19, 2015.

17 The comment file is available at http://www.sec.gov/comments/s7-03-15/s70315.shtml.

18 The discussion of comments received by the SEC on its

release proposing new rules and rule amendments to Regulation SBSR

reflects the Commission’s understanding of the comment letters and

do not necessarily reflect the views of the SEC. Comments received

by the SEC in response to its release proposing new rules and rule

amendments to Regulation SBSR are denoted as “Regulation SBSR

Comment Letter” throughout this release.

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Several commenters expressed concerns that allowing the clearing

agency to report data to a different security-based SDR (“SB-SDR”)

19 than the SB-SDR to which an initial alpha trade was reported could

result in bifurcated data, and contended that beta and gamma trades

should be reported to the same SB-SDR as the alpha trade in order to

facilitate data aggregation and to allow regulators easy access to all

of the data for a particular swap transaction.20

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19 As summarized in this release, references to SDRs in

Regulation SBSR Comment Letters in some cases have been replaced

with “SB-SDR” to delineate between the SEC and the Commission SDR

registration regimes, respectively. Throughout this release,

references to “SDR” refer to SDRs registered with the Commission.

20 See Depository Trust and Clearing Corporation Regulation

SBSR Comment Letter, May 4, 2015, at 4-6 (advocating for all records

related to a single alpha trade to be reported to a single SB-SDR

and suggesting an alternative to the SEC’s proposed rules); Better

Markets, Inc. Regulation SBSR Comment Letter, May 4, 2015, at 2, 4

(stating that the SEC must ensure it is easy to commingle and use

data from two different SDRs and enable beta and gamma trades to be

traced back to the alpha trade, and, if not, that the SEC must

require the alpha, beta, and gamma trades to all be reported to the

same SDR); and Markit Regulation SBSR Comment Letter, May 4, 2015,

at 3, 6.

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Some commenters expressed support for modifications which would

assign the sole reporting duty for a clearing transaction 21 to the

registered clearing agency, provided that the SEC adopts its proposal

to assign the clearing agency the sole reporting obligation for

clearing transactions and that the SEC allows the registered clearing

agency to select the SB-SDR to which it reports.22

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21 SEC Rule 900(g) defines “clearing transaction” as “a

security-based swap that has a registered clearing agency as a

direct counterparty.”). See Regulation SBSR–Reporting and

Dissemination of Security-Based Swap Information,” 80 FR 14564,

Mar. 19, 2015.

22 See International Swaps and Derivatives Association, Inc.

and Securities Industry and Financial Markets Association Regulation

SBSR Comment Letter, May 4, 2015, at 24 (noting that clearing

agencies have demonstrated their ability and preference to report

data for cleared transactions in other jurisdictions globally and

under the CFTC rules) and ICE Trade Vault, LLC Regulation SBSR

Comment Letter, May 4, 2015, at 1, 3, 5 (stating that for cleared

security-based swaps, the clearing agency is the sole party who

holds the complete and accurate record of transactions and

positions, and that no other party has complete information about

the resulting swaps and the subsequent downstream clearing processes

that affect those swaps).

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Some commenters agreed with the SEC’s proposed addition of a

requirement that the registered clearing agency report whether it has

accepted an alpha for clearing to the alpha SB-SDR in the format

required by such SB-SDR.23 Another commenter contended that if the

reporting side 24 to the alpha selected the SB-SDR to receive the

beta and gamma trades, the clearing agency would not have to report to

the alpha SB-SDR that the security-based swap has been accepted for

clearing.25

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23 See International Swaps and Derivatives Association, Inc.

and Securities Industry and Financial Markets Association Regulation

SBSR Comment Letter at 24 (noting that such a requirement would

prevent the “orphaning” of alphas that currently occurs under CFTC

rules) and ICE Trade Vault, LLC Regulation SBSR Comment Letter at 5

(noting that the SDR should immediately accept and process the alpha

termination and that clearing agencies are the sole reporting side

that can report alpha terminations).

24 The “reporting side” under SEC rules is a similar concept

to the “reporting counterparty” under part 45 of the Commission’s

rules.

25 See Markit Regulation SBSR Comment Letter at 15.

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Some commenters acknowledged the value of the proposal to require

the party required to report the alpha to provide the clearing agency

with the transaction ID of the alpha and the identity of the alpha SB-

SDR, noting that the Unique Transaction Identifier has already been

incorporated into submission flows to clearing agencies for use in

reporting in other jurisdictions.26

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26 See International Swaps and Derivatives Association, Inc.

and Securities Industry and Financial Markets Association Regulation

SBSR Comment Letter at 25.

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D. Consultation With Other U.S. Financial Regulators

In developing these rules, Commission staff has engaged in

extensive consultations with U.S. domestic financial regulators. The

agencies and institutions consulted include the SEC, the Federal

Reserve Board of Governors, the Federal Housing Finance Agency, the

Federal Deposit Insurance Corporation, Office of Comptroller of the

Currency, and the Farm Credit Administration.

E. Summary of Proposed Revisions to Part 45

The Commission is proposing revisions and additions to Sec. Sec.

45.1, 45.3, 45.4, 45.5, 45.8, 45.10, and appendix 1 to part 45 in order

to provide clarity to counterparties to a swap and registered entities

regarding their part 45 reporting obligations with respect to each of

the swaps involved in a cleared swap transaction.27 The Commission

proposes the following amendments, each of which is discussed in

greater detail in Section II of this release:

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27 The Commission is also proposing to amend the part 45

authority citation to replace a reference to 7 U.S.C. 24 with a

reference to 7 U.S.C. 24a.

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Amendments to Sec. 45.1 would revise the definition of

“derivatives clearing organization” to update a cross-reference and

to make explicit that the definition covers only registered DCOs.

Revised Sec. 45.1 would also add new definitions for “original

swaps” and “clearing swaps.” These proposed terms would be used

throughout part 45 to help clarify reporting obligations for the swaps

involved in a cleared swap transaction.

Amendments to Sec. 45.3 would: Modify and clarify DCO

creation data reporting obligations for swaps that result from the

clearing process; establish which entity has the obligation to choose

the SDR to which creation data is reported; eliminate confirmation data

reporting obligations for swaps that are intended to be submitted to a

DCO for clearing at the time of execution; and make conforming changes.

Amendments to Sec. 45.4 would modify and clarify

continuation data reporting obligations for original swaps, including

the obligation to report original swap terminations to the SDR to which

the original swap was reported; modify and clarify the obligation to

report data providing for the linking of original and clearing swaps

and the original and clearing swap SDRs; remove the requirement for SD/

MSP reporting counterparties to report daily valuation data for cleared

swaps; and would make conforming changes.

Amendments to Sec. 45.5 would set forth a DCO’s

obligations to create, transmit, and use unique swap identifiers

(“USIs”) to identify clearing swaps.

Amendments to Sec. 45.8 would provide that the DCO will

be the reporting counterparty for clearing swaps.

Amendments to Sec. 45.10 would provide that all swap data

for a given

[[Page 52547]]

clearing swap, and all swap data for each clearing swap that replaces a

particular original swap (and each equal and offsetting clearing swap

that is created upon execution of the same transaction and that does

not replace an original swap), must be reported to a single SDR.

Amendments would also make conforming changes.

Amendments to appendix 1 would modify certain existing PET

data fields and certain explanatory notes in the Comment sections for

existing PET data fields, and would add several new PET data fields to

account for the clarifications provided in this release for the

reporting of clearing swaps.

II. Proposed Regulations

Throughout Section II of this release, the Commission will outline

each existing provision the Commission is proposing to amend, discuss

each proposed amendment, and request comments about the proposed

amendments. The Commission has also included several examples to

demonstrate how cleared swap reporting workflows would function under

the proposed revisions.

A. Definitions–Proposed Amendments to Sec. 45.1

1. Existing Sec. 45.1

The Commission is proposing to revise the definition of

“derivatives clearing organization” in Sec. 45.1 and to add

definitions for the terms “original swap” and “clearing swap” to

Sec. 45.1.

2. Proposed Amendments and Additions to Sec. 45.1

i. “Derivatives Clearing Organization”

Currently, Sec. 45.1 defines “derivatives clearing

organization,” as used in part 45, to have the meaning “set forth in

CEA section 1a(9), and any Commission regulation implementing that

Section, including, without limitation, Sec. 39.5 of this chapter.”

However, the CEA currently defines “derivatives clearing

organization” in section 1a(15), not section 1a(9).

The Commission proposes to revise the definition of “derivatives

clearing organization” in Sec. 45.1 so that it cross-references the

definition provided in Sec. 1.3(d) of the Commission’s regulations and

so that it explicitly refers to a DCO registered with the Commission

under section 5b(a) of the CEA.28 The proposed modification would

redefine a “derivatives clearing organization” for purposes of part

45 to mean “a derivatives clearing organization, as defined by Sec.

1.3(d) of this chapter, that is registered with the Commission.”

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28 7 U.S.C. 7a-1(a).

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ii. “Original Swap” and “Clearing Swap”

As discussed earlier in this release, a cleared-swap transaction

generally comprises an original swap that is terminated upon novation,

and the equal and opposite swaps that replace it, with the DCO as the

counterparty for each swap that replaces the original swap.29 The

existing part 45 regulations do not clearly delineate the swap data

reporting requirements associated with each of the swaps involved in a

cleared-swap transaction. Accordingly, the Commission proposes to add

definitions of “original swap” and “clearing swap” to part 45 so

that the part 45 reporting rules will be more consistent with the

regulations applicable to DCOs set forth in Sec. 39.12(b)(6).

—————————————————————————

29 See 17 CFR 39.12(b)(6).

—————————————————————————

The Commission is proposing to define “original swap” as “a swap

that has been accepted for clearing by a derivatives clearing

organization” and “clearing swap” as “a swap created pursuant to

the rules of a derivatives clearing organization that has a derivatives

clearing organization as a counterparty, including any swap that

replaces an original swap that was extinguished upon acceptance of such

original swap by the derivatives clearing organization for clearing.”

As noted above, while a cleared-swap transaction generally

comprises an original swap that is terminated upon novation and the

equal and opposite swaps that replace it, the Commission is aware of

certain circumstances in which a cleared swap transaction may not

involve the replacement of an original swap.30 Accordingly, the

proposed definition of “clearing swap” is intended to encompass: (1)

Swaps to which the DCO is a counterparty and that replace an original

swap (i.e., swaps commonly known as betas and gammas) and (2) all other

swaps to which the DCO is a counterparty (even if such swap does not

replace an original swap).

—————————————————————————

30 For example, in the preamble to the part 39 adopting

release, the Commission noted that “open offer” systems are

acceptable under Sec. 39.12(b)(6), stating that “Effectively,

under an open offer system there is no `original’ swap between

executing parties that needs to be novated; the swap that is created

upon execution is between the DCO and the clearing member, acting

either as principal or agent.”). “Derivatives Clearing

Organization General Provisions and Core Principles,” 76 FR 69334,

69361, Nov. 8, 2011.

—————————————————————————

As noted above, while original swaps are commonly referred to as

“alpha” swaps and while the equal and opposite swaps that replace the

original swap are commonly referred to as “beta” and “gamma” swaps,

the Commission will use the proposed defined terms “original swap”

and “clearing swap” throughout this section of the release.

The proposed definition of original swap will provide clarity with

respect to certain continuation data reporting requirements for such

swaps by tying such obligations to a specific point in time in the life

of a swap that is either intended to be submitted to a DCO for clearing

at the time of execution, or that is not intended to be cleared at the

time of execution but is later submitted to a DCO for clearing. The

Commission notes that under the proposed definition, a swap that is

submitted to a DCO for clearing can become an original swap by virtue

of the DCO’s acceptance of such swap for clearing, irrespective of: (1)

Whether such swap is executed on or pursuant to the rules of a SEF or

DCM or off-facility; (2) whether or not such swap is subject to the

clearing requirement; and (3) whether such swap is intended to be

cleared at the time of execution or not intended to be cleared at the

time of execution, but subsequently submitted to a DCO for

clearing.31

—————————————————————————

31 See 17 CFR 39.12(b)(6). Clearing swaps would not be

executed on or pursuant to the rules of a SEF or DCM as such swaps

are created by a DCO.

—————————————————————————

3. Request for Comment

The Commission requests comment on all aspects of the proposed

revised and proposed new definitions in Sec. 45.1. The Commission also

invites comments on the following:

(1) Is the Commission’s proposed definition of “original swap”

sufficiently clear and complete? If not, please provide detail about

aspects of the definition that you believe are insufficiently clear or

inadequately addressed.

(2) Is the Commission’s proposed definition of “clearing swap”

sufficiently clear and complete, and does it, together with the

proposed definition of “original swap,” adequately account for all

components of a cleared swap transaction and for all types of cleared

swap transactions? If not, please provide detail about aspects of the

definition that you believe are insufficiently clear or inadequately

addressed.

(3) Is the Commission’s proposed revised definition of

“derivatives clearing organization” sufficiently clear and complete?

If not, please provide detail about aspects of the definition that you

believe are insufficiently clear or inadequately addressed.

(4) Are any other new defined terms necessary regarding swap data

[[Page 52548]]

recordkeeping and reporting requirements of part 45 with respect to

cleared swaps?

(5) Are the terms as defined in Sec. 45.1 adequately clear with

respect to the existing swap data recordkeeping and reporting

requirements of part 45? If not, please explain.

B. Swap Data Reporting: Creation Data–Proposed Amendments to Sec.

45.3

1. Existing Sec. 45.3

Regulation 45.3 requires reporting to an SDR of two types of

“creation data” generated in connection with a swap’s creation:

“Primary economic terms data” and “confirmation data.” 32

Regulation 45.3 governs what creation data must be reported, who must

report it, and deadlines for its reporting.

—————————————————————————

32 Section 45.1 defines “required swap creation data” as

primary economic terms data and confirmation data. Section 45.1

defines “primary economic terms data” as “all of the data

elements necessary to fully report all of the primary economic terms

of a swap in the swap asset class of the swap in question” and

defines “confirmation data” as “all of the terms of a swap

matched and agreed upon by the counterparties in confirming the

swap. For cleared swaps, confirmation data also includes the

internal identifiers assigned by the automated systems of the

derivatives clearing organization to the two transactions resulting

from novation to the clearing house.” 17 CFR 45.1.

—————————————————————————

Regulation 45.3 imposes swap data reporting requirements with

respect to both primary economic terms data and confirmation data to

different reporting counterparties and entities depending on whether

the swap is executed on or pursuant to the rules of a SEF or DCM (Sec.

45.3(a)), subject to mandatory clearing and executed off-facility

(Sec. 45.3(b)), or not subject to mandatory clearing and executed off-

facility (Sec. 45.3(c) and (d)). Regulation 45.3 also addresses

specific creation data reporting requirements in circumstances where a

swap is accepted for clearing by a DCO,33 including excusing the

reporting counterparty from reporting creation data in certain

circumstances.34

—————————————————————————

33 See 17 CFR 45.3(a)(2), (b)(2), (c)(1)(ii), (c)(2)(ii), and

(d)(2).

34 See 17 CFR 45.3(b)(1), (c)(1)(i), (c)(2)(i), and (d)(1).

—————————————————————————

2. Proposed Amendments to Sec. 45.3

As noted above, the Commission has had an opportunity to observe

how the part 45 regulations function in practice with respect to swaps

that are cleared. While CEA section 2(a)(13)(G) requires each swap

(whether cleared or uncleared) to be reported to a registered SDR, the

Commission understands that the interplay between the Sec. 45.3

reporting requirements applicable to SEFs, DCMs and reporting

counterparties, and the reporting requirements applicable to DCOs,

could benefit from greater clarity regarding how the subsections of

Sec. 45.3 assign reporting responsibilities for each of the swaps

involved in a cleared-swap transaction. Accordingly, the Commission

proposes several additions and deletions so that Sec. 45.3 will better

delineate the creation data reporting requirements associated with each

swap involved in a cleared swap transaction. The Commission also

proposes several modifications to clarify existing requirements.

i. Proposed Revised References to Clearing Requirement Exceptions and

Exemptions

Currently, Sec. Sec. 45.3 and 45.8 include references to the end-

user exception to the swap clearing requirement set forth in section

2(h)(7) of the CEA. Following the publication of the Final Part 45

Rulemaking, the Commission codified the end-user exception in Sec.

50.50 and published Two exemptions to the swap clearing requirement:

The inter-affiliate exemption (Sec. 50.52) and the financial

cooperative exemption (Sec. 50.51). The Commission is thus proposing

to revise the introductory language of Sec. 45.3, Sec. Sec. 45.3(b)

through (d), and 45.8(h)(1)(vi) to reflect that exceptions to, and

exemptions from the clearing requirement are now codified in part 50 of

the Commission’s regulations.

ii. Proposed Addition of Sec. 45.3(e)–Clearing Swaps

Currently, paragraphs (a) through (d) of Sec. 45.3 govern creation

data reporting for swaps executed on or pursuant to the rules of a SEF

or DCM and for off-facility swaps, but do not separately address

creation data reporting for swaps created through the clearing process

by a DCO (i.e., clearing swaps). Accordingly, the Commission is

proposing to renumber existing paragraph (e) (Allocations) of Sec.

45.3 as paragraph (f), and to add newly proposed paragraph (e) to Sec.

45.3, which would exclusively govern creation data reporting

requirements for clearing swaps. The Commission also proposes to revise

the introductory language of Sec. 45.3 to make clear that paragraphs

(a) through (d) apply to all swaps except clearing swaps, while

paragraph (e) applies to clearing swaps.

The proposed revisions to Sec. 45.3(e) would require a DCO, as

reporting counterparty under proposed Sec. 45.8(i),35 to report all

required swap creation data for each clearing swap, either as soon as

technologically practicable after an original swap is accepted by the

DCO for clearing (in the event that the clearing swap replaced an

original swap), or as soon as technologically practicable after

execution of a clearing swap (in the event that the clearing swap does

not replace an original swap). Additionally, under the proposed

revisions to Sec. 45.3(e), required swap creation data for clearing

swaps must be provided to a registered SDR electronically by the DCO

and must include all primary economic terms (“PET”) data and all

confirmation data for each clearing swap.

—————————————————————————

35 Currently, Sec. 45.8 establishes a hierarchy under which

the reporting counterparty for a particular swap is determined,

depending generally on the registration status of the counterparties

involved in the swap. That hierarchy does not explicitly mention

DCOs. Accordingly, the Commission is proposing Sec. 45.8(i), which

would establish the DCO as the reporting counterparty for all

clearing swaps. This proposed change is discussed in greater detail

in Section II.E. of this release. The Commission is also proposing

conforming amendments to Sec. 45.4(b)(1) and (2) to add the phrase

“as reporting counterparty” after “derivatives clearing

organization” to make clear that the DCO will be the reporting

counterparty for purposes of those provisions.

—————————————————————————

As noted above, CEA section 2(a)(13)(G) requires each swap (whether

cleared or uncleared) to be reported to a registered SDR. Proposed

paragraphs (a) through (e) of Sec. 45.3 would thus cover creation data

reporting requirements for all swaps: Existing Sec. 45.3(a) applies to

“each swap executed on or pursuant to the rules of a [SEF] or [DCM],”

existing Sec. 45.3(b) through (d) applies to “all off-facility

swaps,” and proposed Sec. 45.3(e) would apply to clearing swaps. The

provisions of Sec. 45.3(a) through (d) as proposed to be amended in

this release would thus exclude clearing swaps. Under the proposed

revisions and amendments to Sec. 45.3, a SEF/DCM or counterparty other

than the DCO will not have swap data reporting obligations with respect

to clearing swaps. Additionally, proposed Sec. 45.3(a) through (d)

would govern the creation data reporting requirements for swaps,

including swaps commonly known as “alpha” swaps, regardless of

whether they later become original swaps by virtue of their acceptance

for clearing.36

—————————————————————————

36 Swaps created by a DCO under Sec. 39.12(b)(6) are a type

of clearing swap as defined in this release, and thus could not be

executed on or pursuant to the rules of a SEF or DCM. Additionally,

a DCO would not report creation data for a swap that was executed on

or pursuant to the rules of a SEF or DCM, or for an off-facility

swap that is submitted to the DCO for clearing, because, under Sec.

45.3(a) through (d), the SEF/DCM or reporting counterparty would be

responsible for reporting creation data for such swaps after

execution. Under the proposed revisions to Sec. 45.3, a DCO will

not have creation data reporting obligations for swaps to which it

is not a counterparty and that are not clearing swaps.

—————————————————————————

In response to the Commission’s 2014 request for comment,

commenters disagreed as to whether part 45 should

[[Page 52549]]

require intended to be cleared alpha swaps to be reported to registered

SDRs. Some commenters noted that reporting of alpha swaps should

continue to be required.37 One commenter noted that the reporting of

alpha swaps provides useful information about the execution of the

alpha swap and information regarding the life cycle of a cleared swap

transaction.38 Other commenters noted that the requirement to report

alpha swaps should not be waived as it is essential for the Commission

to know the origins of a cleared swap transaction, and because the

reporting of alpha swaps provides information necessary for

surveillance and audit-trail purposes.39

—————————————————————————

37 See TR SEF letter, AFR letter, Markit letter, and DTCC

letter.

38 See AFR letter at 5 (noting that “Information related to

swaps clearing is particularly important and in general all life

cycle information relevant to tracking a swap from initial

conception through clearing should be included in swaps reporting

(including the reporting of the initial `alpha’ swap prior to

novation into clearing). Such life cycle information will be

particularly useful in tracking trends in clearing use in swaps

markets, including both enforcement of the clearing mandate and also

the optional use of clearing.”)

39 See Markit letter at 25 (“The reporting requirements in

relation to the alpha swap should not be modified or waived. This is

because it will often be essential for the Commission to know the

exact origin of a cleared swap transaction, in particular for market

surveillance purposes.”); TR SEF letter at 10 (“We do not believe

that the reporting requirements for an alpha swap should be waived

because this information is necessary for surveillance and audit

trail purposes . . . If only the beta and gamma swaps are reported,

then the Commission would not easily see where the swap was

originally executed.”); DTCC letter at 17-18 (arguing that any

changes to the Commission’s reporting requirements which would not

require the reporting of swap transaction data to SDRs for all swaps

would be inconsistent with the CEA, and noting that “[i]n order to

understand the origins of cleared swaps, regulators must have the

ability to access and examine the connections between the alpha,

beta, and gamma swaps. If the Commission’s oversight were limited to

cleared swap data, it would not be able to develop a detailed and

comprehensive understanding of a swap transaction, the trading

activities of market participants, or the detection of any

violations.”).

—————————————————————————

On the other hand, some commenters contended that alpha swaps

should not be required to be reported to an SDR.40 One commenter

stated that there is little value in reporting alpha swaps that are

intended to be cleared as such swaps are, within a short time,

superseded by beta and gamma swaps.41 Another commenter suggested

that separately reporting alpha swaps can result in misleading data and

could result in double-counting of swap transactions.42 One commenter

asserted that part 43 reporting and other relevant rules provide the

necessary information regarding the execution event.43

—————————————————————————

40 See SIFMA letter, CEWG letter, MFA letter, and ISDA letter.

41 See ISDA letter at 43 (“Therefore there is little value to

reporting creation data, either PET or confirmation, for alpha swaps

since they are almost immediately superseded by the cleared swaps,

and thus are not meaningful to an analysis of counterparty exposure.

We agree that the Part 45 reporting requirement for alpha swaps that

are required to be cleared or executed with the intent to clear (and

subsequently cleared) should be waived.”).

42 See SIFMA letter at 4 (noting that “. . . separately

reporting alpha swaps to SDRs can result in misleading data being

retained by SDRs. This is particularly concerning if alpha swaps and

the subsequent beta-gamma swaps are reported to different SDRs,

which could potentially result in the double-counting of swaps.”).

43 See LCH letter at 10 (“Part 45 reporting is not necessary

to the extent that the information required by the Commission

regarding the execution event is already captured directly from the

execution venue or the execution counterparties under Part 43 or

other relevant rules.”).

—————————————————————————

The Commission agrees with commenters who argued that alpha swaps

should be required to be reported. As these commenters stated, alpha

swaps contain information regarding the origins of a cleared swap

transaction that is essential for market surveillance and audit-trail

purposes. It is important that this information be reported reliably

based on the reporting hierarchy established and sourced from the

registered entity or reporting counterparty that the Commission

believes has the easiest and fastest access to the data. Consistent

reporting of alpha swap USIs in creation data for beta and gamma swaps,

for instance, is crucial to the Commission’s ability to trace the

history of a cleared swap transaction from execution between the

original counterparties to clearing novation. Similarly, determining

when an alpha swap has been terminated aids the Commission’s ability to

analyze cleared swap activity and to review swap activity for

compliance with the clearing requirement.

Finally, commenters also espoused varying views on which

counterparty or entity should have the part 45 obligation to report

alpha swaps; these comments will be discussed in section II.G. of this

release.

iii. Proposed Removal of Provisions

As noted above, several current provisions of Sec. 45.3 impose

certain creation data reporting requirements on a DCO in circumstances

where a swap is accepted for clearing by a DCO. To ensure consistency

with Sec. 39.12(b)(6), the Commission is proposing to remove these

creation data reporting provisions (current Sec. 45.3(a)(2),44

(b)(2), (c)(1)(ii), (c)(2)(ii), and (d)(2)), and to replace them with

new proposed Sec. 45.3(e), described above.

—————————————————————————

44 The Commission is also proposing to renumber existing Sec.

45.3(a)(1) as Sec. 45.3(a).

—————————————————————————

Additionally, the Commission is proposing to remove portions of

Sec. 45.3(b)(1), (c)(1)(i), (c)(2)(i), and (d)(1). Currently, where

both a DCO and reporting counterparty have obligations under Sec. 45.3

for reporting creation data for the same swap, these subsections excuse

the reporting counterparty from reporting creation data if the swap is

accepted for clearing before any PET data is reported by the reporting

counterparty. Under the proposed rules, these excusal provisions would

no longer be necessary because the proposed rules would require DCOs to

report creation data only for clearing swaps, and not for swaps

accepted for clearing (i.e., original swaps).

iv. Proposed Removal of Certain Confirmation Data Reporting

Requirements

Currently, Sec. 45.3(a) through (d) requires the SEF/DCM (Sec.

45.3(a)) or the reporting counterparty (Sec. 45.3(b) through (d)) to

report both PET and confirmation data in order to comply with their

creation data reporting obligations. While one commenter suggested that

confirmation data reported to an SDR should be the same for cleared and

uncleared swaps,45 other commenters contended that confirmation data

need not be reported if the swap is required or intended to be

cleared.46 The Commission preliminarily believes that the

confirmation data requirements for clearing swaps in proposed Sec.

45.3(e) would provide the Commission with a sufficient representation

of the confirmation data for a cleared swap transaction, because the

original swap is extinguished upon acceptance for clearing and replaced

by equal and opposite clearing swaps.

—————————————————————————

45 See DTCC letter at 2 (stating that any differentiation

between confirmation data reporting requirements for cleared and

uncleared swaps would unnecessarily bifurcate reporting and

potentially inhibit the Commission’s oversight objectives).

46 See ISDA letter at 8 (stating that confirmation data should

not be required for an alpha trade that is intended for clearing at

the point of execution because such data is not meaningful as the

alphas will be terminated and replaced with cleared swaps

simultaneously or shortly after execution, at which point

confirmation data will be reported by the DCO), CME letter at 2, 3,

8 (stating that for intended to be cleared swaps, including separate

confirmation data elements as part of the reporting submission to

the SDR is redundant and unnecessary, and that DCO rules already

require the generation of a confirmation), ICE letter at 14 (stating

that the Commission should require less information for cleared

transaction confirmations since these confirmation terms are already

defined in the relevant product specs and rulebooks of DCOs).

—————————————————————————

Accordingly, for swaps that are intended to be submitted to a DCO

for

[[Page 52550]]

clearing at the time of execution, the Commission proposes to amend

Sec. 45.3(a), (b), (c)(1)(iii), (c)(2)(iii), and (d)(2) to remove the

existing confirmation data reporting requirements. Under the modified

rules, SEFs/DCMs and reporting counterparties would continue to be

required to report PET data as part of their creation data reporting,

but would be required to report confirmation data only for swaps that,

at the time of execution, are not intended to be submitted to a DCO for

clearing. For swaps that, at the time of execution, are intended to be

submitted to a DCO for clearing, SEFs/DCMs and reporting counterparties

would not be required to report confirmation data. If the swap is

accepted for clearing by a DCO, the DCO would be required to report

confirmation data for the clearing swaps pursuant to proposed Sec.

45.3(e).47

—————————————————————————

47 The Commission notes that the proposed change would only

impact certain confirmation data reporting and recordkeeping

requirements in Sec. 45.3, and does not alter existing obligations

to generate or exchange confirmations under other Commission

regulations.

—————————————————————————

v. Proposed Revisions to Sec. 45.3(f)–Allocations

The Commission is proposing to renumber existing Sec. 45.3(e),

which governs creation data reporting for swaps involving allocation,

as Sec. 45.3(f).48 The Commission is also proposing to replace the

phrase “original swap transaction” in Sec. Sec. 45.3(f)(2) and

45.8(h)(1)(vii)(D), and in the PET data tables found in Appendix 1 to

part 45, with “initial swap transaction” to avoid confusion with the

term “original swap,” which is proposed to be defined in Sec. 45.1.

—————————————————————————

48 The Commission also proposes to renumber Sec. 45.3

paragraphs (f), (g), and (h) as paragraphs (g), (h), and (i),

respectively.

—————————————————————————

vi. Proposed Addition of Sec. 45.3(j): Choice of SDR

Commenters requested that the Commission provide guidance as to who

has the legal right to determine choice of SDR.49 In response, the

Commission is proposing to add new Sec. 45.3(j) in order to explicitly

establish which entity has the obligation to choose the SDR to which

the required swap creation data is reported. As proposed, Sec. 45.3(j)

would provide that: for swaps executed on or pursuant to the rules of a

SEF or DCM (including swaps that may later become original swaps), the

SEF or DCM will have the obligation to choose the SDR; for all other

swaps (including for off-facility swaps and/or clearing swaps) the

reporting counterparty (as determined in Sec. 45.8) will have the

obligation to choose the SDR.50

—————————————————————————

49 See, e.g., LCH comment letter at 11.

50 Section 45.3(j) as proposed generally reflects the language

included in the preamble to the Final Part 45 Rulemaking, which

provides that “the SEF or DCM would select the SDR for platform-

executed swaps, and the reporting counterparty would choose the SDR

for off-facility swaps.” See 77 FR 2136, 2146, Jan. 13, 2012. Under

the proposed rule, the DCO would have the obligation to choose the

SDR for clearing swaps.

—————————————————————————

While some commenters recommended that the Commission affirmatively

codify the right of the DCO to select the SDR,51 other commenters

stated that the Commission should empower the reporting counterparty of

the original trade to select the SDR for the alpha, beta, and gamma

swaps, regardless of how the swap was executed and whether or not it

was cleared.52 The Commission believes that it is appropriate to

place the obligation to choose the SDR with the entity that has the

obligation to make the first report of all required swap creation data.

Doing so permits the entity with the obligation to report required swap

creation data to select an SDR with which it may be an existing user

and to which the entity has established connectivity and developed the

necessary technological protocols and procedures for reporting required

swap creation data. The Commission also understands that, in practice,

the choice of SDR is currently made by such entities.

—————————————————————————

51 See ICE letter at 4-5 (stating that “a DCO’s choice to

report beta and gamma swaps to an affiliated SDR is unambiguous,”

and that while the text of part 45 is silent as to whether a DCO

selects the SDR for cleared swaps, the preambles to both part 45 and

part 49 contemplate that a DCO can adopt rules identifying the SDR

to which it will report).

52 See Markit letter at 4, 25 (stating that this approach:

would create a level playing field between SDRs, allowing them to

compete based on the quality of their services; would be simple

compared to assigning reporting obligations to various parties

depending on the nature and status of the swap transaction; and

would increase the utility of SDR data for the Commission and for

market participants) and DTCC letter at 20-21 (recommending that the

Commission clarify that DCOs must report data to the SDR that

receives the data for the alpha and stating that concerns that have

been raised regarding duplication of records for cleared swaps

results from the Commission’s decision to allow DCOs to report

cleared swap data to their captive SDRs).

—————————————————————————

By virtue of the addition of Sec. 45.3(j) and the revisions to

Sec. 45.10,53 the entity with the obligation to report the initial

required swap creation data would select the SDR to which all

subsequent swap creation and continuation data for that swap would be

reported by choosing the SDR to which such initial required swap

creation data is reported. Thereafter, all required swap creation data

and all required swap continuation data for a given swap would be

reported to the same SDR used by the registered entity or

counterparty.54

—————————————————————————

53 Proposed revisions to Sec. 45.10 are discussed in Section

II.F below. As will be discussed in Section II.C below, by operation

of Sec. 45.10, DCOs will be obligated to report all required

continuation data for original swaps to the registered SDR (as

selected by the SEF, DCM, or reporting counterparty pursuant to

proposed Sec. 45.3(j)) to which required creation data for the swap

was reported pursuant to Sec. 45.3(a) through (d).

54 17 CFR 45.10. See also section II.F.2, infra.

—————————————————————————

Finally, the Commission notes that it is aware that there are

certain situations wherein SEFs, DCMs and reporting counterparties for

off-facility swap transactions may report the part 43 data for a swap

to an SDR prior to reporting the part 45 required creation data for the

same swap. In such situations, the registered entity or reporting

counterparty has effectively chosen the SDR for the swap prior to

submitting the part 45 data, since, pursuant to Sec. 45.10, all swap

data for a given swap is required to be reported to a single SDR.55

For example, if a swap is executed on or pursuant to the rules of SEF

A, and SEF A immediately upon execution reports the part 43 data to SDR

B, prior to reporting part 45 data, SEF A has effectively chosen SDR B

as the SDR for all required creation data for the swap, because Sec.

45.10 requires that all swap data for a given swap must be reported to

a single SDR.56 Accordingly, in this example, part 45 required

creation data must be reported to SDR B.

—————————————————————————

55 Id.

56 Id.

—————————————————————————

vii. Proposed Removal of Expired Compliance Date References

Currently, Sec. 45.3(b), (c), and (d), and the introductory

language to Sec. 45.3 include references to phase-in compliance dates

that have since expired. The Commission is proposing to remove the

references to the expired compliance dates in Sec. 45.3(b)(1)(i),

(b)(1)(ii), (b)(2), (b)(2)(ii), (c)(1)(i)(A), (c)(1)(i)(B),

(c)(2)(i)(A), (c)(2)(i)(B), (d)(1), and (d)(3), and in the introductory

language to Sec. 45.3.

3. Request for Comment

The Commission requests comment on all aspects of proposed new

Sec. 45.3(e) and (j) and the proposed amendments to Sec. 45.3. The

Commission also invites comments on the following:

(6) At the time that a swap is accepted for clearing, are there

entities other than the DCO that would have complete information about

the clearing swaps and that would be better suited to report required

creation data for clearing swaps?

[[Page 52551]]

(7) Are there circumstances where the DCO would have complete

information about the swap that becomes an original swap and would be

better suited than the SEF/DCM or reporting counterparty to report

creation data for such swap in a timely manner? If so, are there any

reasons why the DCO should not be required to report creation data for

the swap that would become the original swap?

(8) Are the requirements of proposed Sec. 45.3(e) sufficiently

clear and do such requirements adequately address the mechanics of the

clearing process?

(9) Do the requirements of renumbered Sec. 45.3(f) allow for

complete, accurate, timely, and efficient reporting of allocations in

light of the proposed definition of “clearing swap” and the proposed

Sec. 45.3(e) creation data reporting requirements for clearing swaps?

(10) Are the obligations set forth in amended Sec. 45.3

sufficiently clear? If not, please explain.

(11) Are there differences between the confirmation data for swaps

that are, at the time of execution, intended to be submitted to a DCO

for clearing, and the confirmation data for the swaps that replace such

swap upon acceptance for clearing? If so, discuss how the Commission

should require the reporting of confirmation data with respect to a

cleared swap transaction.

(12) Should another entity, other than the entity with the

regulatory obligation to report the required swap creation data, be

able to choose an SDR for reporting purposes? If so, please explain.

(13) Are the industry data standards currently used by market

participants sufficient to report required swap creation data as

required in the amended, revised and/or newly proposed provisions of

this release? If not, what are the specific insufficiencies, and how

should they be addressed?

C. Swap Data Reporting: Continuation Data–Proposed Amendments to Sec.

45.4

1. Existing Sec. 45.4

Regulation 45.4 governs the reporting of swap continuation data to

an SDR during a swap’s existence through its final termination or

expiration. This provision establishes the manner in which continuation

data, including life cycle event data or state data, and valuation

data,57 must be reported (Sec. 45.4(a)), and sets forth specific

continuation data reporting requirements for both cleared (Sec.

45.4(b)) and uncleared (Sec. 45.4(c)) swaps. For cleared swaps, Sec.

45.4(b) currently requires that life cycle event data or state data be

reported by the DCO, and that valuation data be reported by both the

DCO and by the reporting counterparty (if the reporting counterparty is

an SD or MSP).

—————————————————————————

57 “Required swap continuation data” is defined in Sec.

45.1 and includes “life cycle event data” or “state data”

(depending on which reporting method is used) and “valuation

data.” Each of these data types is defined in Sec. 45.1. “Life

cycle event data” means “all of the data elements necessary to

fully report any life cycle event.” “State data” means “all of

the data elements necessary to provide a snapshot view, on a daily

basis of all of the primary economic terms of a swap . . .”

“Valuation data” means “all of the data elements necessary to

fully describe the daily mark of the transaction, pursuant to CEA

section 4s(h)(3)(B)(iii), and to Sec. 23.431 of this chapter if

applicable.” 17 CFR 45.1.

—————————————————————————

For uncleared swaps, Sec. 45.4(c) requires the reporting

counterparty to report all required swap continuation data, including

life cycle event data or state data, and valuation data.

2. Proposed Amendments to Sec. 45.4

As noted earlier in this release, the Commission has had an

opportunity to observe how the part 45 regulations function in practice

with respect to swaps that are cleared. The Commission understands that

Sec. 45.4 could benefit from greater clarity regarding continuation

data reporting responsibilities for each of the swaps involved in a

cleared swap transaction. Accordingly, the Commission proposes several

revisions and additions so that Sec. 45.4 will better delineate the

continuation data reporting requirements associated with each swap

involved in a cleared swap transaction. In particular, the Commission

proposes conforming changes to existing Sec. 45.4(a), revisions to

existing Sec. 45.4(b) and to existing Sec. 45.4(c) (proposed to be

renumbered as Sec. 45.4(d)), and the addition of new Sec. 45.4(c).

Each proposed change is discussed in detail below.

i. Proposed Conforming Changes to Sec. 45.4(a)

The Commission is proposing to revise the heading of Sec. 45.4(a)

to read “Continuation data reporting method generally” to reflect

that the continuation data reporting method requirements in Sec.

45.4(a) apply to all swaps, regardless of asset class or whether the

swap is an original swap, clearing swap or uncleared swap, whereas the

continuation data reporting requirements in proposed Sec. 45.4(b),

(c), and (d) would apply to clearing swaps, original swaps, and

uncleared swaps, respectively.

ii. Proposed Revisions to Sec. 45.4(b)

Regulation 45.4(b) currently governs continuation data reporting

obligations for “cleared swaps,” but does not distinguish among the

different swaps involved in a cleared swap transaction (i.e. original

and clearing swaps). The Commission is thus proposing to revise the

introductory language of Sec. 45.4(b) to replace the terms “cleared

swaps” and “swaps cleared by a derivatives clearing organization,”

which were not defined in the Final Part 45 Rulemaking, with the

defined term “clearing swaps.”

The Commission is not proposing modifications to the DCO life-cycle

event data or state data reporting requirements in Sec. 45.4(b)(1) or

to the valuation data reporting requirements in Sec. 45.4(b)(2)(i).

However, the Commission is proposing to remove existing Sec.

45.4(b)(2)(ii), which requires a reporting counterparty that is an SD

or MSP to report valuation data for cleared swaps daily, in addition to

the valuation data that is required to be reported by the DCO pursuant

to Sec. 45.4(b)(2)(i). Under the proposed revisions to Sec.

45.4(b)(2), a reporting counterparty that is an SD or an MSP will not

be required to report valuation data for clearing swaps; instead, the

DCO would be the only swap counterparty required to report required

continuation data, including valuation data, for clearing swaps.

While one commenter contended that valuation data from SD/MSP swap

counterparties is valuable information and that the Commission should

require such information from SD/MSP counterparties for all swaps,

cleared or uncleared,58 numerous commenters stated that only the DCO

should have the responsibility to report valuation data for cleared

swaps, and that the Commission should eliminate the requirement for an

SD or MSP to report valuation data for cleared swaps.59

—————————————————————————

58 See Markit letter at 10-11 (arguing that the Commission

might receive valuable information from valuations reported by

counterparties).

59 See ABA letter at 2, CME letter at 9-10, Financial Services

Roundtable letter at 2, ICE letter at 2, 10, 15, ISDA letter at 13-

14, JBA letter at 2-3, MFA letter at 2, 4, NGSA letter at 4-5.

—————————————————————————

The valuation data reporting requirements applicable to DCOs

pursuant to existing Sec. 45.4(b)(2)(i) should present sufficient

information for the Commission to understand clearing swap valuations.

Additionally, the proposed removal of Sec. 45.4(b)(2)(ii) would codify

a series of no-action letters issued by Commission staff providing no-

action relief to SDs and MSPs from the continuation data reporting

[[Page 52552]]

obligations of that subsection for daily valuation data.60

—————————————————————————

60 See CFTC Division of Market Oversight, No-Action Letter No.

12-55, Dec. 17, 2012; No-Action Letter No. 13-34, Jun. 26, 2013; and

No-Action Letter No. 14-90, Jun. 30, 2014. Staff no-action relief

from the requirements of Sec. 45.4(b)(2)(ii) has been in effect

since the initial compliance date for part 45 reporting.

—————————————————————————

iii. Proposed Addition of Sec. 45.4(c): Continuation Data Reporting

for Original Swaps

Currently, Sec. 45.4(c) governs continuation data reporting for

uncleared swaps. The Commission is proposing to renumber Sec. 45.4(c)

as Sec. 45.4(d) (discussed below), and is proposing the addition of a

new Sec. 45.4(c), which would set forth the continuation data

reporting requirements for original swaps.

Specifically, proposed Sec. 45.4(c) would require a DCO to report

all required continuation data for original swaps, including original

swap terminations, to the SDR to which the swap that became such

original swap was reported pursuant to Sec. 45.3(a) through (d).61

As proposed, Sec. 45.4(c) would also reference the existing

requirement that all continuation data must be reported in the manner

provided in Sec. 45.13(b), and that the SDR, in order to comply with

Sec. 49.10, must also “accept and record” such data, including

original swap terminations.62 The proposed addition of a reference to

Sec. 49.10 is consistent with a commenter’s request for clarification

regarding the obligation of the SDR to accept and process the

termination message from the DCO.63

—————————————————————————

61 As discussed earlier in this release, under the proposed

revisions to Sec. 45.3(a) through (d), a SEF/DCM or reporting

counterparty would be required to report creation data for all swaps

except clearing swaps (including for swaps that later become

original swaps by virtue of their acceptance for clearing by a DCO).

See Section II.B.2., supra. See also Sec. 45.10 (a) through (c)

(providing that all required swap continuation data reported for a

swap must be reported to the same SDR to which required swap

creation data was first reported pursuant to Sec. 45.3). The

Commission notes that pursuant to existing regulation Sec. 45.13,

each reporting entity and/or counterparty is required to “use the

facilities, methods, or data standards provided or required by the

[SDR] to which the entity or counterparty reports the data.” 17 CFR

45.13.

62 Rule Sec. 49.10(a) provides that an SDR “shall accept and

promptly record all swap data in its selected asset class and other

regulatory information that is required to be reported pursuant to

part 45 and part 43 of this chapter by [DCMs], [DCOs], [SEFs],

[SDs], [MSPs] and/or non-swap dealer/non-major swap participant

counterparties.” Rule Sec. 49.10(a)(1) further provides that for

“purposes of accepting all swap data as required by part 45 and

part 43, the registered [SDR] shall adopt policies and procedures,

including technological protocols, which provide for electronic

connectivity between the [SDR] and [DCMs], [DCOs], [SEFs], [SDs],

[MSPs] and/or certain other non-swap dealer/non-major swap

participant counterparties who report such data. The technological

protocols established by a [SDR] shall provide for the receipt of

swap creation data, swap continuation data, real-time public

reporting data, and all other data and information required to be

reported to such [SDR]. The [SDR] shall ensure that its mechanisms

for swap data acceptance are reliable and secure.” 17 CFR 49.10.

The Commission also proposes conforming changes to the introductory

language of Sec. 45.3 and Sec. 45.4 to make clear that all

required swap creation and continuation data must be reported to the

relevant SDR in the manner provided in Sec. 45.13, and pursuant to

Sec. 49.10, which sets forth rules governing the acceptance and

recording of such data.

63 See ICE letter at 4 (noting that failure to accept the

termination message can produce inaccurate swap data due to double

reporting and that the rejection of the termination message could

distort notional amounts and market risks, and stating that amending

the reporting rules to place the reporting obligation on the DCO for

intended to be cleared swaps simplifies the reporting flows and

places the responsibility on the party best-suited to accurately

report cleared swap data).

—————————————————————————

As proposed, Sec. 45.4(c)(1) would require a DCO to report all

life cycle event data for an original swap on the same day that any

life cycle event occurs, or to report all state data for the original

swap, daily.

The continuation data reporting requirements of proposed Sec.

45.4(c) would apply to a swap that has been submitted to a DCO for

clearing and that becomes an original swap by virtue of the DCO’s

acceptance of such swap for clearing. The DCO’s continuation data

reporting obligations for a swap to which it is not a counterparty

(i.e., for swaps other than clearing swaps) will only be triggered if a

swap is accepted for clearing (and thus becomes an original swap). If a

swap is submitted to a DCO for clearing and is not accepted for

clearing, the DCO will not have continuation data reporting obligations

for the swap, because the swap is not an original swap or a clearing

swap.

While some commenters recommended that the original counterparty,

and not the DCO, should report termination of the alpha to the SDR,64

another commenter suggested that the DCO should report termination of

the alpha to the SDR.65 The continuation data reporting methods for

original swaps proposed in Sec. 45.4(c)(1) are consistent with those

for “cleared” swaps currently found in Sec. 45.4(b)(1), which also

places responsibility on the DCO to report life cycle event data or

state data to the SDR. As proposed, Sec. 45.4(c)(1) would place the

responsibility on the DCO to report the required continuation data for

original swaps because the DCO, by virtue of its decision to accept a

swap for clearing and extinguish the swap upon acceptance,66 controls

when termination, a key life-cycle event for an original swap, occurs.

Therefore, it is the Commission’s view that the DCO is in the best

position to report required continuation data for original swaps, as it

has the easiest and quickest access to the information regarding the

termination of such swaps.

—————————————————————————

64 See OTC Hong Kong letter at 2-3 (stating that requiring the

original counterparty to report termination of the alpha would be

more cost-effective because the original reporting counterparty is

already required to report creation data and life cycle event data

of such alpha to an SDR, and thus would already have in place a

technical and operational interface with the SDR of its choice. The

commenter also stated that imposing an additional requirement on a

DCO to report termination of the alpha does not appear to increase

or improve the quantity and quality of information already available

to the Commission, and that the burden on DCOs of the additional

reporting requirement appears to outweigh the benefits to the

Commission) and LCH letter at 8 (stating that reporting entities

should already report terminations under the obligation to report

continuation data).

65 See DTCC letter at 7 (stating that when an alpha swap is

novated, the Commission should require a DCO to submit information

about the beta and gamma swaps in addition to the termination notice

for the alpha swap).

66 See 17 CFR 39.12(b)(6). Through its rules, the DCO

determines whether or not a swap that is submitted for clearing

becomes an original swap.

—————————————————————————

iv. Proposed Additional Continuation Data Fields To Be Reported by DCOs

Several commenters asserted that the most cost-effective method for

establishing a link between the original swaps and the swaps that

replace the original swap upon acceptance for clearing is to include

the USI of the original swap as a prior USI for the beta and gamma

swaps.67 The Commission is of the view that reporting of the USI of

the original swap as continuation data is an efficient mechanism for

linking clearing swaps to the original swap that they replace and

should be used for this purpose. As proposed, Sec. 45.4(c)(2) would

thus require DCOs to include the following additional enumerated data

elements when reporting continuation data for original swaps pursuant

to proposed Sec. 45.4(c)(1): (i) The legal entity identifier (“LEI”)

of the SDR to which each clearing swap for a particular original swap

was reported by the DCO pursuant to new Sec. 45.3(e); (ii) the USI of

the original swap that was replaced by the clearing swaps; 68 and

(iii) the USI

[[Page 52553]]

for the clearing swaps that replace the original swap.

—————————————————————————

67 See CME letter at 10 (“The most effective and efficient

method for achieving linkage for all such events that have a one-to-

one relationship (i.e., assignment or exercise) or a one-to-many

relationship (i.e., clearing, novation, allocation) is by the

inclusion of a prior USI(s).)”; DTCC letter appendix at 3 (stating

that a new swap can generally be linked to an existing swaps through

the use of a “prior USI” data field); ISDA letter at 11 (“Related

swaps sent to different SDRs can also be linked via use of the USI.

. . .”); Markit letter at 8 (arguing that the most effective method

to establish a link between new and existing swaps is to store the

USI of the original swap as a prior USI).

68 See existing Sec. 45.5(a)(2)(iii), (b)(2)(iii), and

(c)(2)(ii) (requiring the entity that created the USI to transmit

the USI of a swap “to the [DCO], if any, to which the swap is

submitted for clearing, as part of the required swap creation data

transmitted to the derivatives clearing organization for clearing

purposes”). Proposed revisions to Sec. 45.5 are described in

Section II.D of this release.

—————————————————————————

These proposed data fields would enable the DCO to fulfill its

continuation data reporting obligations, enable the SDR to maintain the

accuracy and completeness of swap transaction data, and enable the

Commission to track the life of a cleared swap transaction. In

particular, including the LEI of the SDR where required swap creation

data for each clearing swap was reported will permit the Commission and

other regulators to ascertain the SDR where the clearing swaps

associated with a particular original swap reside. This will enable the

Commission and other regulators to review and more effectively

associate data available at multiple SDRs in circumstances where the

reporting entity or counterparty selects one SDR for the original swap

and the DCO selects a different SDR for the clearing swaps under Sec.

45.3.

Inclusion of the original swap’s USI is necessary to enable the SDR

where the swap that became the original swap’s creation data was

reported to associate continuation data reported by the DCO with the

initial creation data reported by a SEF/DCM or reporting counterparty

pursuant to Sec. 45.3(a) through (d).69 Similarly, in the case of

clearing swaps that replace an original swap, inclusion of the USIs of

the clearing swaps will permit the Commission and other regulators to

identify the specific clearing swaps that replaced an original swap,

presenting a full history of the cleared swap transaction.

—————————————————————————

69 For instance, inclusion of the USI of the original swap in

DCO continuation data reporting will permit the SDR receiving such

continuation data to associate data regarding a life cycle event

such as termination with the existing data maintained for the swap.

This will help ensure that data in the SDR remains current and

accurate and will enable the Commission and other regulators to

ascertain whether a swap remains in existence or has been

extinguished upon acceptance for clearing by a DCO.

—————————————————————————

Together, the proposed revisions to Sec. 45.4(b) and the addition

of Sec. 45.4(c) would require the reporting of continuation data for

original swaps and clearing swaps. Accordingly, the Commission expects

that records of original swaps that have been terminated would include

the USIs for the clearing swaps that replaced the original swap and the

LEI of the clearing swap SDR, such that review of an original swap

would permit the identification of, and note the SDR where, the

clearing swaps reside. These provisions will reflect the regulations

applicable to DCOs outlined in part 39 of the Commission’s regulations

and will clearly delineate the continuation data reporting obligations

associated with each swap involved in a cleared swap transaction.70

—————————————————————————

70 See 17 CFR 39.12(b)(6). Part 45 currently requires all swap

data and information reported to and maintained by an SDR regarding

a given swap to be “current and accurate” and to include “all

changes” to a swap. 17 CFR 45.4(a).

—————————————————————————

v. Proposed Revisions to Sec. 45.4(d)

As mentioned above, the Commission is proposing to renumber Sec.

45.4(c) (Continuation data reporting for uncleared swaps) as Sec.

45.4(d). The Commission is also proposing to amend Sec. 45.4(d), which

applies to “all swaps that are not cleared by a derivatives clearing

organization,” to add the phrase “including swaps executed on or

pursuant to the rules of a swap execution facility or designated

contract market.” This proposed change would clarify the existing

requirement that reporting counterparties report all required swap

continuation data for an uncleared swap, irrespective of whether the

swap was executed off-facility (in which case the reporting

counterparty must report required swap creation data), or whether the

swap was executed on or pursuant to the rules of a SEF or DCM (in which

case the SEF or DCM must report the required swap creation data).71

—————————————————————————

71 See 17 CFR 45.3(b) through (d) (creation data reporting

requirements for off-facility swaps) and 17 CFR 45.3(a) (creation

data reporting requirements for swaps executed on or pursuant to the

rules of a SEF or DCM). See also section B.2.ii supra.

—————————————————————————

Finally, the Commission proposes to modify the introductory

language to Sec. 45.4 and Sec. 45.4(d)(1)(ii)(A) to remove outdated

references to compliance dates that have already expired.

3. Request for Comment

The Commission requests comment on all aspects of proposed new

Sec. 45.4(c) and the proposed amendments to Sec. 45.4. The Commission

also invites comments on the following:

(14) Would market participants other than DCOs be better placed to

more efficiently incur the duty to report continuation data for

original swaps? If so, how would placing continuation data reporting

requirements on such other market participants further the goal of

ensuring that swap data for original swaps remains “current and

accurate”?

(15) Should the Commission consider any alternative approaches to

reporting requirements for original swap terminations? If so, please

describe such an approach.

(16) Please describe whether there might be any life-cycle events

for an original swap other than termination. Does Sec. 45.4(c)

adequately address any such life-cycle events?

(17) Would the valuation data that DCOs must currently report to

SDRs pursuant to Sec. 45.4(b)(2)(i) present sufficient information for

the Commission to understand clearing swap valuations? Explain why this

is or is not the case.

(18) What value, if any, would the Commission gain by receiving

clearing swap valuation data from SD/MSP reporting counterparties?

(19) Do the continuation data reporting requirements and existing

definition of life-cycle event found in Sec. 45.1 adequately address

the possible range of events that could occur during the life of a

clearing swap?

(20) Should the Commission require original swap terminations to be

reported as soon as technologically practicable after termination of an

original swap?

(21) Should both the life cycle event method and state data method

for continuation data reporting be permitted for clearing swaps? Please

provide information about the advantages and disadvantages of each

method with respect to clearing swaps.

(22) Do the proposed revisions to Sec. 45.4 provide sufficient

clarity concerning the reporting of continuation data for all life

cycle events required to be reported, including any modifications to

the clearing swaps? If not, what areas require further clarity?

(23) For a swap executed on or pursuant to the rules of a SEF or

DCM, as well as for off-facility swaps, would the DCO to which the swap

is submitted for clearing have the information necessary, at the time

of submission for clearing, to report the required continuation data,

including a notice of termination of the swap, to the SDR to which the

SEF or DCM reported the swap?

(24) Are current industry data standards sufficient for DCOs to

report required swap continuation data to the appropriate SDRs in a

manner that would be consistent with proposed Sec. 45.4? If not, what

are the specific insufficiencies and how should they be addressed?

(25) Are the obligations that would be assigned in the proposed

amendments to Sec. 45.4 sufficiently clear? If not, please explain.

[[Page 52554]]

D. Unique Swap Identifiers–Proposed Amendments to Section 45.5

1. Existing Sec. 45.5

Regulation 45.5 currently requires that each swap subject to the

Commission’s jurisdiction be identified in all recordkeeping and all

swap data reporting by the use of a USI. The rule establishes different

requirements for the creation and transmission of USIs depending on

whether the swap is executed on a SEF or DCM (Sec. 45.5(a)), executed

off-facility with an SD or MSP reporting counterparty (Sec. 45.5(b)),

or executed off-facility with a non-SD/MSP reporting counterparty

(Sec. 45.5(c)). Existing Sec. 45.5 provides that for swaps executed

on a SEF or DCM, the SEF or DCM creates the USI, and for swaps not

executed on a SEF or DCM, the USI is created by an SD or MSP reporting

counterparty, or by the SDR if the reporting counterparty is not an SD

or MSP.72

—————————————————————————

72 See Sec. 45.5(a) through (c).

—————————————————————————

With the exception of swaps with a non-SD/MSP reporting

counterparty, the existing rule generally requires USI creation and

transmission to be carried out by the entity or counterparty required

to report all required swap creation data for the swap. Section 45.5

thus does not currently distinguish between original and clearing

swaps, does not provide USI creation and transmission requirements

specifically for DCOs, and consequently does not provide for the

issuance to DCOs of a USI “namespace,” which is one of two component

parts of a USI.73

—————————————————————————

73 See, e.g., Sec. 45.5(a)(1)(i), (b)(1)(i) and (c)(1)(i)

(the data component of a USI commonly referred to as a namespace is

the unique alphanumeric code assigned to the registered entity

responsible for generating the USI for the purpose of identifying

such registered entity with respect to USI creation).

—————————————————————————

The Commission understands that in market practice, SEFs/DCMs and

reporting counterparties, or SDRs in the case of non-SD/MSP reporting

counterparties, generate and assign USIs for swaps that would become

original swaps under the proposed rules, and that DCOs generate and

assign USIs to swaps that would qualify as clearing swaps in connection

with reporting required swap creation data for clearing swaps to SDRs.

2. Proposed Amendments to Sec. 45.5

The Commission is proposing to renumber existing Sec. 45.5(d) as

Sec. 45.5(e) and to create a new Sec. 45.5(d) which would set forth

requirements regarding the creation and transmission of USIs for

clearing swaps.74

—————————————————————————

74 The Commission also proposes conforming amendments to

renumber existing Sec. 45.5(e) as Sec. 45.5(f).

—————————————————————————

As proposed, Sec. 45.5(d)(1) would require a DCO to generate and

assign a USI for each clearing swap upon, or as soon as technologically

practicable after, acceptance of an original swap by the DCO for

clearing (or execution of a clearing swap that does not replace an

original swap), and prior to reporting the required swap creation data

for each clearing swap. Proposed Sec. 45.5(d)(1) would also require

that the USI for each clearing swap consist of two data components: A

unique alphanumeric code assigned to the DCO by the Commission for the

purpose of identifying the DCO with respect to USI creation; and an

alphanumeric code generated and assigned to that clearing swap by the

automated systems of the DCO. These proposed USI creation requirements

and components for DCOs and clearing swaps are consistent with those

currently required by part 45 for other registered entities such as

SEFs, DCMs, and SDRs.75

—————————————————————————

75 See, e.g., 17 CFR 45.5(a), 45.5(c).

—————————————————————————

As proposed, Sec. 45.5(d)(2) would require a DCO to transmit the

USI for a clearing swap electronically to the SDR to which the DCO

reports required swap creation data for the clearing swap, as part of

that report; and to the DCO’s counterparty with respect to that

clearing swap, as soon as technologically practicable after either

acceptance of the original swap by the DCO for clearing or execution of

a clearing swap that does not replace an original swap. The proposed

Sec. 45.5(d) provisions governing creation and assignment of USIs by

the DCO with respect to clearing swaps are consistent with the

Commission’s “first-touch” approach to USI creation for SEFs, DCMs,

SDs, MSPs, and SDRs.76

—————————————————————————

76 See 77 FR 2136, 2158 (Jan. 13, 2012). The Commission’s

approach with respect to SEFs, DCMs, SDs, MSPs, and SDRs was

designed to foster efficiency by taking advantage of the

technological sophistication and capabilities of such entities,

while ensuring that a swap is identified by a USI from its

inception.

—————————————————————————

Finally, the Commission proposes to amend Sec. Sec. 45.5(a),

45.8(f), and 45.10(a) to incorporate the language “or pursuant to the

rules of” to the phrase “swaps executed on a swap execution facility

or designated contract market” to make clear that those provisions

currently apply to all swaps executed on or pursuant to the rules of a

SEF or DCM.

3. Request for Comment

The Commission requests comment on all aspects of proposed Sec.

45.5(d). The Commission also invites comments on the following:

(26) Should an entity other than the DCO be required to create and

transmit USIs for clearing swaps?

(27) Do the proposed requirements of Sec. 45.5(d)(2) ensure that

all relevant entities will receive the USI for a particular clearing

swap?

(28) Should the proposed USI creation and transmission requirements

for DCOs differ from those of other registered entities such as SEFs,

DCMs and SDRs? If so, please explain how and why the requirements

should differ.

E. Determination of Which Counterparty Must Report–Proposed Amendments

to Sec. 45.8

1. Existing Sec. 45.8

Regulation 45.8 sets forth a hierarchy under which the reporting

counterparty for a particular swap depends on the nature of the

counterparties involved in the transaction. Regulation 45.8 assigns a

reporting counterparty for off-facility swaps, for which the reporting

counterparty must report all required swap creation data, as well as

for swaps executed on or pursuant to the rules of a SEF or DCM, for

which the SEF or DCM must report all required swap creation data.

2. Proposed Amendments to Sec. 45.8

Existing Sec. 45.8 could be improved to better reflect the

mechanics for cleared swap transactions. While existing Sec. 45.3

currently imposes certain creation data reporting requirements on the

DCO in connection with a swap that is accepted for clearing, the

hierarchy currently set forth in Sec. 45.8 does not expressly include

a separate designation for the DCO as a reporting counterparty.

As discussed earlier in this release, a cleared swap transaction

generally involves an original swap that is terminated upon novation,

and the equal and opposite swaps that replace it, with the DCO as the

counterparty for each swap that replaces the original swap.77

Accordingly, the Commission is proposing to add paragraph (i) to Sec.

45.8 in order to explicitly provide that the DCO will be the reporting

counterparty for clearing swaps. This proposed change is consistent

with part 39, which requires that the DCO must be a counterparty to

each swap that replaces an original swap and must have rules governing

acceptance and replacement of an original swap.78 The DCO is also the

entity that should have the easiest

[[Page 52555]]

and quickest access to full information with respect to PET data and

confirmation data for clearing swaps, placing the DCO in the best

position to report all required swap creation data for the clearing

swaps.

—————————————————————————

77 See 17 CFR 39.12(b)(6).

78 Id. (providing that a DCO that clears swaps must have rules

providing that upon acceptance of a swap by the DCO for clearing,

the “original swap is replaced by an equal and opposite swap

between the [DCO] and each clearing member . . .”).

—————————————————————————

The Commission is also proposing to amend the introductory language

of Sec. 45.8 to make clear that the reporting counterparty for all

swaps except clearing swaps will be made as provided in paragraphs (a)

through (h) of Sec. 45.8, while the reporting counterparty for

clearing swaps will be made as provided in paragraph (i) of Sec. 45.8.

The Commission also proposes to remove the language “if

available” from Sec. 45.8(h)(1)(i) to ensure consistency with

proposed changes to appendix 1 to part 45 and because this language was

only relevant prior to availability of the LEI system.

Finally, the Commission proposes to further amend Sec. 45.8 to

remove part of paragraphs (d)(1) and (f)(1) and to remove part of

paragraph (h)(2) and all of paragraphs (h)(2)(i) and (ii). Section

45.8(h) currently provides that if the SEF/DCM is unable to determine

which counterparty to a swap is the reporting counterparty, it must

notify each counterparty that it cannot identify which counterparty is

the reporting counterparty, and must also transmit to each counterparty

the LEI of the other counterparty. The removal of these paragraphs

would ensure that swaps that are executed anonymously on a SEF or DCM,

and then cleared in accordance with the Commission’s straight-through

processing requirements, remain anonymous.79 Section 45.8(d)(1) and

(f)(1) contemplate a process whereby the counterparties agree which

counterparty shall be the reporting counterparty no later than the end

of the first business day following the date of execution of the swap.

The removal of these paragraphs will provide for a more streamlined

process with respect to the determination of the reporting counterparty

for swaps where paragraphs (d)(1) or (f)(1) apply. SEFs and DCMs have

adopted rules governing determination of the reporting counterparty for

all swaps executed on or pursuant to the rules of a SEF or DCM, which

eliminates the need for these portions of Sec. 45.8(d)(1), (f)(1), and

(h)(2). The Commission is also proposing conforming changes to

explanatory notes in the PET data tables in appendix 1 to part 45 that

reference the situation described in Sec. 45.8(h)(2).

—————————————————————————

79 The Commission notes that Sec. 49.17(f)(2) prohibits SDRs

from disclosing the identity or LEI of a counterparty for swaps that

are executed anonymously on a SEF or DCM, and then cleared in

accordance with the Commission’s straight-through processing

requirements, when counterparties to a particular swap are allowed

access to data related to the swap. See “Swap Data Repositories–

Access to SDR Data by Market Participants,” 79 FR 16672, Mar. 26,

2014.

—————————————————————————

3. Request for Comment

The Commission requests comment on all aspects of proposed Sec.

45.8(i). The Commission also invites comments on the following:

(29) Are the proposed additions of Sec. Sec. 45.8(i) and 45.3(j),

along with existing Sec. 45.8, sufficiently clear with respect to the

determination of the reporting counterparty and the choice of SDR?

Please explain any scenarios for which the determination of the

reporting counterparty or choice of SDR would not be sufficiently

clear.

F. Reporting to a Single Swap Data Repository–Proposed Amendments to

Sec. 45.10

1. Existing Sec. 45.10

Regulation 45.10 currently requires “all swap data for a given

swap” to be reported to a single SDR, which must be the same SDR to

which creation data for that swap is first reported. The time and

manner in which such data must be reported to a single SDR depends on

whether the swap is executed on a SEF or DCM (Sec. 45.10(a)), executed

off-facility with an SD/MSP reporting counterparty (Sec. 45.10(b)), or

executed off-facility with a non-SD/MSP reporting counterparty (Sec.

45.10(c)). Currently, Sec. 45.10(b) and (c) also discuss circumstances

in which a reporting counterparty is excused from reporting PET data to

an SDR because the swap is accepted for clearing by a DCO before the

applicable reporting deadline.

2. Proposed Amendments to Sec. 45.10

In order to further clarify that “all swap data for a given swap”

encompasses all swap data required to be reported pursuant to parts 43

and 45 of the Commission’s regulations, the Commission is proposing to

add language to this effect to paragraphs (a) through (c) and to the

introductory language of Sec. 45.10. This proposed additional language

would clarify the existing requirement that registered entities and

reporting counterparties must provide all swap data required under

parts 43 and 45 to a single SDR for a given swap.80

—————————————————————————

80 The Commission is also proposing to repeat the language

“Off-facility swaps with a swap dealer or major swap participant

reporting counterparty” from the title of Sec. 45.10(b) in the

body of that regulation to make clear that the requirement pertains

to off-facility swaps with an SD or MSP.

—————————————————————————

The Commission is also proposing to remove Sec. 45.10(b)(2) and

(c)(2).81 These two paragraphs are no longer applicable because they

reference provisions in Sec. 45.3(b)(1), (c)(1)(i), and (c)(2)(i)

that, as discussed earlier in this release, the Commission is proposing

to remove.82

—————————————————————————

81 The Commission also proposes conforming amendments to Sec.

45.10 to renumber paragraph (b)(3) as (b)(2), paragraph (c)(3) as

(c)(2), and paragraph (c)(4) as (c)(3). The Commission also proposes

to remove a reference to Sec. 45.10(c)(2) from existing Sec.

45.10(c)(4) because the Commission is proposing to remove Sec.

45.10(c)(2).

82 See Section II.B.2.ii, supra.

—————————————————————————

The Commission is proposing to add new Sec. 45.10(d), which would

govern clearing swaps and would establish explicit requirements that

DCOs report all required swap creation data and all required swap

continuation data for each clearing swap to a single SDR. Specifically,

proposed Sec. 45.10(d)(1) would require a DCO to report all required

swap creation data for a particular clearing swap to a single SDR. As

proposed, Sec. 45.10(d)(1) would also require the DCO to transmit the

LEI of the SDR to which it reported the required swap creation data for

each clearing swap to the counterparty of each clearing swap, as soon

as technologically practicable after either acceptance of the original

swap by the DCO for clearing or execution of a clearing swap that does

not replace an original swap.

As proposed, Sec. 45.10(d)(2) would require a DCO to report all

required swap creation data and all required swap continuation data for

a particular clearing swap to the same SDR that received the initial

swap creation data for the clearing swap required by Sec. 45.10(d)(1).

In the event there are clearing swaps that replace a particular

original swap, and in the event there are equal and opposite clearing

swaps that are created upon execution of the same transaction and that

do not replace an original swap, Sec. 45.10(d)(3) would require the

DCO to report all required swap creation and continuation data for each

such clearing swap to a single SDR.83 Accordingly, all required

creation data and all required continuation data for all clearing swaps

that can be traced back to the same original swap (and for all equal

and opposite clearing swaps that are created upon execution of the same

transaction but that do not replace

[[Page 52556]]

an original swap) will be reported to a single SDR.

—————————————————————————

83 The Commission notes that proposed Sec. 45.10(d)(3) would

require any equal and opposite clearing swaps, including those

resulting from the operation of Sec. 39.12(b)(6) of the

Commission’s regulations, to be reported to a single SDR, regardless

of whether such clearing swaps replaced an original swap.

—————————————————————————

The Commission notes that by operation of proposed new Sec.

45.8(i) and (j) and proposed Sec. 45.3(e), there may be scenarios in

which the SEF/DCM or reporting counterparty reports required swap

creation data for the swap that became the original swap to one SDR,

and the DCO reports required swap creation data for the clearing swaps

that replace the original swap to a different SDR. While some

commenters stated that the Commission should require resulting swaps to

be reported to the same SDR as original swaps,84 the Commission is

proposing to require that all swap data for the clearing swaps that can

be traced back to the same original swap be reported to the same SDR,

but is not requiring that the clearing swaps be reported to the same

SDR as the original swap.

—————————————————————————

84 See DTCC letter at 2-3, appendix at 4, 21 (arguing that the

Commission should adopt a “single SDR” rule to ensure that all of

the data for a swap is available in one SDR.); ISDA letter at 44

(contending that original and resulting swaps should be reported to

the same SDR when a swap was executed without the intention or

requirement to clear, but is subsequently cleared).

—————————————————————————

As noted above, proposed Sec. 45.3(j) would place the obligation

to choose the SDR to which required swap creation data is reported on

the registered entity or counterparty that is required to make the

first report of required swap creation data pursuant to Sec. 45.3.

Placing the obligation to choose the SDR on the registered entity or

counterparty that is required to report the swap, rather than on

another entity, should result in more efficient data reporting and

promote market competition, while avoiding injecting a third party into

the decision as to how a registered entity or counterparty fulfills its

regulatory obligation to report initial required swap creation data.

The registered entity or counterparty that is required to report may

select an SDR to which its technological systems are most suited and/or

to which it already has an established relationship, with existing

technological protocols and procedures, providing for the efficient and

accurate reporting of swap data. The Commission notes that under

proposed Sec. 45.3(j), a registered entity or counterparty would not

be precluded from choosing an SDR based on consideration of market

preference or other factors; however, the obligation to choose the SDR

will rest solely with the registered entity or counterparty enumerated

therein. As discussed above, the Commission is proposing a number of

requirements 85 which should allow for the efficient and accurate

linking of data where the original swap and clearing swaps are not

reported to the same SDR.

—————————————————————————

85 See Section H, infra, discussing proposed additional PET

data fields including: Clearing swap USIs, Clearing swap SDR,

Original swap USI, and Original swap SDR. See also section C.2.iv.

supra, discussing information required for continuation data for

original swaps, including: (i) the LEI of the SDR to which each

clearing swap for a particular original swap was reported by the DCO

pursuant to new Sec. 45.3(e); (ii) the USI of the original swap

that was replaced by the clearing swaps; and (iii) the USI for the

clearing swaps that replace the original swap.

—————————————————————————

The Commission has included the following example to illustrate the

application of proposed Sec. 45.10:

Swap 1 is intended to be submitted to a DCO for clearing and

executed on or pursuant to the rules of a SEF. The SEF reports all

required creation data for such swap to registered SDR A pursuant to

Sec. 45.3(a), selected by the SEF pursuant to Sec. 45.3(j)(1), and

submits the swap to the DCO for clearing. Upon acceptance of Swap 1 for

clearing, the DCO extinguishes Swap 1 and replaces it with Swap 2 and

Swap 3, both of which are clearing swaps. Swap 1 is now an original

swap.

Under the proposal, Sec. 45.4(c) would require the DCO to report

the termination of Swap 1 to SDR A,86 reflecting that Swap 1, now an

original swap, has been terminated through clearing novation.87 The

DCO would also report all required swap creation data for clearing Swap

2 to a single SDR of its choice (say, for example, SDR B) pursuant to

proposed Sec. Sec. 45.3(e) and (j)(2), and 45.10(d).88 Similarly,

the DCO would be required to report all required swap creation data for

clearing Swap 3 to a single SDR, in this case SDR B. Pursuant to

proposed Sec. 45.10(d)(3), the DCO would be required to report all

required swap creation data for clearing Swap 2 and clearing Swap 3 to

the same SDR (SDR B) because Swap 2 and Swap 3 replaced Swap 1.

Thereafter, proposed Sec. 45.10(d)(2) would require the DCO to report

all required swap creation data and continuation data to the SDR where

the first report of required swap creation data for both clearing Swap

2 and clearing Swap 3 was made (SDR B).

—————————————————————————

86 Pursuant to proposed Sec. 45.10(a)(2), (b)(2), and (c)(3),

continuation data for original swaps must be reported to the SDR

where the first report of required swap creation data was made for

the swap.

87 Pursuant to existing Sec. 45.13(b), the DCO “shall use

the facilities, methods, or data standards provided or required by”

SDR A. 17 CFR 45.13(b).

88 The Commission notes that pursuant to proposed Sec.

45.10(a) through (d), the DCO in this example could select an SDR

other than SDR A.

—————————————————————————

The requirements for DCOs demonstrated in the above example and

contained in proposed Sec. 45.10(d)(1) and (2) are consistent with the

existing requirements for SEFs, DCMs, and other reporting

counterparties under current Sec. 45.10. By requiring that all swap

data for each clearing swap be reported to a single SDR, proposed Sec.

45.10(d)(1) and (2) further the Commission’s stated purpose in creating

Sec. 45.10, and part 45 generally, of reducing fragmentation of data

for a given swap across multiple SDRs.89

—————————————————————————

89 See, e.g., 77 FR 2136, 2139, Jan. 13, 2012, (“To avoid

fragmentation of data for a given swap across multiple SDRs, the

[Notice of Proposed Rulemaking] [for part 45] would require that all

data for a particular swap must be reported to the same SDR.”); at

2143 (“First, in order to prevent fragmentation of data for a

single swap across multiple SDRs, which would seriously impair the

ability of the Commission and other regulators to view or aggregate

all of the data concerning the swap, the proposed rule provided

that, once an initial data report concerning a swap is made to an

SDR, all data reported for that swap thereafter must be reported to

the same SDR.”); and at 2168 (“The Commission believes the

important regulatory purposes of the Dodd-Frank Act would be

frustrated, and that regulators’ ability to see necessary

information concerning swaps could be impeded, if data concerning a

given swap was spread over multiple SDRs.”).

—————————————————————————

The proposed requirement in Sec. 45.10(d)(3) that the DCO report

to a single SDR all swap data for each clearing swap that can be traced

back to the same original swap also supports the goal of avoiding

fragmentation of swap data. Though clearing swaps are new individual

swaps, all clearing swaps that issue from the same original swap are

component parts of a cleared swap transaction. Fragmentation among

clearing swaps would needlessly impair the ability of the Commission

and other regulators to view or aggregate all the data concerning the

related clearing swaps.

3. Request for Comment

The Commission requests comment on all aspects of proposed new

Sec. 45.10(d) and amended Sec. 45.10(a) through (c). The Commission

also invites comments on the following:

(30) Are the obligations assigned in the newly proposed and amended

provisions of Sec. 45.10 sufficiently clear? If not, please explain

how you believe they should be clarified.

G. Examples of Cleared Swap Reporting Workflows Under the Proposed

Revisions

The following examples demonstrate the manner in which the proposed

rules would operate in hypothetical scenarios involving: (1) an off-

facility swap not subject to the clearing requirement with an SD/MSP

reporting counterparty; and (2) a swap executed on or pursuant to the

rules of a SEF or DCM. All references to part 45 appearing in the

following examples refer to the rules as proposed in this release.

These

[[Page 52557]]

examples are provided only for illustrative purposes to demonstrate the

applicability of certain rules proposed in this release in hypothetical

scenarios. The examples are not intended to dictate any aspect of

compliance, reporting or other related processes and are not intended

to cover all possible reporting circumstances.

1. Off-Facility Swap Not Subject to the Clearing Requirement With SD/

MSP Reporting Counterparty

An off-facility swap that is not subject to the clearing

requirement is executed with an SD reporting counterparty. The SD

generates and assigns a USI for the swap pursuant to Sec. 45.5(b) and

reports all required swap creation data for the swap to SDR A pursuant

to Sec. 45.3(c). The SD submits the swap to a DCO for clearing and,

pursuant to Sec. 45.10(b), transmits to the DCO, at the time the swap

is submitted for clearing, the identity of SDR A and the USI for the

swap.

The DCO accepts the swap for clearing, extinguishing it and

replacing it with clearing swaps; the swap that was submitted for

clearing is now an original swap. The DCO generates and assigns a USI

to each clearing swap pursuant to proposed Sec. 45.5(d) and, pursuant

to the proposed amendments to Sec. 45.3(e), reports all required swap

creation data for the clearing swaps, including the original swap

USI,90 to SDR B, which the DCO in this example selected pursuant to

proposed Sec. 45.3(j)(2).

—————————————————————————

90 Proposed modifications to appendix 1 would require that PET

data include the original swap USI. See Proposed additions to

appendix 1 to part 45, “Additional Data categories and fields for

clearing swaps.”

—————————————————————————

Pursuant to the proposed amendments to Sec. 45.4(c), the DCO would

report continuation data for the original swap, including the original

swap termination notice, to SDR A using either the life cycle or state

data methods, and using the facilities, methods, or data standards

provided or required by SDR A.91 In addition to all other necessary

continuation data, original swap continuation data reported by the DCO,

including the original swap termination notice, would also include: the

LEI of SDR B (the SDR to which creation data for each clearing swap

that replaced the particular original swap was reported);92 the USI

of the original swap as transmitted to the DCO by the SD at the time

the swap was submitted for clearing; and the USI for each clearing

swap.

—————————————————————————

91 See 15 CFR 45.13(b).

92 The Commission notes that the proposed Sec. 45.4(c)(2)(i)

requirement that the DCO include the LEI of the SDR to which all

required swap creation data for each clearing swap was reported by

the DCO applies whether or not swap data for the original and

clearing swaps is reported to the same SDR or to different SDRs. The

Commission expects that this information will be useful for

regulators with respect to their review of data pertaining to

cleared swap transactions, and to SDRs with respect to their

processing of swap data received, even when the original and

clearing swaps reside in the same SDR.

—————————————————————————

The DCO would have no further continuation data reporting

obligations with respect to the original swap thereafter. However, the

Commission notes that pursuant to Sec. 45.14, registered entities and

counterparties required to report swap data to an SDR must report any

errors and omissions in the data reported.93 Additionally, non-

reporting counterparties are required to notify the reporting

counterparty of such errors or omissions.94 Finally, pursuant to

Sec. 49.10(a), SDR A would be required to accept and record any

original swap continuation data, including the original swap

termination.

—————————————————————————

93 While the DCO would have no additional continuation data

reporting requirement with respect to the original swap after

reporting the termination upon acceptance for clearing, the DCO

remains obligated under Sec. 45.14 to correct errors and omissions

in the data reported by the DCO, including the termination notice.

For example, if a swap is submitted to, and accepted by, a DCO for

clearing, the DCO would report the termination notice of the

original swap to the SDR to which the creation data for the original

swap was reported. After submission of the termination notice to the

SDR, if the DCO should become aware of an error or omission in the

termination notice, the DCO is required, pursuant to Sec. 45.14, to

correct any errors and omissions in the data so reported as soon as

is technologically practicable after discovery of such errors or

omissions. Likewise, all reporting entities and swap counterparties

also remain obligated under Sec. 45.14 to correct errors and

omissions in all data reported by or on behalf of each entity and

swap counterparty to an SDR.

94 Pursuant to Sec. 45.14(b), if a counterparty to a swap

that is not the reporting counterparty as determined by Sec. 45.8

discovers any error or omission with respect to the continuation

data, including termination notice of the original swap, such non-

reporting counterparty is required to notify the DCO of each such

error or omission.

—————————————————————————

2. Swaps Executed on or Pursuant to the Rules of a SEF or DCM

A swap is executed on or pursuant to the rules of a SEF or DCM. The

SEF/DCM generates and assigns a USI for the swap pursuant to Sec.

45.5(a) and reports all required swap creation data to SDR A pursuant

to Sec. 45.3(a). The SEF/DCM submits the swap to a DCO for clearing

and, pursuant to Sec. 45.10(a), transmits to the DCO, at the time the

swap is submitted for clearing, the identity of SDR A and the USI for

the swap.

The DCO accepts the swap for clearing, extinguishing it and

replacing it with clearing swaps; the swap that was submitted for

clearing is now an original swap. Under the proposed amendments to

Sec. Sec. 45.5(d) and 45.3(e), the DCO would generate and assign a USI

to each clearing swap and report all required swap creation data,

including the original swap USI, for the clearing swaps to registered

SDR A, which, in this example, the DCO selected pursuant to proposed

Sec. 45.3(j)(2).95

—————————————————————————

95 Pursuant to 45.3(j)(2), the DCO could have selected SDR B.

—————————————————————————

Pursuant to the proposed amendments to Sec. 45.4(c), the DCO would

report continuation data for the original swap, including the original

swap termination notice, to SDR A using either the life cycle or state

data methods, and using the facilities, methods, or data standards

provided or required by SDR A. Such continuation data would include the

LEI of SDR A (the SDR to which creation data for each clearing swap

that replaced the particular original swap was reported), the USI of

the original swap as transmitted to the DCO by the SEF/DCM at the time

the swap was submitted for clearing, and the USI for each clearing

swap.

The DCO would have no further continuation data reporting

obligations with respect to the original swap thereafter. However, the

Commission notes that pursuant to Sec. 45.14, registered entities and

counterparties required to report swap data to an SDR must report any

errors and omissions in the data reported. Additionally, non-reporting

counterparties are also required notify the reporting counterparty of

such errors or omissions.96 Finally, pursuant to Sec. 49.10(a), SDR

A would be required to accept and record the original swap termination.

—————————————————————————

96 See notes 93-94, supra.

—————————————————————————

3. General Comments Received by the Commission Regarding the Approach

Proposed in This Release

As demonstrated by the examples above, the Commission is proposing

an approach to the reporting of cleared swaps that would require

reporting counterparties or SEFs/DCMs to report creation and

continuation data for swaps commonly known as alphas, and that would

require DCOs to report alpha swap terminations and swaps commonly known

as beta and gamma swaps.

A number of commenters suggested that part 45 should place swap

data reporting obligations solely on DCOs, including with respect to

swaps that are intended to be cleared at the time of execution and

accepted for clearing by a DCO (alpha swaps) and swaps resulting from

clearing (beta and gamma

[[Page 52558]]

swaps).97 However, one commenter noted that it would not be

appropriate to require a DCO to report information related to the

execution of an alpha swap.98

—————————————————————————

97 See CMC letter at 1, 3, 6 (noting that “cleared swaps

reporting should be handled exclusively by DCOs.”); NFPEA letter at

12 (noting that “If and when a swap is cleared and thereafter, all

information about the swap should be reported to the SDR solely by

the DCO”); EEI letter at 3, 14 (“The Commission should put all

obligations for reporting cleared swaps on DCOs.”); ICE letter at

3, 17 (stating that the DCO should be the sole reporting party for

intended to be cleared swaps.); CEWG letter at 16 (“The Working

Group recommends that the Part 45 regulations be amended to make

clear that the DCO has the reporting obligations (creation and

continuation data) for the original alpha swap and resulting

positions . . .”); CME letter at 20 (contending that the act of

submitting an intended to be cleared swap to a DCO should completely

discharge the reporting obligations of each reporting counterparty,

SEF or DCM, and that this position would be consistent with

Congressional intent and would help ensure the Commission gets

access to the best possible information for regulatory purposes

without imposing unnecessary costs on the Commission or market

participants).

98 See LCH letter at 10 (“It would not be appropriate to

oblige the DCO to enhance part 45 reporting in order to source

information regarding the original execution that should be provided

directly by the execution venue or execution counterparties.”).

—————————————————————————

The Commission understands that reporting counterparties and

registered entities have invested substantial time and resources to

report swaps to registered SDRs (whether or not such swaps are intended

to be cleared at the time of execution) and that DCOs have invested

substantial resources to report beta and gamma swaps that result from

acceptance of a swap for clearing. Adopting the framework suggested by

commenters above could result in a disruption of industry work flows

and could require significant retooling of operational and

technological solutions in place designed to report swap data, all at

an additional cost to market participants.

H. Primary Economic Terms Data–Proposed Amendments to Appendix 1 to

Part 45–Tables of Minimum Primary Economic Terms

The Commission’s current lists of minimum primary economic terms

for swaps in each swap asset class are found in tables in Exhibits A-D

of appendix 1 to part 45. Those tables include data elements that

reflect generic economic terms and conditions common to most

standardized products. They reflect the fact that PET data captures a

swap’s basic nature and essential economic terms, and are provided in

order to ensure to the extent possible that most such essential terms

are included when required primary economic terms are reported for each

swap.

The Commission is proposing the following revisions to Exhibits A

through D of appendix 1, each of which is discussed in greater detail

below: (1) modifications to existing PET data fields; (2) the addition

of three new PET data fields applicable to all reporting entities for

all swaps; and (3) the addition of a number of new data fields that

must be reported by DCOs for clearing swaps.99

—————————————————————————

99 The Commission also proposes to revise each of the data

categories and fields that reference the clearing requirement

exception in CEA section 2(h)(7) to reflect that exceptions to, and

exemptions from, the clearing requirement, including the clearing

requirement exception in CEA section 2(h)(7), are set forth under

part 50 of the Commission’s regulations.

—————————————————————————

i. Proposed Modifications to Existing PET Data Fields

The Commission proposes clarifying and conforming changes and minor

corrective modifications to the following existing PET data fields:

The Unique Swap Identifier for the swap–The Commission is

proposing to remove the explanatory note in the Comment section to this

data field in Exhibits A-D. The explanatory note is no longer necessary

because under proposed Sec. 45.5(d), the DCO would create the USI for

each clearing swap.

PET data fields that utilize a legal entity identifier

100–The Commission is proposing conforming changes to the Comment

sections to data fields in Exhibits A-D that utilize the LEI to reflect

that the CFTC has designated an LEI system101 and to reflect that a

substitute identifier may be reported for natural person swap

counterparties.

—————————————————————————

100 These include the following fields in Exhibits A through

D: The Legal Entity Identifier of the reporting counterparty; If the

swap will be allocated, or is a post-allocation swap, the Legal

Entity Identifier of the agent; The Legal Entity Identifier of the

non-reporting party; Clearing venue; The identity of the

counterparty electing an exception or exemption to the clearing

requirement under part 50 of this chapter (formerly The identity of

the counterparty electing the clearing requirement exception in CEA

section 2(h)(7)); Exhibit A: An indication of the counterparty

purchasing protection; An indication of the counterparty selling

protection; Information identifying the reference entity; Exhibit D:

Buyer, Seller.

101 The explanatory notes discussing a situation where no CFTC

designated LEI is yet available are no longer applicable. See

generally “Order Extending the Designation of the Provider of Legal

Entity Identifiers To Be Used in Recordkeeping and Swap Data

Reporting Pursuant to the Commission’s Regulations,” 80 FR 44078,

Jul. 24, 2015.

—————————————————————————

If no CFTC-approved Legal Entity Identifier for the non-

reporting counterparty is yet available, the internal identifier for

the non-reporting counterparty used by the swap data repository–The

Commission is also proposing to remove this data field in each of the

Exhibits. As noted above, the CFTC has designated an LEI, and these PET

data fields are no longer applicable.

For a mixed swap reported to two non-dually-registered

swap data repositories, the identity of the other swap data repository

(if any) to which the swap is or will be reported–The Commission is

proposing to add an explanatory note to the Comment section for this

data field in Exhibits A-D providing that the field value is the LEI of

the other SDR to which the swap is or will be reported.

Block trade indicator–The Commission is proposing to

modify the Comment section to this data field in Exhibits A-D to

reflect that the CFTC has issued a final rulemaking regarding

Procedures To Establish Appropriate Minimum Block Sizes for Large

Notional Off-Facility Swaps and Block Trades.102

—————————————————————————

102 See generally “Procedures To Establish Appropriate

Minimum Block Sizes for Large Notional Off-Facility Swaps and Block

Trades,” 78 FR 32866, May 31, 2013.

—————————————————————————

Execution venue–The Commission is proposing to modify the

explanatory note in the Comment section to this data field in Exhibits

A-D to reflect that the CFTC has designated an LEI system and to

require the reporting of only the LEI of the SEF or DCM for swaps

executed on or pursuant to the rules of a SEF or DCM.

Clearing indicator–The Commission is proposing

modifications to the explanatory note in the Comment section to this

data field in Exhibits A through D to provide for the reporting of a

Yes/No indication of whether the swap will be submitted for clearing to

a DCO.

Clearing venue–The Commission is proposing modifications

to the Comment section of this data field in Exhibits A-D to provide

for the reporting of only the LEI of the derivatives clearing

organization.

ii. Proposed Addition of New PET Data Fields Applicable to All

Reporting Entities for All Swaps

The Commission proposes to add to Exhibits A-D the following new

PET fields which would be applicable to all reporting entities for all

swaps:

Asset class–This data field would provide the specific

asset class for the swap. Field values: credit, equity, FX, rates and

other commodity.

An indication of whether the reporting counterparty is a

derivatives clearing organization with respect to the swap.

Clearing exception or exemption type–This field would

provide the type

[[Page 52559]]

of clearing exception or exemption being claimed. Field values: End

user, Inter-affiliate or Cooperative.

The asset class data field will assist the Commission in

identifying the asset class for swaps reported to registered SDRs

pursuant to part 45. The indication of whether the reporting

counterparty is a DCO with respect to the swap data field is consistent

with proposed Sec. 45.8(i), which designates the DCO as the reporting

counterparty for clearing swaps, and the existing PET data fields that

require certain information related to the registration status of the

counterparties to be included in PET data reporting. The clearing

exception or exemption types data field will provide information with

respect to the specific exception or exemption from the clearing

requirement that is being elected for the swap.103

—————————————————————————

103 As noted above, in addition to the end-user exception to

the swap clearing requirement set forth in section 2(h)(7) of the

CEA and codified in part 50 of the Commission’s regulations, the

Commission has published two exemptions to the swap clearing

requirement: the inter-affiliate exemption (Sec. 50.52) and the

financial cooperative exemption (Sec. 50.51).

—————————————————————————

iii. Proposed Addition of New PET Data Fields Applicable to DCOs for

Clearing Swaps

The Commission also proposes to modify Exhibits A-D in order to add

new PET fields specifically to be reported by DCOs for clearing swaps.

The proposed fields, which would be placed under the heading

“Additional Data Categories and Fields for Clearing Swaps” in each

table included as Exhibits A-D, would more accurately capture the

additional, unique features of clearing swaps that are not relevant to

uncleared swaps. The newly proposed data fields that must be reported

by DCOs for clearing swaps include the following:

Clearing swap USIs–This data field would provide the USI

for each clearing swap that replaces the original swap, other than the

USI for which the PET data is currently being reported.

Original swap USI–This data field would provide the USI

for the original swap that was replaced by clearing swaps.104

—————————————————————————

104 See also Sec. 45.10(a)(1), (b)(1)(iii), (b)(2)(ii),

(c)(1)(iii), (c)(2)(ii), and (c)(3) (requiring entities with

reporting obligations to transmit to the DCO for swaps submitted for

clearing “the identity of the swap data repository to which

required swap creation data is reported” and the USI for the swap).

—————————————————————————

Original swap SDR–This data field would provide the LEI

of the SDR to which the original swap was reported.105

—————————————————————————

105 Id.

—————————————————————————

Clearing member LEI–This data field would provide the LEI

of the clearing member.

Clearing member client account–This data field would

provide the account number for the client, if applicable, of the

clearing member.

Origin (house or customer)–This data field would provide

information regarding whether the clearing member acted as principal

for a house trade or agent for a customer trade.

Clearing Receipt Timestamp–This data field would provide

the date and time at which the DCO received the original swap that was

submitted for clearing.

Clearing Acceptance Timestamp–This data field would

provide the date and time at which the DCO accepted the original swap

that was submitted for clearing.

Some commenters argued that the Commission should not require

additional data fields for reporting and should reduce the number of

fields currently required.106 The Commission is of the view that the

proposed modifications to existing PET data fields will add clarity to

the current reporting requirements and, in regards to the additional

fields, will require the reporting of information that is essential to

the efficient operation of reporting of the swaps involved in a cleared

swap transaction.

—————————————————————————

106 See CMC letter at 3 (recommending that the Commission

reduce the number and complexity of data fields required to improve

data reporting); CME letter at 17-19 (providing recommendations on

modification for specific data fields and arguing against requiring

certain additional reporting); DTCC letter at 3, appendix at 15

(suggesting that the Commission consider whether requiring fewer

data elements would better enable the Commission and other

regulators to fulfill their regulatory obligations); International

Energy Credit Association letter at 5-6 (arguing that existing swap

data reporting requirements do not need to be expanded and that data

reporting would be improved by reducing the current reporting

burden); Swiss Re letter at 5 (describing reporting difficulties for

specific data fields).

—————————————————————————

3. Request for Comment

The Commission requests comment on all aspects of the proposed

revisions to the PET data tables found in appendix 1 to part 45 and the

proposed “Additional Data Categories and Fields for Clearing Swaps.”

The Commission also invites comments on the following:

(31) Are there additional data categories and fields for clearing

swaps which are necessary to understand a clearing swap and/or the

mechanics of the clearing process? If so, please describe such

additional data categories and fields.

(32) Will reporting any of the new or revised data categories and

fields result in any operational or technological challenges? If so,

please explain.

(33) Are there other entities, in addition to those currently

required to be identified in swap data reporting, that may play some

part in the execution or reporting of a cleared swap transaction? If

so, what are they? Should their identifying information be reported to

a registered SDR as an element of PET data?

(34) Are the newly proposed and revised PET data fields included in

appendix 1, including the PET data therein, sufficiently clear? If not,

please explain.

III. Request for Comments

The Commission requests comments concerning all aspects of the

proposed regulations, including, without limitation, all of the aspects

of the proposed regulations on which comments have been requested

specifically herein. The Commission also invites comments on the

following:

(35) Please identify any challenges that might result from any

differences between the Commission’s and the SEC’s respective proposals

for treatment of cleared swap transactions.

(36) Are there differences between the Commission’s and the SEC’s

respective proposals for the reporting of cleared swap transactions

that should be harmonized? If so, please explain.

(37) Based upon the proposed modifications to the swap data

reporting provisions of part 45, do commenters believe that associated

modifications are necessary to the recordkeeping provisions of Sec.

45.2?

(38) In practice, would DCOs employ agents for reporting clearing

swaps to an SDR? Please explain any ways you believe the proposed

regulations should be modified to facilitate a DCO’s ability to employ

agents to report clearing swaps.

(39) Please describe the nature of any changes necessary, i.e.,

operational, technological, administrative, etc., for SEFs, DCMs and

reporting counterparties to comply with the rules proposed in the

release, and the length of time needed to implement each type of

change.

(40) Do the proposed amendments and additions to part 45 adequately

address the reporting of swap transaction data for both the principal

and agency clearing models? If not, please explain.

(41) Do commenters believe that additional revisions are necessary

to part 45 to accurately and timely report any other type of swap

transaction data for clearing transactions? If so, please explain.

[[Page 52560]]

IV. 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.107 The rules proposed herein will have a direct effect on

SDRs, DCOs, SEFs, DCMs, SDs, MSPs, and non-SD/MSP counterparties who

are counterparties to one or more swaps and subject to the Commission’s

jurisdiction. The Commission has previously established certain

definitions of “small entities” to be used by the Commission in

evaluating the impact of its rules on small entities in accordance with

the RFA.108 The Commission has previously determined that DCMs109

and DCOs110 are not small entities for the purpose of the RFA. The

Commission has also previously proposed that SDRs, SEFs, SDs, and MSPs

should not be considered to be small entities.111

—————————————————————————

107 See 5 U.S.C. 601 et seq.

108 47 FR 18618, 18618-21, Apr. 30, 1982.

109 Id.

110 66 FR 45604, 45609, Aug. 29, 2001.

111 75 FR 76574, 76595, Dec. 8, 2010 (The Notice of Proposed

Rulemaking for 17 CFR part 45 describes why SDRs, SEFs, SDs, and

MSPs should not be considered small entities).

—————————————————————————

The Final Part 45 Rulemaking and preceding proposal discussed how

certain non-SD/MSP counterparties could be considered small entities in

certain limited situations, but concluded that part 45 does not have a

significant impact on a substantial number of small entities.112 The

modifications to part 45 proposed herein do not modify that conclusion,

or the reasoning behind it, and therefore the Commission does not

believe that these proposed rules will have a significant economic

impact on a substantial number of small entities.

—————————————————————————

112 77 FR 2136, 2170-71, Jan. 13, 2012 (The Final Part 45

Rulemaking discussion for non-SD/MSP counterparties); 75 FR at

76595, Dec. 8, 2010, (The part 45 Notice of Proposed Rulemaking

discussion for non-SD/MSP counterparties).

—————————————————————————

Therefore, the Chairman, on behalf of the Commission, pursuant to 5

U.S.C. 605(b), hereby certifies that the proposed rules will not have a

significant economic impact on a substantial number of small entities.

B. Paperwork Reduction Act

The purposes of the Paperwork Reduction Act of 1995, 44 U.S.C. 3501

et seq. (“PRA”) are, among other things, to minimize the paperwork

burden to the private sector, to ensure that any collection of

information by a government agency is put to the greatest possible

uses, and to minimize duplicative information collections across the

government.113 The PRA applies to all information, “regardless of

form or format,” whenever the government is “obtaining, causing to be

obtained, [or] soliciting” information, and includes required

“disclosure to third parties or the public, of facts or opinions,”

when the information collection calls for “answers to identical

questions posed to, or identical reporting or recordkeeping

requirements imposed on, ten or more persons.” 114 The PRA

requirements have been determined to include not only mandatory but

also voluntary information collections, and include both written and

oral communications.115 Under the PRA, an agency may not conduct or

sponsor, and a person is not required to respond to, a collection of

information unless it displays a currently valid control number from

the Office of Management and Budget (“OMB”). The OMB control number

of this information collection is 3038-0089.

—————————————————————————

113 See 44 U.S.C. 3501.

114 See 44 U.S.C. 3502.

115 See 5 CFR 1320.3(c)(1).

—————————————————————————

The Commission is not seeking to amend information collection 3038-

0089 because the Commission believes that the rule modifications

proposed herein will not impose any new information collection

requirements that require approval from OMB under the PRA. The proposed

amendments may necessitate changes to market participants’ and

registered entities’ reporting systems, but burdens for the maintenance

and utilization of reporting functionality are already included in the

approved information collection.116 Any necessary changes to

reporting functionality will not increase the existing annual burden

calculated for a market participant or registered entity to “oversee,

maintain, and utilize the reporting functionality.” 117 Changes to

the data reported pursuant to the proposed amendments, whether in the

form of additional data fields or the shifting of reporting

responsibilities, also do not impose any new collection of information

because, as noted in the original publication of part 45, reporting

pursuant to this part is largely automatic and electronic, which limits

the burden of reporting to the hours and cost required in maintaining

and utilizing an entity’s reporting functionality.118

—————————————————————————

116 See 77 FR 2136, 2171-2176, Jan. 13, 2012.

117 See 77 FR at 2174, Jan. 13, 2012.

118 See 77 FR at 2174 (“The Commission anticipates that the

reporting required by Sec. Sec. 45.3 and 45.4 will to a significant

extent be automatically completed by electronic computer systems;

the following burden hours are calculated based on the annual burden

hours necessary to oversee, maintain, and utilize the reporting

functionality.”).

—————————————————————————

Additionally, though the proposed rules clarify the

responsibilities of certain entities under part 45 where the

responsibilities were not explicitly assigned in the original rule, the

relevant entities were included in the PRA calculation for the original

rule, meaning that explicitly assigning the responsibilities now does

not create a burden that is not already included in information

collection 3038-0089. Further, the proposed changes, especially in the

context of swap data reporting, could also affect burdens that are

included in the burdens calculated for part 43 of the Commission’s

regulations and, as described in the original publication of part 45,

any cost or burden created by the proposed changes should not be

considered additional to the burdens already calculated for part 43, as

applicable.119 To the extent that this rulemaking contains provisions

that would qualify as collections of information for which the

Commission has already sought and obtained a control number from OMB,

the burden hours associated with those provisions are not replicated

here, as the Commission is obligated to account for PRA burden once and

the PRA encourages multiple applications of a single collection.120

Therefore, these proposed amendments to part 45 do not, by themselves,

impose any new information collection requirements other than those

that already exist in parts 43 and 45 of the Commission’s regulations.

—————————————————————————

119 See id. (“The Commission notes, however, that these

burdens should not be considered additional to the costs of

compliance with part 43, because the basic data reporting

technology, processes, and personnel hours and expertise needed to

fulfill the requirements of part 43 encompass both the data stream

necessary for real-time public reporting and the creation data

stream necessary for regulatory reporting.”).

120 See 44 U.S.C. 3501(2) and (3).

—————————————————————————

The Commission specifically invites public comment on the accuracy

of its estimate that no additional information collection requirements

or changes to existing collection requirements would result from this

proposal.

Information Collection Comments

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

[[Page 52561]]

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 derivatives clearing organizations, designated contract

markets, and swap execution facilities, including through the use of

appropriate automated, electronic, mechanical, or other technological

information collection techniques, e.g., permitting electronic

submission of responses.

Copies of the submission from the Commission to OMB are available

from the CFTC Clearance Officer, 1155 21st Street NW., Washington, DC

20581, (202) 418-5160 or from http://RegInfo.gov. Organizations and

individuals desiring to submit comments on the proposed information

collection requirements should send those comments to:

The Office of Information and Regulatory Affairs, Office

of Management and Budget, Room 10235, New Executive Office Building,

Washington, DC 20503, Attn: Desk Officer of the Commodity Futures

Trading Commission;

(202) 395-6566 (fax); or

[email protected] (email).

Please provide the Commission with a copy of submitted comments so

that all comments can be summarized and addressed in the final

rulemaking, and please refer to the ADDRESSES section of this

rulemaking for instructions on submitting comments to the Commission.

OMB is required to make a decision concerning the proposed information

collection requirements between 30 and 60 days after publication of

this release in the Federal Register. Therefore, a comment to OMB is

best assured of receiving full consideration if OMB receives it within

30 calendar days of publication of this release. Nothing in the

foregoing affects the deadline enumerated above for public comment to

the Commission on the proposed rules.

C. Cost-Benefit Considerations

1. Introduction

Section 15(a) of the CEA requires the Commission to consider the

costs and benefits of its actions before promulgating a regulation

under the CEA or issuing certain orders.121 Section 15(a) further

specifies that the costs and benefits shall be evaluated in light of

five broad areas of market and public concern: (1) Protection of market

participants and the public; (2) efficiency, competitiveness, and

financial integrity of futures markets; (3) price discovery; (4) sound

risk management practices; and (5) other public interest

considerations. The Commission considers the costs and benefits

resulting from its discretionary determinations with respect to the

section 15(a) factors.

—————————————————————————

121 7 U.S.C. 19(a).

—————————————————————————

The Commission is proposing revisions and additions to Sec. Sec.

45.1, 45.3, 45.4, 45.5, 45.8, 45.10, and appendix 1 to part 45 in order

to provide clarity to counterparties to a swap and registered entities

regarding their part 45 reporting obligations with respect to cleared

swap transactions and to improve the efficiency of data collection and

maintenance associated with the reporting of the swaps involved in a

cleared swap transaction.

2. Background

The swap data reporting framework adopted in the Final Part 45

Rulemaking 122 was largely based on the mechanisms for the trading

and execution of uncleared swaps. The plain language of the existing

part 45 rules presumes the existence of a single, continuous swap both

prior to and after acceptance of a swap for clearing by a DCO. Under

that framework, registered entities and counterparties would each

report data with respect to a single swap when such swap is initially

executed, referred to as “creation data,” and over the course of the

swap’s existence, referred to as “continuation data.” 123

—————————————————————————

122 See “Swap Data Recordkeeping and Reporting

Requirements,” 77 FR 2136, Jan. 13, 2012.

123 Section 45.1 defines “required swap creation data” as

primary economic terms data and confirmation data. Section 45.1

defines “primary economic terms data” as “all of the data

elements necessary to fully report all of the primary economic terms

of a swap in the swap asset class of the swap in question” and

defines “confirmation data” as “all of the terms of a swap

matched and agreed upon by the counterparties in confirming the

swap. For cleared swaps, confirmation data also includes the

internal identifiers assigned by the automated systems of the

derivatives clearing organization to the two transactions resulting

from novation to the clearing house.” 17 CFR 45.1.

—————————————————————————

The Commission has since had additional opportunities to consult

with industry and with other regulators, including the Securities and

Exchange Commission (“SEC”),124 and to observe how the part 45

regulations function in practice with respect to swaps that are

cleared, including how the implementation of part 45 interacts with the

implementation of part 39 of the Commission’s regulations, which

contains provisions applicable to DCOs.

—————————————————————————

124 The SEC proposed certain new rules and rule amendments to

Regulation SBSR governing reporting in the context of security-based

swaps. See “Regulation SBSR–Reporting and Dissemination of

Security-Based Swap Information,” 80 FR 14740, Mar. 19, 2015.

—————————————————————————

In particular, Sec. 39.12(b)(6) provides that upon acceptance of a

swap by a DCO for clearing, the original swap is extinguished and

replaced by equal and opposite swaps, with the DCO as the counterparty

to each such swap.125 The original swap that is extinguished upon

acceptance for clearing is commonly referred to as the “alpha” swap

and the equal and opposite swaps that replace the original swap are

commonly referred to as “beta” and “gamma” swaps. The Commission is

of the view that the existing part 45 regulations could be amended to

better accommodate the multi-swap framework of Sec. 39.12(b)(6) by

explicitly addressing beta and gamma swaps as distinct swaps for

purposes of part 45 reporting.126

—————————————————————————

125 See 17 CFR 39.12(b)(6) (requiring a DCO that clears swaps

to “have rules providing that, upon acceptance of a swap by the

[DCO] for clearing: (i) the original swap is extinguished; (ii) the

original swap is replaced by an equal and opposite swap between the

[DCO] and each clearing member acting as principal for a house

trading or acting as agent for a customer trade . . .”). Subsequent

to adoption of the Final Part 45 Rulemaking, the Commission affirmed

that the multi-swap framework (comprising separate and unique

original and resulting swaps) should apply for part 45 reporting

purposes. See Statement of the Commission on the Approval of Chicago

Mercantile Exchange Rule 1001 at 6, Mar. 6, 2013, available at

http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/statementofthecommission.pdf.

126 The Commission also notes that a single swap reporting

framework for cleared swaps, as opposed to a multi-swap framework

like the one contemplated by Sec. 39.12(b)(6), would likely not be

consistent with the approach proposed by the SEC in its release

proposing certain new rules and rule amendments to Regulation SBSR.

See “Regulation SBSR–Reporting and Dissemination of Security-Based

Swap Information,” 80 FR 14740, Mar. 19, 2015. The Commission

discusses the benefits associated with harmonizing its approach with

that of other regulators later in this release.

—————————————————————————

The existing part 45 regulations do not explicitly reflect industry

practice, which the Commission understands is to generally report part

45 data for cleared swap transactions in conformance with the framework

described in Sec. 39.12(b)(6), where separate swaps (alphas, betas,

and gammas) are represented individually in reported swap data. The

Commission understands that under existing market practice: SEFs, DCMs

and reporting counterparties generally report required swap creation

data for alpha swaps to the SDR of their choice; DCOs that

[[Page 52562]]

accept alpha swaps for clearing generally report required swap creation

data for the beta and gamma swaps that result from clearing novation of

the alpha swap to the SDR of their choice (which may be different than

the SDR to which the alpha swap was reported); such DCOs do not in all

cases include the USI of the alpha swap in creation data reported for

the beta and gamma swaps; and that DCOs may inconsistently report, and

SDRs may inconsistently accept and process, alpha swap

terminations.127

—————————————————————————

127 While the above reflects the Commission’s general

understanding of industry practice with respect to the reporting of

component parts of a cleared swap transaction, the Commission does

not possess complete information regarding certain details and

nuances of the reporting practices of different registered entities

and reporting counterparties. For instance, in some cases, the

Commission generally does not possess sufficient information to

ascertain the period of time between the DCO’s acceptance of an

alpha swap for clearing and the DCO’s report of creation data for

beta and gamma swaps. Questions eliciting specific details or

nuances of industry practice that are likely to have cost/benefit

implications are posed in the relevant sections discussing the costs

and benefits of each proposed amendment or addition below.

—————————————————————————

The gaps between the existing part 45 regulations, Sec.

39.12(b)(6), and certain industry practices, including those outlined

above, have likely contributed to a lack of certainty regarding the

applicability of the part 45 regulations to beta and gamma swaps,

including which registered entity or counterparty is required to report

creation data and/or continuation data for such swaps, and the manner

in which such swaps must be reported. The Commission understands that

this uncertainty presents compliance challenges for registered entities

and reporting counterparties.

Additionally, the lack of clarity regarding existing part 45

obligations with respect to beta and gamma swaps has impacted the

accuracy, quality, and usefulness of data that is reported for cleared

swaps. For instance, inconsistent DCO reporting of alpha swap USIs in

creation data for beta and gamma swaps hinders the Commission’s ability

to trace the history of a cleared swap transaction from execution

between the original counterparties to clearing novation. Even in cases

where the Commission can ascertain the USI of a specific alpha swap

that was replaced by beta and gamma swaps, SDR data available to the

Commission at times misleadingly shows some alpha swaps as remaining

open between the original counterparties, when in actuality such swaps

have been extinguished through clearing novation. An inability to

determine whether an alpha swap has been terminated impedes the

Commission’s ability to analyze cleared swap activity and to review

swap activity for compliance with the clearing requirement. Situations

where alpha swaps that have been terminated that appear to remain open

create a risk of double counting swap notional exposures and would

impede the Commission’s ability to analyze and study swaps market

activity using accurate information. The inability to link the

different swaps in a cleared swap transaction also impedes the

Commission’s ability to assess exposures of market participants in the

uncleared and cleared swaps markets. Additionally, certain creation

data fields that are currently populated for beta and gamma swaps prove

difficult to interpret, and thus can result in inconsistencies in their

application and reporting among alpha, beta, and gamma swaps, hindering

the Commission’s ability to interpret and analyze data regarding beta

and gamma swaps.

The revisions and additions proposed in this release would amend

part 45 so that it differentiates reporting requirements for cleared

and uncleared swap transactions, and so that it explicitly addresses

swap counterparty and registered entity reporting requirements for each

component (e.g., alpha, beta, and gamma) of a cleared swap transaction.

This proposal will remove uncertainty as to which counterparty to a

swap is responsible for reporting creation data for each of the various

components of a cleared swap transaction. The proposal will also make

clear whose obligation it is to report the extinguishment of the

original swap upon acceptance of a swap by a DCO for clearing. These

additional details will include where, when, and how to report the swap

data pertaining to the establishment of the beta and gamma swaps and

the reporting of the termination message to the SDR that originally

received the swap data for the alpha swap. This proposal is also

intended to improve the efficiency of data collection and maintenance

associated with the reporting of the swaps involved in a cleared swap

transaction and to improve the accuracy, quality, and usefulness of

data that is reported for cleared swaps and alpha swaps that have been

extinguished due to clearing novation.

The Commission believes that the baseline for this consideration of

costs and benefits is generally the existing part 45 regulations, which

were adopted in 2011.128 However, as described above, in certain

circumstances, industry practice has been informed by certain

provisions of part 39 and by subsequent industry developments, and thus

does not necessarily reflect the plain language of the existing part 45

regulations. In those circumstances, the baseline for this

consideration of costs and benefits will be industry practice.

—————————————————————————

128 See “Swap Data Recordkeeping and Reporting

Requirements,” 77 FR 2136, Jan. 13, 2012.

—————————————————————————

The following consideration of costs and benefits is organized

according to the rules and rule amendments proposed in this release.

For each rule, the Commission summarizes the proposed amendments 129

and identifies and discusses the costs and benefits attributable to

them, including costs and benefits raised by commenters in response to

the Commission’s 2014 request for comment regarding swap data

recordkeeping and reporting requirements.130 The Commission then

considers the costs and benefits of certain alternatives to the rules

proposed in this release, as well as the costs and benefits of all of

the proposed rules jointly in light of the five public interest

considerations set out in section 15(a) of the CEA.

—————————————————————————

129 As described in detail throughout Section II of 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 to ensure consistency with the wording in newly proposed

definitions. Non-substantive amendments of this nature will not be

discussed in the cost-benefit portion of this release.

130 See “Review of Swap Data Recordkeeping and Reporting

Requirements,” Request for Comment, 79 FR 16689, Mar. 26, 2014.

—————————————————————————

The Commission notes that this consideration of costs and benefits

is based on the understanding that the swaps market functions

internationally, with many transactions involving U.S. firms taking

place across international boundaries, with some Commission registrants

being organized outside of the United States, with leading industry

members typically conducting operations both within and outside the

United States, and with industry members commonly following

substantially similar business practices wherever located. Where the

Commission does not specifically refer to matters of location, the

below discussion of costs and benefits refers to the effects of the

proposed rules on all swaps activity subject to the proposed and

amended regulations, whether by virtue of the activity’s physical

location in the United States or by virtue of the activity’s connection

with or effect on U.S. commerce under CEA section 2(i).131 The

Commission also notes that

[[Page 52563]]

the existing part 45 regulations generally contemplate situations where

a swap may be required to be reported pursuant to U.S. law and the law

of another jurisdiction.132

—————————————————————————

131 7 U.S.C. 2(i). Section 2(i)(1) makes the swaps provisions

of the Dodd-Frank Act, and Commission regulations promulgated under

those provisions, applicable to activities outside the United States

that “have a direct and significant connection activities in, or

effect on, commerce of the United States;” while section 2(i)(2)

makes them applicable to activities outside the United States that

contravene Commission rules promulgated to prevent evasion of Dodd-

Frank. Application of section 2(i)(1) to the existing part 45

regulations with respect to SDs/MSPs and non-SD/non-MSP

counterparties is discussed in the Commission’s non-binding

Interpretive Guidance and Policy Statement Regarding Compliance With

Certain Swap Regulations, 78 FR 45292 (July 26, 2013).

132 See 17 CFR 45.1 (defining “International swap” to mean

“a swap required by U.S. law and the law of another jurisdiction to

be reported both to a swap data repository and to a different trade

repository registered with the other jurisdiction.”); see also 17

CFR 45.3(h) (prescribing requirements with respect to international

swaps).

—————————————————————————

3. Definitions–Proposed Amendments to Sec. 45.1

Proposed amendments to Sec. 45.1 would revise the definition of

“derivatives clearing organization” for purposes of part 45 to update

a reference to an existing definition of “derivatives clearing

organization” and to make clear that part 45 applies to DCOs

registered with the Commission. Proposed amendments to Sec. 45.1 would

also add new definitions for “original swaps” (swaps that have been

accepted for clearing by a DCO, commonly referred to as “alpha”

swaps) and “clearing swaps” (swaps created pursuant to the rules of a

DCO that have a DCO as a counterparty, including, but not limited to,

any swap that replaces an original swap that was extinguished upon

acceptance for clearing, commonly referred to as “beta” and “gamma”

swaps).

These proposed terms would be used throughout part 45 to help

clarify reporting obligations for each swap involved in a cleared swap

transaction. The Commission will use the defined terms “original

swaps” and “clearing swaps” throughout this consideration of costs

and benefits when discussing the future applicability of the rules

proposed in this release to the particular components of a cleared swap

transaction. Given that these terms are a product of this release and

are not yet part of industry nomenclature, the Commission will also use

the terms “alpha, beta, and gamma” throughout this consideration of

costs and benefits when discussing existing industry practice and when

helpful for purposes of clarification.133

—————————————————————————

133 The Commission determined to utilize the proposed to be

defined terms “original swap” and “clearing swaps” in this

release rather than the industry terms “alpha, beta, and gamma”

because while a cleared-swap transaction generally comprises an

original swap that is terminated upon novation and the equal and

opposite swaps that replace it, the Commission is aware of certain

circumstances in which a cleared swap transaction may not involve

the replacement of an original swap (e.g., an open offer swap, as

discussed earlier in this release). See note 30, supra.

—————————————————————————

i. Costs

The Commission does not anticipate that these proposed definitions,

in and of themselves, would impose additional costs on DCOs or market

participants. However, these proposed definitions will be referenced in

other proposed substantive provisions. The costs and benefits of those

substantive requirements will be discussed in the relevant sections

below.

ii. Benefits

As discussed earlier in this release, the plain language of the

existing part 45 regulations presumes the existence of one continuous

swap and does not explicitly acknowledge distinct reporting

requirements for the individual components (i.e., alphas, betas, and

gammas) of a cleared swap transaction. However, industry practice is

generally to report part 45 data for cleared swap transactions in

conformance with the multi-swap framework described in Sec.

39.12(b)(6) (i.e., to report alphas, betas, and gammas separately). The

definitions of original and clearing swaps, along with the other

revisions to part 45 proposed in this release, would help align the

part 45 regulations with part 39 and with certain industry practices

and would explicitly delineate the swap data reporting obligations

associated with each of the swaps involved in a cleared swap

transaction.134

—————————————————————————

134 The Commission acknowledges that the alternative

approaches to the reporting of cleared swap transactions separately

discussed in the Consideration of Alternatives section later in this

release could also provide these benefits for registered entities

and swap counterparties. However, for the reasons explained in that

section, the Commission is of the view that the proposed approach is

more consistent with industry practice than the alternatives.

—————————————————————————

4. Creation Data Reporting by Derivatives Clearing Organizations–

Proposed Amendments to Sec. 45.3

Currently, Sec. 45.3 requires reporting to an SDR of two types of

“creation data” generated in connection with a swap’s creation:

“primary economic terms data” and “confirmation data.” 135

Regulation 45.3 governs what creation data must be reported, who must

report it, and deadlines for its reporting.

—————————————————————————

135 Section 45.1 defines “required swap creation data” as

primary economic terms data and confirmation data. Section 45.1

defines “primary economic terms data” as “all of the data

elements necessary to fully report all of the primary economic terms

of a swap in the swap asset class of the swap in question” and

defines “confirmation data” as “all of the terms of a swap

matched and agreed upon by the counterparties in confirming the

swap. For cleared swaps, confirmation data also includes the

internal identifiers assigned by the automated systems of the

derivatives clearing organization to the two transactions resulting

from novation to the clearing house.” 17 CFR 45.1.

—————————————————————————

Proposed Sec. 45.3(e) would govern creation data reporting

requirements for swaps that fall under the proposed definition of

clearing swaps. Proposed Sec. 45.3(e) would require a DCO, as

reporting counterparty under proposed Sec. 45.8(i),136 to report all

required swap creation data for each clearing swap as soon as

technologically practicable after acceptance of an original swap by a

DCO for clearing (in the event that the clearing swap replaces an

original swap) or as soon as technologically practicable after

execution of the clearing swap (in the event that the clearing swap

does not replace an original swap).137

—————————————————————————

136 As discussed in greater detail below, proposed Sec.

45.8(i) would designate the DCO as the reporting counterparty for

clearing swaps.

137 As noted earlier in this release, the proposed definition

of “clearing swap” is intended to encompass: (1) swaps that

replace an original swap and to which the DCO is a counterparty

(i.e. swaps commonly known as betas and gammas) and (2) all other

swaps to which the DCO is a counterparty (even if such swap does not

replace an original swap). The Commission understands that there may

be instances in which a clearing swap does not replace an original

swap. For example, in the preamble to the part 39 adopting release,

the Commission noted that “open offer” systems are acceptable

under Sec. 39.12(b)(6), stating that “Effectively, under an open

offer system there is no `original’ swap between executing parties

that needs to be novated; the swap that is created upon execution is

between the DCO and the clearing member, acting either as principal

or agent.”). “Derivatives Clearing Organization General Provisions

and Core Principles,” 76 FR 69334, 69361, Nov. 8, 2011.

—————————————————————————

Additionally, the proposed rule would require DCOs to

electronically report to a registered SDR required swap creation data

for clearing swaps. Swaps other than clearing swaps, including swaps

that later become original swaps by virtue of their acceptance for

clearing by a DCO, would continue to be reported as currently required

under existing Sec. 45.3(a) through (d). The Commission is thus

proposing an approach to creation data reporting that would require

reporting counterparties or SEFs/DCMs to report creation data for swaps

commonly known as alpha swaps, and that would require DCOs to report

creation data for swaps commonly known as beta and gamma swaps, and for

any other swaps to which the DCO is a counterparty.

With respect to confirmation data reporting, for swaps that are

intended to be cleared at the time of execution, the Commission

proposes to amend Sec. 45.3(a), (b), (c)(1)(iii), (c)(2)(iii), and

[[Page 52564]]

(d)(2) to remove certain existing confirmation data reporting

requirements. Under the modified rules, SEFs/DCMs and reporting

counterparties would continue to be required to report primary economic

terms (“PET”) data as part of their creation data reporting, but

would not be required to report confirmation data for swaps that are

intended to be submitted to a DCO for clearing at the time of

execution. Instead, the DCO would be required to report confirmation

data for clearing swaps pursuant to proposed Sec. 45.3(e).

The Commission is also proposing new Sec. 45.3(j), which would

provide that: For swaps executed on or pursuant to the rules of a SEF

or DCM (including swaps that become original swaps), the SEF or DCM

would have the obligation to choose the SDR for such swaps; for all

other swaps (including for off-facility swaps and/or clearing swaps)

the reporting counterparty (as determined in Sec. 45.8) would have the

obligation to choose the SDR.

i. Costs

The Commission understands that under current industry practice,

DCOs commonly report to SDRs creation data for swaps that would fall

under the definition of clearing swaps. Accordingly, to the extent that

DCOs currently report in conformance with proposed Sec. 45.3(e), the

Commission does not expect the proposed rule to result in any

additional costs. The Commission requests comment on specific details

of market practice of DCOs and whether Sec. 45.3(e) would carry any

associated costs and/or impose additional obligations that go beyond

existing industry practice of DCOs.

With respect to registered DCOs organized outside of the United

States, its territories, and possessions that are subject to

supervision and regulation in a foreign jurisdiction, a home country

trade reporting regulatory regime may require the DCO to report swap

data to a trade repository in the home country jurisdiction. For

clearing swaps that a DCO would be required to report both to a

registered SDR pursuant to the proposed amendments to part 45, and to a

foreign trade repository pursuant to a home country trade reporting

regulatory regime, a DCO could be expected to incur some additional

costs in satisfying both its CFTC and home country reporting

obligations, relative to a DCO that would only be subject to part 45

reporting requirements. As DCOs are not required to provide such cost

information to the Commission, the Commission presently lacks access to

the information needed to assess the magnitude of the costs relating to

compliance with reporting obligations in multiple jurisdictions.

However, the Commission expects that industry technological innovations

may effectively allow for satisfaction of swap data reporting

requirements across more than one jurisdiction by means of a single

data submission, and that a streamlined reporting process or other

technology and operational enhancements could mitigate the cost of

satisfying reporting requirements for swaps that may be required to be

reported to a foreign trade repository under a home country regulatory

regime as well as to a registered SDR pursuant to proposed amendments

to part 45.138 Additionally, the Commission anticipates that adopting

an approach to the reporting of cleared swaps in the United States that

is, to the extent possible, consistent with the approaches adopted in

other jurisdictions may also minimize compliance costs for entities

operating in multiple jurisdictions.139 The Commission also notes

that any costs arising from reporting swap data with respect to more

than one jurisdiction could already have been realized, to the extent

that DCOs located outside the United States are already reporting swap

data to a registered SDR in addition to reporting swap data to trade

repository pursuant to a home country regulatory regime.

—————————————————————————

138 As noted above, the part 45 regulations contemplate

situations where a swap may be required to be reported pursuant to

U.S. law and the law of another jurisdiction.

139 The Commission’s understanding is that the approach

proposed in this release for the reporting of cleared swaps (e.g.,

requiring separate reporting of alphas, betas, and gammas) is

largely consistent with the multi-swap approach adopted by a number

of jurisdictions, including, for example, the European Union,

Singapore, and Australia.

—————————————————————————

The Commission requests comment regarding any unique costs and

benefits of proposed Sec. 45.3(e), and the proposed amendments and

additions to part 45 generally, in regard to extraterritorial

application, including:

Are there any benefits or costs that the Commission

identified in this release that do not apply, or apply to a different

extent, to the extraterritorial application of the proposed additions

and amendments to part 45?

Are there any costs or benefits that are unique to the

extraterritorial application of the proposed additions and amendments

to part 45? If so, please specify how.

If significant differences exist in the costs and benefits

of the extraterritorial and domestic application of the proposed

additions and amendments to part 45, what are the implications of those

differences for the substantive requirements of the proposed additions

and amendments to part 45?

To what extent would trade reporting requirements in non-

U.S. jurisdictions require a DCO to report swap data for clearing swaps

to a foreign trade repository in addition to a registered SDR? Please

describe any unique costs resulting from such scenarios.

Are there any consistencies and/or inconsistencies between

the proposed amendments to part 45 and any foreign trade reporting

regulations that would apply to registered DCOs that would impose costs

or provide benefits? If so, please describe any such consistencies and/

or inconsistencies and associated cost and/or benefit implications.

The Commission requests that comments focus on information and

analysis specifically relevant to the questions posed above as opposed

to addressing the cross-border scope of the part 45 regulations. The

Commission further requests that commenters supply the Commission with

relevant data to support their comments.

With respect to confirmation data reporting, one commenter

contended that requiring the reporting of confirmation data, in

addition to PET data, is unnecessarily burdensome if the Commission

collects the proper PET data.140 The Commission anticipates that the

proposed removal of certain confirmation data reporting requirements

will result in decreased costs for swap counterparties and/or

registered entities that are currently gathering and conveying

electronically the information necessary to report confirmation data

for swaps that are intended to be submitted to a DCO for clearing at

the time of execution.141

—————————————————————————

140 See CEWG letter at 4-5 (stating that reporting

confirmation data in addition to PET data is highly redundant

because confirmation data simply includes all of the PET data

matched and agreed to by the counterparties).

141 See ISDA letter at 6-8 (noting that “Confirmation data

should not be required for an alpha trade that is intended for

clearing at point of execution, whether due to the clearing mandate

or bilateral agreement. Confirmation data for alpha swaps is not

meaningful since they will be terminated and replaced with cleared

swaps simultaneously or shortly after execution for which

confirmation data will be reported by the DCO.”).

—————————————————————————

Finally, with respect to choice of SDR, the Commission

preliminarily believes that amendments to Sec. 45.3(j) will not impose

any additional costs because the amendments simply codify existing

practice–the Commission understands that the workflows that apply the

proposed choice of SDR obligations are already in place.

The Commission preliminarily believes that allowing DCOs to choose

[[Page 52565]]

the SDRs to which they report creation and continuation data is cost-

minimizing for DCOs because it allows them to select the SDR which is

most cost effective. Therefore, as discussed in greater detail below,

the Commission anticipates that DCOs that have affiliated SDRs will

continue their current practice of reporting clearing swaps to their

affiliated SDRs.

ii. Benefits

Proposed Sec. 45.3(e) would explicitly articulate DCO part 45

reporting obligations with respect to clearing swaps (e.g., betas and

gammas).142 As explained above, existing Sec. 45.3 does not

explicitly acknowledge distinct reporting requirements for swaps

commonly known as alphas, betas, and gammas. The proposed amendments

will explicitly delineate creation data reporting obligations for each

component of a cleared swap transaction, which would improve the

Commission’s ability to analyze data associated with such transactions.

—————————————————————————

142 The Commission acknowledges that the alternatives

separately discussed in the Consideration of Alternatives section

later in this release could also provide these benefits for

registered entities and swap counterparties. However, for the

reasons explained in that section, the Commission is of the view

that the proposed approach is more consistent with industry practice

than the alternatives.

—————————————————————————

Requiring DCOs to report required swap creation data for clearing

swaps to SDRs in the manner proposed in this release is expected to

result in uniform protocols and consistent reporting of the individual

components of a cleared swap transaction. DCOs already have the

processes, procedures, and connectivity in place for reporting swap

data to some registered SDRs, and given that DCOs utilize automated

systems to communicate with SDRs, the Commission expects the data

submitted by DCOs to SDRs to be standardized and readily available. The

Commission submits that the proposed reporting framework for cleared

swaps will result in more consistent reporting of all components of a

cleared swap transaction, including linkages between the related swaps,

thereby increasing the efficiency of the SDR data collection function

and enhancing the Commission’s ability to utilize the data for

regulatory purposes, including for systemic risk mitigation, market

monitoring, and market abuse prevention.

With respect to the proposed removal of certain confirmation data

reporting requirements for swaps that are intended to be submitted to a

DCO for clearing at the time of execution, the Commission is of the

view that the proposed confirmation data reporting requirements for

clearing swaps should provide necessary confirmation data with respect

to cleared swap transactions. Given that the proposed rules would

require the DCO to report confirmation data for clearing swaps,

requiring an additional set of confirmation data reporting for the now-

terminated original swap, in addition to PET data, would be unnecessary

and provide little benefit.

Finally, with respect to choice of SDR, under proposed Sec.

45.3(j), the party with the obligation to choose the SDR has the

discretion to select the SDR of its choice. This could be an SDR with

which the party already has a working relationship, an SDR which is, in

the registered entity or reporting counterparty’s estimation, most

cost-effective, or an SDR that provides the best overall service and

product. This flexibility to select SDRs may minimize reporting errors

and foster competition between SDRs, as swap data for a particular

reporting counterparty would be maintained in fewer SDRs, and may

reduce costs, as reporting counterparties and registered entities

(other than DCOs) should not have to establish connection to more than

one SDR unless they prefer to do so. The Commission’s understanding is

that Sec. 45.3(j) is consistent with industry practice,143 and thus

that the benefits described above are already being realized.

—————————————————————————

143 The Commission notes that industry practice with respect

to choice of SDR has likely been influenced in part by a variety of

factors, including, among others, the Commission’s statement

regarding CME Rule 1001. See Statement of the Commission on the

Approval of CME Rule 1001 at 6, Mar. 6, 2013. The Commission notes

that other DCOs have adopted similar rules. See, e.g., ICE Clear

Credit Rule 211.

—————————————————————————

5. Continuation Data Reporting by Derivatives Clearing Organizations–

Proposed Amendments to Sec. 45.4

The Commission proposes amendments to Sec. 45.4, which governs the

reporting of swap continuation data to an SDR during a swap’s existence

through its final termination or expiration, to incorporate the

distinction between original swaps and clearing swaps. The Commission

is also proposing to remove Sec. 45.4(b)(2)(ii), which requires a

reporting counterparty that is an SD or MSP to report valuation data

for cleared swaps daily; instead, the DCO would be the only swap

counterparty required to report swap continuation data, including

valuation data, for clearing swaps.

Notably, proposed Sec. 45.4(c) would require a DCO to report all

required continuation data for original swaps, including original swap

terminations, to the SDR to which such original swap was reported.

Finally, proposed Sec. 45.4(c)(2) would require that continuation data

reported by DCOs include the following data fields as life cycle event

data or state data for original swaps pursuant to proposed Sec.

45.4(c)(1): (i) The LEI of the SDR to which each clearing swap that

replaced a particular original swap was reported by the DCO pursuant to

new Sec. 45.3(e); (ii) the USI of the original swap that was replaced

by the clearing swaps; and (iii) the USIs for each of the clearing

swaps that replace the original swap.

i. Costs

Currently, Sec. 45.4(b)(2) requires that both SDs/MSPs and DCOs

report daily valuation data for cleared swaps. The proposed removal of

Sec. 45.4(b)(2)(ii) would eliminate the existing valuation data

reporting requirement for SDs/MSPs, leaving DCOs as the sole entity

responsible for daily valuation data reporting. As DCOs are currently

required to report valuation data for cleared swaps, they would not

bear any additional costs as a result of this proposed amendment.

With respect to termination notices, one commenter stated that DCOs

should not be required to report termination of a cleared alpha because

doing so would result in increased operational costs associated with

establishing linkages to all registered SDRs.144 While DCOs are

currently required to report continuation data, including terminations,

to SDRs under existing Sec. 45.4,145 the Commission’s understanding

is that DCOs do not consistently report original swap terminations.

DCOs that do not currently have connectivity to the SDR where the SEF/

DCM or original counterparties first reported the swap would incur

costs associated with establishing such connectivity. DCOs will also

realize costs associated with the termination notice and submissions

correcting previously erroneously reported or omitted data. However,

DCO reporting of alpha swap terminations has not been uniform or

consistent and

[[Page 52566]]

may vary by DCO and SDR, and the Commission is generally aware that in

some instances, DCOs currently report alpha swap terminations to the

original SDR that received the original submission of the intended to

be cleared swap. The proposed rules thus will not introduce any new

costs for those DCOs which have already implemented systems to report

alpha swap terminations to SDRs.

—————————————————————————

144 See OTC Hong Kong letter at 2-3 (contending that setup,

application development, and testing to interface with each SDR is

likely to require at least 150 man-days, and that a more cost-

effective framework would be to require the original counterparty to

report termination of the alpha once it receives confirmation that

the alpha has been accepted for clearing, and that the original

counterparty would already have in place technical and operational

interfaces with the SDR of its choice. The commenter also contended

that the burden on DCOs of additional reporting outweighs the

benefits to the CFTC).

—————————————————————————

The Commission requests more detailed information regarding the

nature and amount of the costs identified above, as well information

about the nature and amount of any other costs likely to result from

proposed Sec. 45.4(c), including a description of market practice as

it relates to those costs. The Commission also requests information

regarding whether DCOs are currently reporting alpha swap terminations

and the scope of such reporting relative to all swaps accepted for

clearing by such DCOs. The Commission notes that it does not possess

the information required to quantify such costs since DCOs and SDRs are

not required to provide the relevant information regarding cost

structures to the Commission, but requests that commenters provide

quantitative estimates, as well as data and other information to

support those estimates.

With respect to the proposed additional data fields, as discussed

above, proposed Sec. 45.4(c)(2) would add three data fields (the LEI

of the SDR to which creation data for the clearing swaps was reported,

the USI of the original swap, and USIs of the clearing swaps) to the

life cycle event data or to state data reported by DCOs as continuation

data for original swaps.146 All three of these data fields are either

already in use or can be created by the SDR and reported by the DCO.

While requiring the reporting of additional fields may impose costs,

DCOs should already possess the information needed for these fields,

and the Commission preliminarily believes that the extra costs to DCOs

associated with proposed Sec. 45.4(c)(2) would be minimal. The

Commission does not possess the information required to quantify such

costs since DCOs and SDRs are not required to provide to the Commission

the relevant information regarding the costs associated with creating

and using these fields, but requests that commenters provide

quantitative estimates, as well as data and other information to

support those estimates.

—————————————————————————

146 “Required swap continuation data” is defined in Sec.

45.1 and includes “life cycle event data” or “state data”

(depending on which reporting method is used) and “valuation

data.” Each of these data types is defined in Sec. 45.1. “Life

cycle event data” means “all of the data elements necessary to

fully report any life cycle event.” “State data” means “all of

the data elements necessary to provide a snapshot view, on a daily

basis of all of the primary economic terms of a swap . . .” 17 CFR

45.1.

—————————————————————————

ii. Benefits

Proposed Sec. 45.4(c) would ensure that data concerning original

swaps remains current and accurate, allowing the Commission to

ascertain whether an original swap was terminated through clearing

novation. Original swap data that does not reflect the current state of

the swap frustrates the use of swap data for regulatory purposes,

including, but not limited to, assessing market exposures between

counterparties and evaluating compliance with the clearing requirement.

The Commission is of the view that, to the extent that DCOs’ current

practices are not currently in conformance with the proposed rule,

requiring the DCO to report continuation data for original swaps is the

most efficient and effective method to ensure that data concerning

original swaps remains current and accurate as the DCO, through its

rules, determines when an original swap is terminated and thus has the

quickest and easiest access to authoritative information concerning

termination of the original swap.

Proposed Sec. 45.4(c) would ensure that part 45 explicitly

addresses DCO part 45 continuation data reporting obligations with

respect to original swaps (i.e., alphas).147 Existing Sec. 45.4(b),

which addresses “continuation data reporting for cleared swaps,”

requires DCOs to report continuation data for “all swaps cleared by a

[DCO],” but does not explicitly address the multi-swap framework

provided in Sec. 39.12(b)(6).148 Therefore, uncertainty persists as

to whether, under existing Sec. 45.4(b) the DCO must report

continuation data for the alpha, beta and gamma swaps. The inconsistent

interpretation of this reporting requirement leads to substantial

differences in reporting of cleared swaps and presents challenges for

regulatory oversight. The Commission understands that the continuation

data reporting requirements could benefit from greater clarity

regarding the obligations to report continuation data for original

swaps that have been terminated and the clearing swaps that replace a

terminated original swap.

—————————————————————————

147 The Commission acknowledges that the alternatives

separately discussed in the Consideration of Alternatives section

later in this release could also provide these benefits for

registered entities and swap counterparties. However, for the

reasons explained in that section, the Commission is of the view

that the proposed approach is superior to the alternatives.

148 As discussed earlier in this release, Sec. 39.12(b)(6)

provides that upon acceptance of a swap by a DCO for clearing, the

original swap is extinguished and replaced by equal and opposite

swaps, with the DCO as the counterparty to each such swap. See 17

CFR 39.12(b)(6).

—————————————————————————

With respect to the valuation data reporting requirements of

current Sec. 45.4(b)(2)(ii), while one commenter contended that it

would be valuable for the Commission to receive counterparty valuations

for all swaps, whether cleared or uncleared,149 several commenters

contended that the DCO is the best and ultimate source of the valuation

reporting for cleared swaps. The benefit to the Commission of receiving

cleared swap valuation data from SDs/MSPs would not justify the

significant expense and difficulty incurred by SDs/MSPs to report this

data to the SDR.150

—————————————————————————

149 See Markit letter at 11.

150 See ABA letter at 2, ISDA letter at 13-14 (noting that the

cost savings for SDs/MSPs who would otherwise have to build to

additional SDRs solely for the purpose of reporting valuation data

greatly outweighs any perceived benefit of receiving such data), JBA

letter at 2, MFA letter at 4 (contending that the valuation data

provided by the DCO will generally be more accurate and robust than

that from a given reporting counterparty, as the DCOs have

procedures in place for valuing open swap positions that source and

validate pricing information from a variety of sources), and NGSA

letter at 4-5 (noting that imposing valuation data reporting on DCOs

alone also alleviates unnecessary burdens on SDRs, who would receive

fewer messages on a daily basis).

—————————————————————————

The Commission preliminarily believes that the Sec. 45.4(b)(2)

proposal to remove the requirement that SDs and MSPs report daily

valuation data for cleared swaps could result in cost savings to the

extent that any SDs and MSPs are not currently relying on no-action

relief.151 In addition, because there are fewer DCOs than non-DCO

reporting counterparties, placing the responsibility to report

valuation data solely on the DCO will result in a more consistent and

standardized valuation reporting scheme, as there would be a dramatic

decrease in the number of potential valuation data submitters to SDRs.

This would benefit SDRs, regulators, and the public because it would

facilitate data aggregation and improve the Commission’s ability to

analyze SDR data and to satisfy its risk and market oversight

responsibilities, including measurement of the notional

[[Page 52567]]

amount of outstanding swaps in the market.

—————————————————————————

151 See CFTC Division of Market Oversight, No-Action Letter

No. 12-55, Dec. 17, 2012; No-Action Letter No. 13-34, Jun. 26, 2013;

No-Action Letter No. 14-90, Jun. 30, 2014; and No-Action Letter

No.15-38, June 15, 2015. Staff no-action relief from the

requirements of Sec. 45.4(b)(2)(ii) has been in effect since the

initial compliance date for part 45 reporting.

—————————————————————————

Proposed Sec. 45.4(c)(2) would require DCOs to report three

important continuation data fields for original swaps which would

assist regulators in tracing the history of, and associating the

individual swaps involved in, a cleared swap transaction, from

execution of the original swap through the life of each clearing swap

that replaces an original swap, regardless of the SDR(s) to which the

original and clearing swaps are reported. The newly required

continuation data elements to be reported by the DCOs for original

swaps will ensure that original swap continuation data includes

sufficient information to identify, by USI, any clearing swaps created

from the same original swap, as well as the SDR where those clearing

swaps reside. As such, the Commission expects that review of any

particular swap in a registered SDR will include a listing of all other

relevant USIs with respect to that swap (e.g., original swap and

clearing swaps). The Commission believes that this requirement will

help ensure the availability of information necessary to link original

swaps and clearing swaps, even if those swaps are reported to different

SDRs. The ability to link original and clearing swaps across multiple

SDRs would decrease data fragmentation and would increase the ability

of the Commission to accurately aggregate cleared swap data across

various SDRs. As a result, proposed Sec. 45.4(c)(2) would improve the

ease of use for cleared swaps data, which will enhance the Commission’s

ability to perform its regulatory duties, including to protect market

participants and the public.

6. Unique Swap Identifier Creation by Derivatives Clearing

Organizations–Sec. 45.5(d)

Regulation 45.5 currently requires that each swap subject to the

Commission’s jurisdiction be identified in all swap recordkeeping and

data reporting by a USI. The rule establishes different requirements

for the creation and transmission of USIs depending on whether the swap

is executed on a SEF or DCM or executed off-facility with or without an

SD or MSP reporting counterparty. Section 45.5 also provides that for

swaps executed on or pursuant to the rules of a SEF or DCM, the SEF or

DCM creates the USI, and for swaps not executed on or pursuant to the

rules of a SEF or DCM, the USI is created by an SD or MSP reporting

counterparty, or by the SDR if the reporting counterparty is not an SD

or MSP.

Proposed new rule Sec. 45.5(d) would require a DCO to generate and

assign a USI for a clearing swap upon, or as soon as technologically

practicable after, acceptance of an original swap by the DCO for

clearing (in the event the clearing swap replaces an original swap) or

execution of a clearing swap (in the event that the clearing swap does

not replace an original swap), and prior to reporting the required swap

creation data for the swap. Proposed Sec. 45.5(d) contains provisions

governing creation and assignment of USIs by the DCO that are

consistent with analogous provisions governing creation and assignment

of USIs by SEFs, DCMs, SDs, MSPs, and SDRs.

i. Costs

The Commission believes that proposed Sec. 45.5(d) is largely

consistent with industry practice and will not result in any additional

costs for DCOs. Any DCOs that would not be in complete conformance with

the proposed rule might have to enhance their existing technological

protocols in order to create USIs in house, but these marginal costs

would likely be lower than the costs associated with obtaining a USI

with a separate USI-creating entity. While the Commission believes that

creating USIs in-house, rather than with a different USI creating

entity, might be less costly for DCOs, the Commission currently lacks

data on that comparison and requests that commenters submit comments

and/or data to estimate the quantifiable costs associated with USI

creation.

ii. Benefits

As noted above, the existing part 45 regulations do not explicitly

address the assignment of USIs to swaps that fall within the proposed

definition of clearing swaps. Explicitly requiring DCOs to generate,

assign and transmit USIs for clearing swaps would provide regulatory

certainty with respect to the generation and assignment of USIs for

clearing swaps. The proposal would also help ensure consistent and

uniform USI creation and assignment for such swaps and would allow

regulators to better identify and trace the swaps generally involved in

cleared swap transactions, from execution of the original swap through

the life of each clearing swap.

7. Determination of the Reporting Counterparty for Clearing Swaps-Sec.

45.8

Current Sec. 45.8 establishes a hierarchy under which the

reporting counterparty for a particular swap depends on the nature of

the counterparties involved in the transaction. DCOs are not included

in the existing Sec. 45.8 hierarchy. The Commission is proposing to

amend Sec. 45.8 in order to identify DCOs in the hierarchy as the

reporting counterparty for clearing swaps.

i. Costs

The Commission does not anticipate that the proposed amendments to

Sec. 45.8, in and of themselves, will impose any additional costs on

registered entities or reporting counterparties. The Commission

preliminarily believes that the rule simply reflects established

reporting arrangements, which, to the Commission’s understanding, is

for the DCO to submit data to the SDR for swaps that would fall within

the definition of clearing swaps.

ii. Benefits

As noted above, clearing swaps are not explicitly acknowledged in

existing Sec. 45.3, and DCOs are not identified as reporting

counterparties in the reporting counterparty hierarchy of Sec. 45.8.

The Commission expects that modifications to the Sec. 45.8 reporting

counterparty hierarchy will eliminate ambiguity regarding which

registered entity or swap counterparty is required to report required

creation data for clearing swaps, explicitly delineating the nature and

extent of DCO reporting obligations, and affording market participants

and SDRs a more precise and accurate understanding of reporting

obligations under part 45.152

—————————————————————————

152 The Commission acknowledges that the alternatives

separately discussed in the Consideration of Alternatives section

later in this release could also provide these benefits for

registered entities and swap counterparties. However, for the

reasons explained in that section, the Commission is of the view

that the proposed approach is more consistent with industry practice

than the alternatives.

—————————————————————————

8. Reporting to a Single Swap Data Repository–Sec. 45.10

Regulation 45.10 currently requires that all swap data for a given

swap must be reported to a single SDR, which must be the same SDR to

which creation data for that swap is first reported. The time and

manner in which such data must be reported to a single SDR depends on

whether the swap is executed on a SEF or DCM or executed off-facility

with or without an SD/MSP reporting counterparty. The Commission is

proposing to require DCOs to report all data for a particular clearing

swap to a single SDR. Moreover, consistent with current industry

practice, proposed Sec. 45.10(d)(3) would require the DCO to report

all required swap creation data for each clearing swap that replaces a

particular original swap (i.e., the beta and gamma that replace a

particular

[[Page 52568]]

alpha) to a single SDR, such that all required creation data and all

required continuation data for all clearing swaps that can be traced

back to the same original swap would be reported to the same SDR

(although not necessarily the same SDR as the original swap).

i. Costs

The Commission does not expect DCOs to incur any new costs

associated with ensuring that clearing swap data is reported to a

single SDR because the requirements of the proposed rule are, to the

Commission’s understanding, consistent with current DCO reporting

practice.

ii. Benefits

The Commission preliminarily believes that the benefit of reporting

data associated with each clearing swap to a single SDR is that all

required creation data, all required continuation data for related

clearing swaps and, by extension, USIs linking clearing swaps to the

original swap, would be stored with the same SDR. This would minimize

confusion on the part of SDRs and regulators regarding which swaps are

still active and which ones have been terminated. The Commission notes

that the benefits of reporting all data for clearing swaps to the same

SDR are currently being realized, as it is current industry practice

for DCOs to report swaps that would fall under the proposed definition

of clearing swaps in conformance with proposed Sec. 45.10(d)(3).

9. Primary Economic Terms Data–Amendments to the Primary Economic

Terms Data Tables for Clearing Swaps

The Commission’s current lists of minimum (required) primary

economic terms for swaps in each swap asset class are found in tables

in Exhibits A through D of appendix 1 to part 45. The Commission

proposes to add several new data elements under the heading

“Additional Data Categories and Fields for Clearing Swaps” to

Exhibits A through D in order to more accurately capture the

additional, unique features of clearing swaps that are not relevant to

uncleared swaps. The newly proposed data fields include: The USI for

the clearing swap; the USI for the original swap; the SDR to which the

original swap was reported; clearing member LEI, clearing member client

account origin, house or customer account; clearing receipt timestamp;

and clearing acceptance timestamp.

The Commission also proposes to add several new required data

elements which would be applicable to all swaps, and to make conforming

changes to some existing data elements. The newly proposed fields

include: Asset class, an indication of whether the reporting

counterparty is a DCO with respect to the swap, and clearing exception

or exemption types.

i. Costs

A number of commenters noted that making any changes and additions

to required data fields could present substantial costs and operational

burdens.153 However, these comments, which did not come from DCOs,

related to creation data reporting fulfilled by a swap counterparty and

not by a registered entity. The newly proposed data fields for clearing

swaps would be reported exclusively by DCOs. The Commission

preliminarily believes that DCOs are better situated than swap

counterparties to report the additional fields for clearing swaps

without the substantial costs and operational burdens cited by

commenters because DCOs already possess certain information, or other

registered entities and swap counterparties are required to transmit

the information to DCOs, regarding those fields. For example, the data

necessary to report the proposed “original swap SDR” field is

currently required to be transmitted to the DCO under existing Sec.

45.5, and the Commission understands that data required by the proposed

“clearing receipt timestamp” and “clearing acceptance timestamp”

fields may already be generated and present in DCO systems–such DCOs

would just have to transfer those timestamps to the reporting system

for each clearing swap. Similarly, the Commission understands that

house or customer account designations are already collected and

maintained in relation to certain part 39 reporting obligations. Hence,

there would be no additional cost in collecting the information

necessary to report the “origin (house or customer)” field, and

marginal costs would stem from conveying the information in part 45

swap data reports. The Commission notes that it does not currently have

complete information regarding the extent to which DCOs may already

possess the information required by the proposed additional fields.

Accordingly, for each of the proposed new data fields for clearing

swaps, the Commission requests comment regarding the extent to which

DCOs currently possess the required information, and the costs

associated with obtaining and/or reporting such information.

—————————————————————————

153 See, e.g., CDEU letter at 1-2, CMC letter at 5, EDF

Trading North American at 6, and International Energy Credit

Association at 5.

—————————————————————————

The Commission expects that the addition of the three data fields

applicable to all reporting entities for all swaps will result in some

increase in costs. The Commission does not currently possess the data

needed to quantify such costs since reporting entities and SDRs are not

required to provide to the Commission the relevant information

regarding the costs associated with creating and using these fields,

but requests that commenters provide quantitative estimates, as well as

data and other information to support such estimates. The information

necessary to report these data elements is likely to be readily

available in connection with the execution of swaps, with some marginal

costs stemming from the requirement to include the information in PET

data reported to an SDR (to the extent that such information is not

already reported). The Commission understands that in some cases,

market practice is to report some of the information required by the

proposed three new data fields applicable to all reporting entities for

all swaps.

ii. Benefits

The Commission preliminarily believes that the proposed additions

to the list of minimum primary economic terms would result in a variety

of benefits. Fields such as USI for the original swap or the SDR to

which the original swap was reported may facilitate the monitoring of

each original swap by SDRs and regulators and may prevent potential

double-counting of swap transactions or notional amounts, thus

improving the accuracy of SDR data. Other proposed fields such as

clearing member LEI or clearing member client account information would

facilitate the Commission’s assessment of risk management of market

participants, promoting the protection of the financial integrity of

the markets and the protection of market participants and the public.

The asset class data field would assist the Commission in determining

the asset class for swaps reported to SDRs, enhancing the Commission’s

ability to identify swaps activity in each asset class as well as the

capability to use the data for regulatory purposes. The indication of

whether the reporting counterparty is a DCO with respect to the swap

data field would identify when a DCO is a reporting counterparty for

clearing swaps, increasing the ability to interpret and utilize data

for these swaps. The clearing exception or exemption types data field

would

[[Page 52569]]

enable the Commission to ascertain the specific exception or exemption

from the clearing requirement that was elected and would assist in the

evaluation of compliance with the clearing requirement, as well as

assessing market activity in the uncleared swap markets.

10. Consideration of Alternatives

The Commission considered the costs and benefits of certain

alternatives raised by commenters in response to the Commission’s 2014

request for comment, including whether part 45 should require intended

to be cleared swaps (original swaps) to be reported to registered SDRs.

Some commenters noted that reporting of alpha swaps is beneficial and

should continue to be required,154 while other commenters contended

that alpha swaps should not be required to be reported to an SDR and

questioned the benefits of requiring the reporting of alpha swaps.155

—————————————————————————

154 See TR SEF letter at 10 (stating that the information

associated with the reporting of alpha swaps is necessary for

surveillance and audit trail purposes, that it would be helpful for

the Commission to see all three swaps when analyzing data, and that

if only the beta and gamma are reported, the Commission would not

easily see where the swap was originally executed), AFR letter at 5

(stating that in general, all life cycle information relevant to

track a swap from initial conception to clearing should be included

in reporting, including the reporting of the initial alpha swap

prior to novation into clearing, because such information will be

useful in tracking trends in clearing use, including enforcement of

the clearing mandate and optional use of clearing), Markit letter at

25 (stating that reporting requirements in relation to the alpha

swap should not be modified or waived because it will often be

essential for the Commission to know the exact origin of a cleared

swap transaction, particularly for market surveillance purposes),

and DTCC letter at 17-18 (stating that: Any changes to the

Commission’s reporting requirements that would not require the

reporting of swap transaction data to SDRs of all swaps, including

alpha swaps, would be inconsistent with CEA section 2(a)(13)(G);

that a material, price forming event occurs upon execution of an

alpha swap; that regulators should continue to require the reporting

of alpha swap data in order to maintain a complete audit trail of

all transaction-level activity related to a swap trade; and that in

order to understand the origin of cleared swaps, regulators must

have the ability to access and examine the connections between the

alpha, beta, and gamma swaps).

155 See SIFMA letter at 4 (stating that separately reporting

alpha swaps to SDRs can result in misleading data being retained by

SDRs, and that this is particularly concerning if alphas and

subsequent betas and gammas are reported to different SDRs, which

could result in double counting of swaps), CEWG letter at 15

(contending that counterparties enter into an alpha with the

expectation that it will be cleared almost immediately thereafter,

and that requiring the reporting of alpha, beta, and gamma swaps

might result in parties reporting related swaps to different SDRs),

CME letter at 2-3 (contending that there is no value in having

execution venues report intended-to-be-cleared swaps that will exist

only for a few seconds, and that amending the rules such that the

DCO is the only party with reporting responsibilities for intended-

to-be-cleared swaps would lower operational risk, cost, and burden,

and would ensure the Commission gets data directly from the source),

MFA letter, and ISDA letter.

—————————————————————————

Some commenters stated that the Commission should require resulting

swaps to be reported to the same SDR as original swaps, so that the

entire history of a swap would reside at the same SDR.156 A number of

commenters suggested that part 45 should place swap data reporting

obligations solely on DCOs, including with respect to swaps that are

intended to be cleared at the time of execution and accepted for

clearing by a DCO (swaps commonly known as “alpha” swaps) and swaps

resulting from clearing (swaps commonly known as “beta” and “gamma”

swaps).157 However, one commenter noted that it would not be

appropriate to require a DCO to report information related to the

execution of an alpha swap.158

—————————————————————————

156 See DTCC letter at 2-3, appendix at 4, 21 (arguing that

the Commission should adopt a “single SDR” rule to ensure that all

of the data for a swap is available in one SDR); ISDA letter at 44

(contending that original and resulting swaps should be reported to

the same SDR when a swap was executed without the intention or

requirement to clear, but is subsequently cleared).

157 See CMC letter at 1, 3, 6 (noting that “cleared swaps

reporting should be handled exclusively by DCOs.”); NFPEA letter at

12 (noting that “If and when a swap is cleared and thereafter, all

information about the swap should be reported to the SDR solely by

the DCO”); EEI letter at 3, 14 (stating that the Commission should

put all obligations for reporting cleared swaps on DCOs and that the

DCO is the only entity with access to all relevant information to

trace a cleared swap for its entire existence and is the only entity

that can provide the Commission with position information for

individual market participants); ICE letter at 3, 17 (stating that

the DCO should be the sole reporting party for intended to be

cleared swaps, that reporting prior to acceptance of a swap for

clearing introduces another point of failure in the reporting chain,

and that there is little if any benefit of requiring a party other

than the DCO to report, as the intended to be cleared swap exists

only for a few seconds); CEWG letter at 16 (“The Working Group

recommends that the Part 45 regulations be amended to make clear

that the DCO has the reporting obligations (creation and

continuation data) for the original alpha swap and resulting

positions . . .”); CME letter at 20 (contending that the act of

submitting an intended to be cleared swap to a DCO should completely

discharge the reporting obligations of each reporting counterparty,

SEF or DCM, and that this position would be consistent with

Congressional intent and would help ensure the Commission gets

access to the best possible information for regulatory purposes

without imposing unnecessary costs on the Commission or market

participants); DTCC letter at 21 (noting that placing the cleared

swap reporting burden exclusively on DCOs would eliminate the

possibility of duplicate reporting for cleared swaps, which would

eliminate the need to require reporting counterparties and SDRs to

adopt costly and elaborate mechanisms); and NFP Electric

Associations letter at 4.

158 See LCH letter at 10 (“It would not be appropriate to

oblige the DCO to enhance Part 45 reporting in order to source

information regarding the original execution that should be provided

directly by the execution venue or execution counterparties.”).

—————————————————————————

In light of these comments, the Commission considered the costs and

benefits of four alternatives in comparison to the costs and benefits

of the proposed rule: (1) Requiring original and clearing swaps to be

reported to the same SDR chosen by the reporting counterparty or SEF/

DCM; (2) requiring original and clearing swaps to be reported to the

same SDR chosen by the DCO accepting the swap for clearing; (3)

requiring only one report for each swap intended for clearing, that is,

not requiring original (alpha) swaps to be reported separately from

clearing swaps, with the SDR chosen by the reporting counterparty or

SEF/DCM; and (4) requiring only one report for each swap intended for

clearing as in (3), but with the SDR chosen by the DCO accepting the

swap for clearing.

The first two alternatives each require swaps that are intended to

be cleared and the resulting clearing swaps to be reported to the same

SDR. If such swaps were reported to the same SDR, there would be no

need for certain requirements in proposed Sec. 45.4(c) that extra

fields, such as clearing swap SDR, be included in the report to the SDR

for the clearing swap to link the clearing swap to an original swap on

a different SDR. Similarly, the need for certain clearing swap PET data

fields, such as the identity of the original SDR, intended to be used

for linking purposes, might not be necessary. This would reduce costs

relative to the proposed rule. Moreover, DCOs would incur reduced costs

since they would only have to report data regarding cleared swap

transactions to a single SDR. Further, market participants and the

Commission could access all information about a single set of related

original and clearing swaps at a single SDR, also reducing costs

relative to the proposed rule.

However, because the proposed rule more closely reflects current

industry practice relative to the alternative, there would be some

potentially significant one-time costs, including the costs of changes

to existing systems, associated with changing practices to conform to

the alternatives. Additionally, a substantial portion of aggregation

costs for regulators, and, likely, market participants, arises from the

current landscape, which includes multiple SDRs. The proposed

requirements to link original and clearing swaps at multiple SDRs is a

relatively minor burden compared with the larger, already- incurred

costs from having multiple SDRs. Additionally, costs associated with

monitoring and aggregation would likely be mitigated by the

continuation data fields of proposed

[[Page 52570]]

Sec. 45.4(c)(2), which would enable regulators to more effectively

connect original swaps at one SDR with clearing swaps at another SDR.

Regarding who would choose the single SDR, the SDR could be chosen

by the reporting counterparty (or DCM or SEF) or by the DCO. Under

either of the first two alternatives, one registered entity or

counterparty’s choice of SDR would bind a second registered entity or

counterparty to also report to that SDR, which could be an SDR that the

second registered entity or counterparty would not otherwise select.

Allowing the reporting counterparty or SEF/DCM to choose the SDR would

enable the reporting party to choose the SDR with the best combination

of prices and service, and thus may promote competition among SDRs.

Allowing the DCO to choose the SDR would likely result in the DCO

always choosing the same SDR, which may be the SDR that is affiliated

with the DCO (that is, shares the same parent company). This would

reduce costs for DCOs since they would need to maintain connectivity

with only one SDR, but would limit the ability of SDRs to compete since

DCOs could choose to report only to SDRs with which they are

affiliated. The Commission requests comment on the extent to which SDRs

compete on the basis of price or service and the extent to which SDRs

are chosen on the basis of relationships with registered entities and

reporting counterparties.

Under the third and fourth alternatives, there would be no

requirement to report intended to be cleared swaps (original swaps)

separately from the resulting clearing swaps. Rather, there would only

be one report for each cleared swap transaction. This would be a change

from current swap market practice but is similar to existing practice

in the futures market where there is no separate record for futures

contracts before they are cleared. As with the first two alternatives,

the choice of SDR could be made by the reporting counterparty as

determined under current Sec. 45.8, or by the DCO as under proposed

Sec. 45.8(i). If there is only one report for each cleared swap

transaction, there would be ongoing cost savings associated with the

need to make fewer reports to SDRs. As with the first two alternatives,

there would be no need for the requirement in proposed Sec. 45.4(c)

that extra fields, such as clearing swap SDR, be included in the report

to the SDR to link the clearing swap to an original swap on a different

SDR, and market participants and the Commission could access all

information about a single cleared swap transaction at a single SDR.

This would also reduce costs relative to the proposed rule. However,

the benefits of separate reports for original and clearing swaps would

be foregone and there may be a less complete record of the history of

each cleared swap. It may be possible to reclaim these benefits through

requiring additional fields in each cleared swap report (although this

would also increase costs). Moreover, because the proposed rule more

closely reflects current industry practice relative to these

alternatives, there would be some potentially significant one-time

costs, including the costs of changes to existing systems, associated

with changing practices to conform to the alternatives. The effects of

who chooses the SDR are similar to the effects described for the first

two alternatives.

The Commission has determined not to propose the alternatives at

this time because the proposed rule is more consistent with current

industry practice than the alternatives. The Commission understands

that reporting counterparties and registered entities are already set

up to report alpha swaps to registered SDRs (whether or not such swaps

are intended to be cleared at the time of execution) and that DCOs are

already set up to report beta and gamma swaps that result from

acceptance of a swap for clearing, and have been making such reports.

Accordingly, the industry has already incurred the costs of setting up

a system for reporting cleared swap transactions to SDRs (including

separate reports for swaps that would fall within the proposed

definitions of original and clearing swaps). Changing this system to

conform to an alternative rule would be costly, and the Commission

notes that these practices did not evolve as a direct consequence of

Commission actions.

The Commission also preliminarily believes that clarifying distinct

reporting requirements in part 45 for alphas (swaps that become

original swaps) and betas and gammas (clearing swaps that replace

original swaps) presents a full history of each cleared swap

transaction and permits the Commission and other regulators to identify

and analyze each component part of such transactions. The Commission

also continues to hold the view that placing the part 45 reporting

obligation on the counterparty or registered entity closest to the

source of, and with the easiest and fastest access to, complete and

accurate data regarding a swap fosters accuracy and completeness in

swap data reporting. In light of these benefits, the Commission

proposes to maintain the current industry practice of separately

reporting both alpha swaps (i.e., swaps that would become original

swaps under the proposed rules) and beta and gamma swaps (i.e.,

clearing swaps as defined under the proposed rules).

Additionally, the multi-swap reporting approach proposed in this

release is largely consistent with the approach proposed by the SEC in

its release proposing certain new rules and rule amendments to

Regulation SBSR,159 and is also largely consistent with the approach

adopted by several foreign regulators.160 Given that the swaps market

is global in nature, the Commission anticipates that adopting an

approach to the reporting of cleared swaps in the United States that is

consistent with the approaches adopted in other jurisdictions may

minimize compliance costs for entities operating in multiple

jurisdictions.

—————————————————————————

159 See “Regulation SBSR–Reporting and Dissemination of

Security-Based Swap Information,” 80 FR 14740, Mar. 19, 2015.

160 The Commission’s understanding is that a number of

jurisdictions, including the European Union, Singapore, and

Australia, for example, also account for a multi-swap approach to

the reporting of cleared swaps.

—————————————————————————

The Commission requests comment on whether the ongoing cost savings

of adopting an alternative rule would justify the one-time costs of

changing industry practice to conform to the alternative rule.

11. Request for Comment

The Commission requests comment on all aspects of the proposed

rules. Beyond specific questions interspersed throughout its

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 the alternatives that the Commission

discussed in this release; data and any other information 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

positions posited 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.

12. Section 15(a) Factors

Section 15(a) of the CEA requires the Commission to consider the

effects of its

[[Page 52571]]

actions in light of the following five factors:

(1) Protection of market participants and the public. In the Final

Part 45 Rulemaking,161 the Commission stated that the data reporting

requirements of part 45 provided for protection of market participants

and the public by providing regulatory agencies with a wealth of

previously unavailable data in a unified format, greatly enhancing the

ability of market and systemic risk regulators to perform their

oversight and enforcement functions.162 The Commission preliminarily

believes that the proposed amendments would enhance these protections

by explicitly providing how and by whom each of the swaps involved in a

cleared swap transaction should be reported. In particular, by

requiring DCOs to electronically report the creation data and

continuation data for clearing swaps, the Commission believes that data

on all clearing swaps associated with a specific original swap will be

aggregated at the same SDR, provided by a single entity and readily

available for accurate and complete analysis. This would also allow the

Commission and other regulators to access all data pertaining to

related clearing swaps from a single SDR. These enhancements should

allow for efficiencies in oversight and enforcement functions,

resulting in improved protection of market participants and the public.

—————————————————————————

161 77 FR 2136, Jan. 13, 2012.

162 Id. at 2188.

—————————————————————————

(2) The efficiency, competitiveness and financial integrity of the

markets. In the Final Part 45 Rulemaking, the Commission stated that

the swap data reporting requirements of part 45 would enhance the

financial integrity of swap markets.163 The Commission also stated

that part 45’s streamlined reporting regime, including the counterparty

hierarchy used to select the reporting counterparty, could be

considered efficient in that it assigns greater reporting

responsibility to more sophisticated entities more likely to be able to

realize economies of scale and scope in reporting costs.164 The

Commission preliminarily believes that the proposed amendments may

further enhance this efficiency by requiring DCOs to report where they

are the party best equipped to do so.165 In addition, by explicitly

delineating reporting responsibilities associated with each component

of a cleared swap transaction, the proposed rules should result in

improved reliability and consistency of the swaps data reported,

further enhancing the financial integrity of the swap markets.

—————————————————————————

163 Id. at 2189.

164 Id.

165 As noted earlier in this release, the Commission’s

understanding is that the DCO is the entity that should have the

easiest and quickest access to full information with respect to PET

data and confirmation data for clearing swaps, as well with respect

to terminations of original swaps.

—————————————————————————

The rule obligating the reporting counterparty or SEF/DCM to choose

the SDR for the original intended to be cleared swap may promote

competition among SDRs. However, the Commission also acknowledges that

by allowing DCOs to choose the SDR to which they report, competition

for SDR services would be impacted as a result of some DCOs reporting

to their affiliated SDR, that is, an SDR that shares the same parent

company as the DCO. Any such impact on competition would be a

consequence of business decisions designed to realize costs savings

associated with the affiliations between DCOs and SDRs. It is

reasonable to expect that DCOs would continue to report to affiliated

SDRs under the proposed rules, but nothing in the proposed rules would

require them to do so. The Commission notes that section 21 of the CEA

permits a DCO to register as an SDR.

Additionally, the Commission notes that a significant portion of

swap activity is reported to non-affiliated SDRs. Sample data from a

recent representative week suggests that more than 40 percent of

reported swaps are being reported to non-affiliated SDRs. A sizeable

portion of the market could thus avoid the competitive impacts

described above. The Commission requests comment on the extent to which

a DCO’s choice of an affiliated SDR may impact competition, including

how market share among affiliated and non-affiliated SDRs may increase

or lessen such an impact on competition.

(3) Price Discovery. In the Final Part 45 Rulemaking, the

Commission stated that the swap data reporting requirements of part 45

did not have a material effect on the price discovery process.166 The

Commission preliminarily believes that the proposed amendments also

would not have a material effect on price discovery. The Commission

requests comment on whether the proposed amendments would have any

effect on price discovery.

—————————————————————————

166 77 FR 2136, 2189, Jan. 13, 2012.

—————————————————————————

(4) Risk Management. In the Final Part 45 Rulemaking, the

Commission stated that the data reporting requirements of part 45 did

not have a material effect on sound risk management practices.167 The

Commission preliminarily believes that the proposed amendments also

would not have a material effect on sound risk management practices.

The Commission requests comment on whether the proposed amendments

would have any effect on sound risk management practices.

—————————————————————————

167 Id. at 2189.

—————————————————————————

(5) Other Public Interest Considerations. In the Final Part 45

Rulemaking, the Commission stated that the data reporting requirements

would allow regulators to readily acquire and analyze market data, thus

streamlining the surveillance process.168 The Commission

preliminarily believes that the proposed amendments would enhance this

consideration by providing certainty about how and by whom each of the

swaps involved in a cleared swap transaction should be reported.

—————————————————————————

168 Id.

—————————————————————————

As noted earlier in this release, the multi-swap reporting approach

proposed in this release is largely consistent with the approaches

proposed by the SEC and adopted by several foreign regulators. Given

that the swaps market is global in nature, the Commission anticipates

that adopting an approach that is consistent with the approaches

adopted by other regulators may further other public interest

considerations by reducing compliance costs for entities operating in

multiple jurisdictions.

D. Antitrust Considerations

Section 15(b) of the CEA requires the Commission to take into

consideration the public interest to be protected by the antitrust laws

and endeavor to take the least anticompetitive means of achieving the

objectives of the CEA, in issuing any order or adopting any Commission

rule or regulation.

The Commission does not anticipate that the proposed amendments to

part 45 will result in anti-competitive behavior. However, because the

proposed amendments affect the existing reporting regime and swap

transaction workflows, the Commission encourages comments from the

public on any aspect of the proposal that may have the potential to be

inconsistent with the anti-trust laws or be anti-competitive in nature.

For example, the Commission is generally concerned with market

concentration, the vertical integration of registered entities (DCMs,

SEFs, DCOs, and SDRs), and the use of market power rather than

competitive forces to determine the success or failure of particular

SDRs. Accordingly, the Commission requests comment regarding whether

the proposal in total, or its individual parts, could be deemed anti-

competitive.

[[Page 52572]]

List of Subjects in 17 CFR Part 45

Data recordkeeping requirements and data reporting requirements,

Swaps.

For the reasons stated in the preamble, the Commodity Futures

Trading Commission proposes to amend 17 CFR part 45 as set forth below:

PART 45–SWAP DATA RECORDKEEPING AND REPORTING REQUIREMENTS

0

1. The authority citation for part 45 is revised to read as follows:

Authority: 7 U.S.C. 6r, 7, 7a-1, 7b-3, 12a, and 24a, as amended

by Title VII of the Wall Street Reform and Consumer Protection Act

of 2010, Pub. L. 111-203, 124 Stat. 1376 (2010), unless otherwise

noted.

0

2. Amend Sec. 45.1 as follows:

0

a. Add a definition for “clearing swap” in alphabetical order;

0

b. Revise the definition of “derivatives clearing organization”; and

0

c. Add a definition for “original swap” in alphabetical order.

The additions and revisions read as follows:

Sec. 45.1 Definitions.

* * * * *

Clearing swap means a swap created pursuant to the rules of a

derivatives clearing organization that has a derivatives clearing

organization as a counterparty, including any swap that replaces an

original swap that was extinguished upon acceptance of such original

swap by the derivatives clearing organization for clearing.

* * * * *

Derivatives clearing organization means a derivatives clearing

organization, as defined by Sec. 1.3(d) of this chapter, that is

registered with the Commission.

* * * * *

Original swap means a swap that has been accepted for clearing by a

derivatives clearing organization.

* * * * *

0

3. Revise Sec. 45.3 to read as follows:

Sec. 45.3 Swap data reporting: creation data.

Registered entities and swap counterparties must report required

swap creation data electronically to a swap data repository as set

forth in this section and in the manner provided in Sec. 45.13(b). The

rules governing acceptance and recording of such data by a swap data

repository are set forth in Sec. 49.10 of this chapter. The reporting

obligations of swap counterparties with respect to swaps executed prior

to the applicable compliance date and in existence on or after July 21,

2010, the date of enactment of the Dodd-Frank Act, are set forth in

part 46 of this chapter. This section and Sec. 45.4 establish the

general swap data reporting obligations of swap dealers, major swap

participants, non-SD/MSP counterparties, swap execution facilities,

designated contract markets, and derivatives clearing organizations to

report swap data to a swap data repository. In addition to the

reporting obligations set forth in this section and Sec. 45.4,

registered entities and swap counterparties are subject to other

reporting obligations set forth in this chapter, including, without

limitation, the following: Swap dealers, major swap participants, and

non-SD/MSP counterparties are also subject to the reporting obligations

with respect to corporate affiliations reporting set forth in Sec.

45.6; swap execution facilities, designated contract markets, swap

dealers, major swap participants, and non-SD/MSP counterparties are

subject to the reporting obligations with respect to real time

reporting of swap data set forth in part 43 of this chapter;

counterparties to a swap for which an exception to, or an exemption

from, the clearing requirement has been elected under part 50 of this

chapter are subject to the reporting obligations set forth in part 50

of this chapter; and, where applicable, swap dealers, major swap

participants, and non-SD/MSP counterparties are subject to the

reporting obligations with respect to large traders set forth in parts

17 and 18 of this chapter. Paragraphs (a) through (d) of this section

apply to all swaps except clearing swaps, while paragraph (e) applies

only to clearing swaps.

(a) Swaps executed on or pursuant to the rules of a swap execution

facility or designated contract market. For each swap executed on or

pursuant to the rules of a swap execution facility or designated

contract market, the swap execution facility or designated contract

market must report all primary economic terms data for the swap, as

defined in Sec. 45.1, as soon as technologically practicable after

execution of the swap. If the swap is not intended to be submitted to a

derivatives clearing organization for clearing at the time of

execution, the swap execution facility or designated contract market

must report all confirmation data for the swap, as defined in Sec.

45.1, as soon as technologically practicable after execution of the

swap.

(b) Off-facility swaps subject to the clearing requirement. For all

off-facility swaps subject to the clearing requirement under part 50 of

this chapter, except for those off-facility swaps for which an

exception or exemption from the clearing requirement has been elected

under part 50 of this chapter, and those off-facility swaps covered by

CEA section 2(a)(13)(C)(iv), required swap creation data must be

reported as provided in paragraph (b) of this section.

(1) The reporting counterparty, as determined pursuant to Sec.

45.8, must report all primary economic terms data for the swap, within

the applicable reporting deadline set forth in paragraph (b)(1)(i) or

(ii) of this section.

(i) If the reporting counterparty is a swap dealer or a major swap

participant, the reporting counterparty must report all primary

economic terms data for the swap as soon as technologically practicable

after execution, but no later than 15 minutes after execution.

(ii) If the reporting counterparty is a non-SD/MSP counterparty,

the reporting counterparty must report all primary economic terms data

for the swap as soon as technologically practicable after execution,

but no later than one business hour after execution.

(2) [Reserved]

(c) Off-facility swaps not subject to the clearing requirement,

with a swap dealer or major swap participant reporting counterparty.

For all off-facility swaps not subject to the clearing requirement

under part 50 of this chapter, all off-facility swaps for which an

exception to, or an exemption from, the clearing requirement has been

elected under part 50 of this chapter, and all off-facility swaps

covered by CEA section 2(a)(13)(C)(iv), for which a swap dealer or

major swap participant is the reporting counterparty, required swap

creation data must be reported as provided in paragraph (c) of this

section.

(1) Credit, equity, foreign exchange, and interest rate swaps. For

each such credit swap, equity swap, foreign exchange instrument, or

interest rate swap:

(i) The reporting counterparty, as determined pursuant to Sec.

45.8, must report all primary economic terms data for the swap, within

the applicable reporting deadline set forth in paragraph (c)(1)(i)(A)

or (B) of this section.

(A) If the non-reporting counterparty is a swap dealer, a major

swap participant, or a non-SD/MSP counterparty that is a financial

entity as defined in CEA section 2(h)(7)(C), or if the non-reporting

counterparty is a non-SD/MSP counterparty that is not a financial

entity as defined in CEA section 2(h)(7)(C) and verification of primary

economic terms occurs electronically, then the reporting counterparty

must report all primary economic terms data for the swap as

[[Page 52573]]

soon as technologically practicable after execution, but no later than

30 minutes after execution.

(B) If the non-reporting counterparty is a non-SD/MSP counterparty

that is not a financial entity as defined in CEA section 2(h)(7)(C),

and if verification of primary economic terms does not occur

electronically, then the reporting counterparty must report all primary

economic terms data for the swap as soon as technologically practicable

after execution, but no later than 30 minutes after execution.

(ii) If the swap is not intended to be submitted to a derivatives

clearing organization for clearing at the time of execution, the

reporting counterparty must report all confirmation data for the swap,

as defined in Sec. 45.1, as soon as technologically practicable after

confirmation, but no later than: 30 minutes after confirmation if

confirmation occurs electronically; or 24 business hours after

confirmation if confirmation does not occur electronically.

(2) Other commodity swaps. For each such other commodity swap:

(i) The reporting counterparty, as determined pursuant to Sec.

45.8, must report all primary economic terms data for the swap, within

the applicable reporting deadline set forth in paragraph (c)(2)(i)(A)

or (B) of this section.

(A) If the non-reporting counterparty is a swap dealer, a major

swap participant, or a non-SD/MSP counterparty that is a financial

entity as defined in CEA section 2(h)(7)(C), or if the non-reporting

counterparty is a non-SD/MSP counterparty that is not a financial

entity as defined in CEA section 2(h)(7)(C) and verification of primary

economic terms occurs electronically, then the reporting counterparty

must report all primary economic terms data for the swap as soon as

technologically practicable after execution, but no later than two

hours after execution.

(B) If the non-reporting counterparty is a non-SD/MSP counterparty

that is not a financial entity as defined in CEA section 2(h)(7)(C),

and if verification of primary economic terms does not occur

electronically, then the reporting counterparty must report all primary

economic terms data for the swap as soon as technologically practicable

after execution, but no later than two hours after execution.

(ii) If the swap is not intended to be submitted to a derivatives

clearing organization for clearing at the time of execution, the

reporting counterparty must report all confirmation data for the swap,

as defined in Sec. 45.1, as soon as technologically practicable after

confirmation, but no later than: 30 minutes after confirmation if

confirmation occurs electronically; or 24 business hours after

confirmation if confirmation does not occur electronically.

(d) Off-facility swaps not subject to the clearing requirement,

with a non-SD/MSP reporting counterparty. For all off-facility swaps

not subject to the clearing requirement under part 50 of this chapter,

all off-facility swaps for which an exception to, or an exemption from,

the clearing requirement has been elected under part 50 of this

chapter, and all off-facility swaps covered by CEA section

2(a)(13)(C)(iv), in all asset classes, for which a non-SD/MSP

counterparty is the reporting counterparty, required swap creation data

must be reported as provided in paragraph (d) of this section.

(1) The reporting counterparty, as determined pursuant to Sec.

45.8, must report all primary economic terms data for the swap, as soon

as technologically practicable after execution, but no later than 24

business hours after execution.

(2) If the swap is not intended to be submitted to a derivatives

clearing organization for clearing at the time of execution, the

reporting counterparty must report all confirmation data for the swap,

as defined in Sec. 45.1, as soon as technologically practicable after

confirmation, but no later than 24 business hours after confirmation.

(e) Clearing swaps. As soon as technologically practicable after

acceptance of an original swap by a derivatives clearing organization

for clearing, or as soon as technologically practicable after execution

of a clearing swap that does not replace an original swap, the

derivatives clearing organization, as reporting counterparty, must

report all required swap creation data for the clearing swap. Required

swap creation data for clearing swaps must include all confirmation

data and all primary economic terms data, as those terms are defined in

Sec. 45.1 and as included in appendix 1 to this part.

(f) Allocations. For swaps involving allocation, required swap

creation data shall be reported to a single swap data repository as

follows.

(1) Initial swap between reporting counterparty and agent. The

initial swap transaction between the reporting counterparty and the

agent shall be reported as required by Sec. 45.3(a) through (d). A

unique swap identifier for the initial swap transaction must be created

as provided in Sec. 45.5.

(2) Post-allocation swaps–(i) Duties of the agent. In accordance

with this section, the agent shall inform the reporting counterparty of

the identities of the reporting counterparty’s actual counterparties

resulting from allocation, as soon as technologically practicable after

execution, but not later than eight business hours after execution.

(ii) Duties of the reporting counterparty. The reporting

counterparty must report all required swap creation data for each swap

resulting from allocation to the same swap data repository to which the

initial swap transaction is reported as soon as technologically

practicable after it is informed by the agent of the identities of its

actual counterparties. The reporting counterparty must create a unique

swap identifier for each such swap as required in Sec. 45.5.

(iii) Duties of the swap data repository. The swap data repository

to which the initial swap transaction and the post-allocation swaps are

reported must map together the unique swap identifiers of the initial

swap transaction and of each of the post-allocation swaps.

(g) Multi-asset swaps. For each multi-asset swap, required swap

creation data and required swap continuation data shall be reported to

a single swap data repository that accepts swaps in the asset class

treated as the primary asset class involved in the swap by the swap

execution facility, designated contract market, or reporting

counterparty making the first report of required swap creation data

pursuant to this section. The registered entity or reporting

counterparty making the first report of required swap creation data

pursuant to this section shall report all primary economic terms for

each asset class involved in the swap.

(h) Mixed swaps. (1) For each mixed swap, required swap creation

data and required swap continuation data shall be reported to a swap

data repository registered with the Commission and to a security-based

swap data repository registered with the Securities and Exchange

Commission. This requirement may be satisfied by reporting the mixed

swap to a swap data repository or security-based swap data repository

registered with both Commissions.

(2) The registered entity or reporting counterparty making the

first report of required swap creation data pursuant to this section

shall ensure that the same unique swap identifier is recorded for the

swap in both the swap data repository and the security-based swap data

repository.

(i) International swaps. For each international swap, the reporting

counterparty shall report as soon as practicable to the swap data

repository the identity of the non-U.S. trade

[[Page 52574]]

repository not registered with the Commission to which the swap is also

reported and the swap identifier used by the non-U.S. trade repository

to identify the swap. If necessary, the reporting counterparty shall

obtain this information from the non-reporting counterparty.

(j) Choice of SDR. The entity with the obligation to choose the

swap data repository to which all required swap creation data for the

swap is reported shall be the entity that is required to make the first

report of all data pursuant to this section, as follows:

(1) For swaps executed on or pursuant to the rules of a swap

execution facility or designated contract market, the swap execution

facility or designated contract market shall choose the swap data

repository;

(2) For all other swaps, the reporting counterparty, as determined

in section 45.8, shall choose the swap data repository.

0

4. Revise Sec. 45.4 to read as follows:

Sec. 45.4 Swap data reporting: continuation data.

Registered entities and swap counterparties must report required

swap continuation data electronically to a swap data repository as set

forth in this section and in the manner provided in Sec. 45.13(b). The

rules governing acceptance and recording of such data by a swap data

repository are set forth in Sec. 49.10 of this chapter. The reporting

obligations of registered entities and swap counterparties with respect

to swaps executed prior to the applicable compliance date and in

existence on or after July 21, 2010, the date of enactment of the Dodd-

Frank Act, are set forth in part 46 of this chapter. This section and

Sec. 45.3 establish the general swap data reporting obligations of

swap dealers, major swap participants, non-SD/MSP counterparties, swap

execution facilities, designated contract markets, and derivatives

clearing organizations to report swap data to a swap data repository.

In addition to the reporting obligations set forth in this section and

Sec. 45.3, registered entities and swap counterparties are subject to

other reporting obligations set forth in this chapter, including,

without limitation, the following: Swap dealers, major swap

participants, and non-SD/MSP counterparties are also subject to the

reporting obligations with respect to corporate affiliations reporting

set forth in Sec. 45.6; swap execution facilities, designated contract

markets, swap dealers, major swap participants, and non-SD/MSP

counterparties are subject to the reporting obligations with respect to

real time reporting of swap data set forth in part 43 of this chapter;

and, where applicable, swap dealers, major swap participants, and non-

SD/MSP counterparties are subject to the reporting obligations with

respect to large traders set forth in parts 17 and 18 of this chapter.

(a) Continuation data reporting method generally. For each swap,

regardless of asset class, reporting counterparties and derivatives

clearing organizations required to report swap continuation data must

do so in a manner sufficient to ensure that all data in the swap data

repository concerning the swap remains current and accurate, and

includes all changes to the primary economic terms of the swap

occurring during the existence of the swap. Reporting entities and

counterparties fulfill this obligation by reporting either life cycle

event data or state data for the swap within the applicable deadlines

set forth in this section. Reporting counterparties and derivatives

clearing organizations required to report swap continuation data for a

swap may fulfill their obligation to report either life cycle event

data or state data by reporting:

(1) Life cycle event data to a swap data repository that accepts

only life cycle event data reporting;

(2) State data to a swap data repository that accepts only state

data reporting; or

(3) Either life cycle event data or state data to a swap data

repository that accepts both life cycle event data and state data

reporting.

(b) Continuation data reporting for clearing swaps. For all

clearing swaps, required continuation data must be reported as provided

in this section.

(1) Life cycle event data or state data reporting. The derivatives

clearing organization, as reporting counterparty, must report to the

swap data repository either:

(i) All life cycle event data for the swap, reported on the same

day that any life cycle event occurs with respect to the swap; or

(ii) All state data for the swap, reported daily.

(2) Valuation data reporting. Valuation data for the swap must be

reported by the derivatives clearing organization, as reporting

counterparty, daily.

(c) Continuation data reporting for original swaps. For all

original swaps, required continuation data, including terminations,

must be reported to the swap data repository to which the swap that was

accepted for clearing was reported pursuant to Sec. 45.3(a) through

(d) in the manner provided in Sec. 45.13(b) and in this section, and

must be accepted and recorded by such swap data repository as provided

in Sec. 49.10 of this chapter.

(1) Life cycle event data or state data reporting. The derivatives

clearing organization that accepted the swap for clearing must report

to the swap data repository either:

(i) All life cycle event data for the swap, reported on the same

day that any life cycle event occurs with respect to the swap; or

(ii) All state data for the swap, reported daily.

(2) In addition to all other necessary continuation data fields,

life cycle event data and state data must include all of the following:

(i) The legal entity identifier of the swap data repository to

which all required swap creation data for each clearing swap was

reported by the derivatives clearing organization pursuant to Sec.

45.3(e);

(ii) The unique swap identifier of the original swap that was

replaced by the clearing swaps; and

(iii) The unique swap identifier of each clearing swap that

replaces a particular original swap.

(d) Continuation data reporting for uncleared swaps. For all swaps

that are not cleared by a derivatives clearing organization, including

swaps executed on or pursuant to the rules of a swap execution facility

or designated contract market, the reporting counterparty must report

all required swap continuation data as provided in this section.

(1) Life cycle event data or state data reporting. The reporting

counterparty for the swap must report to the swap data repository

either all life cycle event data for the swap or all state data for the

swap, within the applicable deadline set forth in paragraphs (d)(1)(i)

or (ii) of this section.

(i) If the reporting counterparty is a swap dealer or major swap

participant:

(A) Life cycle event data must be reported on the same day that any

life cycle event occurs, with the sole exception that life cycle event

data relating to a corporate event of the non-reporting counterparty

must be reported no later than the second business day after the day on

which such event occurs.

(B) State data must be reported daily.

(ii) If the reporting counterparty is a non-SD/MSP counterparty:

(A) Life cycle event data must be reported no later than the end of

the first business day following the date of any life cycle event; with

the sole exception that life cycle event data relating to a corporate

event of the non-reporting counterparty must be reported no later than

the end of the second business day following such event.

[[Page 52575]]

(B) State data must be reported daily.

(2) Valuation data reporting. Valuation data for the swap must be

reported by the reporting counterparty for the swap as follows:

(i) If the reporting counterparty is a swap dealer or major swap

participant, the reporting counterparty must report all valuation data

for the swap, daily.

(ii) If the reporting counterparty is a non-SD/MSP counterparty,

the reporting counterparty must report the current daily mark of the

transaction as of the last day of each fiscal quarter. This report must

be transmitted to the swap data repository within 30 calendar days of

the end of each fiscal quarter. If a daily mark of the transaction is

not available for the swap, the reporting counterparty satisfies this

requirement by reporting the current valuation of the swap recorded on

its books in accordance with applicable accounting standards.

0

5. Revise Sec. 45.5 to read as follows:

Sec. 45.5 Unique swap identifiers.

Each swap subject to the jurisdiction of the Commission shall be

identified in all recordkeeping and all swap data reporting pursuant to

this part by the use of a unique swap identifier, which shall be

created, transmitted, and used for each swap as provided in paragraphs

(a) through (f) of this section.

(a) Swaps executed on or pursuant to the rules of a swap execution

facility or designated contract market. For each swap executed on or

pursuant to the rules of a swap execution facility or designated

contract market, the swap execution facility or designated contract

market shall create and transmit a unique swap identifier as provided

in paragraphs (a)(1) and (2) of this section.

(1) Creation. The swap execution facility or designated contract

market shall generate and assign a unique swap identifier at, or as

soon as technologically practicable following, the time of execution of

the swap, and prior to the reporting of required swap creation data.

The unique swap identifier shall consist of a single data field that

contains two components:

(i) The unique alphanumeric code assigned to the swap execution

facility or designated contract market by the Commission for the

purpose of identifying the swap execution facility or designated

contract market with respect to unique swap identifier creation; and

(ii) An alphanumeric code generated and assigned to that swap by

the automated systems of the swap execution facility or designated

contract market, which shall be unique with respect to all such codes

generated and assigned by that swap execution facility or designated

contract market.

(2) Transmission. The swap execution facility or designated

contract market shall transmit the unique swap identifier

electronically as follows:

(i) To the swap data repository to which the swap execution

facility or designated contract market reports required swap creation

data for the swap, as part of that report;

(ii) To each counterparty to the swap, as soon as technologically

practicable after execution of the swap;

(iii) To the derivatives clearing organization, if any, to which

the swap is submitted for clearing, as part of the required swap

creation data transmitted to the derivatives clearing organization for

clearing purposes.

(b) Off-facility swaps with a swap dealer or major swap participant

reporting counterparty. For each off-facility swap where the reporting

counterparty is a swap dealer or major swap participant, the reporting

counterparty shall create and transmit a unique swap identifier as

provided in paragraphs (b)(1) and (2) of this section.

(1) Creation. The reporting counterparty shall generate and assign

a unique swap identifier as soon as technologically practicable after

execution of the swap and prior to both the reporting of required swap

creation data and the transmission of data to a derivatives clearing

organization if the swap is to be cleared. The unique swap identifier

shall consist of a single data field that contains two components:

(i) The unique alphanumeric code assigned to the swap dealer or

major swap participant by the Commission at the time of its

registration as such, for the purpose of identifying the swap dealer or

major swap participant with respect to unique swap identifier creation;

and

(ii) An alphanumeric code generated and assigned to that swap by

the automated systems of the swap dealer or major swap participant,

which shall be unique with respect to all such codes generated and

assigned by that swap dealer or major swap participant.

(2) Transmission. The reporting counterparty shall transmit the

unique swap identifier electronically as follows:

(i) To the swap data repository to which the reporting counterparty

reports required swap creation data for the swap, as part of that

report;

(ii) To the non-reporting counterparty to the swap, as soon as

technologically practicable after execution of the swap; and

(iii) To the derivatives clearing organization, if any, to which

the swap is submitted for clearing, as part of the required swap

creation data transmitted to the derivatives clearing organization for

clearing purposes.

(c) Off-facility swaps with a non-SD/MSP reporting counterparty.

For each off-facility swap for which the reporting counterparty is a

non-SD/MSP counterparty, the swap data repository to which primary

economic terms data is reported shall create and transmit a unique swap

identifier as provided in paragraphs (c)(1) and (2) of this section.

(1) Creation. The swap data repository shall generate and assign a

unique swap identifier as soon as technologically practicable following

receipt of the first report of required swap creation data concerning

the swap. The unique swap identifier shall consist of a single data

field that contains two components:

(i) The unique alphanumeric code assigned to the swap data

repository by the Commission at the time of its registration as such,

for the purpose of identifying the swap data repository with respect to

unique swap identifier creation; and

(ii) An alphanumeric code generated and assigned to that swap by

the automated systems of the swap data repository, which shall be

unique with respect to all such codes generated and assigned by that

swap data repository.

(2) Transmission. The swap data repository shall transmit the

unique swap identifier electronically as follows:

(i) To the counterparties to the swap, as soon as technologically

practicable following creation of the unique swap identifier; and

(ii) To the derivatives clearing organization, if any, to which the

swap is submitted for clearing, as soon as technologically practicable

following creation of the unique swap identifier.

(d) Clearing swaps. For each clearing swap, the derivatives

clearing organization that is a counterparty to such swap shall create

and transmit a unique swap identifier as provided in paragraphs (d)(1)

and (2) of this section.

(1) Creation. The derivatives clearing organization shall generate

and assign a unique swap identifier upon, or as soon as technologically

practicable after, acceptance of an original swap by the derivatives

clearing organization for clearing or execution of a clearing swap that

does not replace an original swap, and prior to the reporting of

required swap creation data for the clearing swap. The unique swap

identifier shall consist of a single data field that contains two

components:

(i) The unique alphanumeric code assigned to the derivatives

clearing organization by the Commission for the purpose of identifying

the derivatives

[[Page 52576]]

clearing organization with respect to unique swap identifier creation;

and

(ii) An alphanumeric code generated and assigned to that clearing

swap by the automated systems of the derivatives clearing organization,

which shall be unique with respect to all such codes generated and

assigned by that derivatives clearing organization.

(2) Transmission. The derivatives clearing organization shall

transmit the unique swap identifier electronically as follows:

(i) To the swap data repository to which the derivatives clearing

organization reports required swap creation data for the clearing swap,

as part of that report; and

(ii) To its counterparty to the clearing swap, as soon as

technologically practicable after acceptance of a swap by the

derivatives clearing organization for clearing or execution of a

clearing swap that does not replace an original swap.

(e) Allocations. For swaps involving allocation, unique swap

identifiers shall be created and transmitted as follows.

(1) Initial swap between reporting counterparty and agent. The

unique swap identifier for the initial swap transaction between the

reporting counterparty and the agent shall be created as required by

paragraphs (a) through (c) of this section, and shall be transmitted as

follows:

(i) If the unique swap identifier is created by a swap execution

facility or designated contract market, the swap execution facility or

designated contract market must include the unique swap identifier in

its swap creation data report to the swap data repository, and must

transmit the unique identifier to the reporting counterparty and to the

agent.

(ii) If the unique swap identifier is created by the reporting

counterparty, the reporting counterparty must include the unique swap

identifier in its swap creation data report to the swap data

repository, and must transmit the unique identifier to the agent.

(2) Post-allocation swaps. The reporting counterparty must create a

unique swap identifier for each of the individual swaps resulting from

allocation, as soon as technologically practicable after it is informed

by the agent of the identities of its actual counterparties, and must

transmit each such unique swap identifier to:

(i) The non-reporting counterparty for the swap in question.

(ii) The agent.

(iii) The derivatives clearing organization, if any, to which the

swap is submitted for clearing, as part of the required swap creation

data transmitted to the derivatives clearing organization for clearing

purposes.

(f) Use. Each registered entity or swap counterparty subject to the

jurisdiction of the Commission shall include the unique swap identifier

for a swap in all of its records and all of its swap data reporting

concerning that swap, from the time it creates or receives the unique

swap identifier as provided in this section, throughout the existence

of the swap and for as long as any records are required by the CEA or

Commission regulations to be kept by that registered entity or

counterparty concerning the swap, regardless of any life cycle events

or any changes to state data concerning the swap, including, without

limitation, any changes with respect to the counterparties to or the

ownership of the swap. This requirement shall not prohibit the use by a

registered entity or swap counterparty in its own records of any

additional identifier or identifiers internally generated by the

automated systems of the registered entity or swap counterparty, or the

reporting to a swap data repository, the Commission, or another

regulator of such internally generated identifiers in addition to the

reporting of the unique swap identifier.

0

6. Revise Sec. 45.8 to read as follows:

Sec. 45.8 Determination of which counterparty must report.

The determination of which counterparty is the reporting

counterparty for all swaps, except clearing swaps, shall be made as

provided in paragraphs (a) through (h) of this section. The

determination of which counterparty is the reporting counterparty for

all clearing swaps shall be made as provided in paragraph (i) of this

section.

(a) If only one counterparty is a swap dealer, the swap dealer

shall be the reporting counterparty.

(b) If neither counterparty is a swap dealer, and only one

counterparty is a major swap participant, the major swap participant

shall be the reporting counterparty.

(c) If both counterparties are non-SD/MSP counterparties, and only

one counterparty is a financial entity as defined in CEA section

2(h)(7)(C), the counterparty that is a financial entity shall be the

reporting counterparty.

(d) If both counterparties are swap dealers, or both counterparties

are major swap participants, or both counterparties are non-SD/MSP

counterparties that are financial entities as defined in CEA section

2(h)(7)(C), or both counterparties are non-SD/MSP counterparties and

neither counterparty is a financial entity as defined in CEA section

2(h)(7)(C):

(1) For a swap executed on or pursuant to the rules of a swap

execution facility or designated contract market, the counterparties

shall agree which counterparty shall be the reporting counterparty.

(2) For an off-facility swap, the counterparties shall agree as one

term of their swap which counterparty shall be the reporting

counterparty.

(e) Notwithstanding the provisions of paragraphs (a) through (d) of

this section, if both counterparties to a swap are non-SD/MSP

counterparties and only one counterparty is a U.S. person, that

counterparty shall be the reporting counterparty.

(f) Notwithstanding the provisions of paragraphs (a) through (e) of

this section, if neither counterparty to a swap is a U.S. person, but

the swap is executed on or pursuant to the rules of a swap execution

facility or designated contract market or otherwise executed in the

United States, or is cleared by a derivatives clearing organization:

(1) For such a swap executed on or pursuant to the rules of a swap

execution facility or designated contract market, the counterparties

shall agree which counterparty shall be the reporting counterparty.

(2) For an off-facility swap, the counterparties shall agree as one

term of their swap which counterparty shall be the reporting

counterparty.

(g) If a reporting counterparty selected pursuant to paragraphs (a)

through (f) of this section ceases to be a counterparty to a swap due

to an assignment or novation, the reporting counterparty for reporting

of required swap continuation data following the assignment or novation

shall be selected from the two current counterparties as provided in

paragraphs (g)(1) through (4) of this section.

(1) If only one counterparty is a swap dealer, the swap dealer

shall be the reporting counterparty and shall fulfill all counterparty

reporting obligations.

(2) If neither counterparty is a swap dealer, and only one

counterparty is a major swap participant, the major swap participant

shall be the reporting counterparty and shall fulfill all counterparty

reporting obligations.

(3) If both counterparties are non-SD/MSP counterparties, and only

one counterparty is a U.S. person, that counterparty shall be the

reporting counterparty and shall fulfill all counterparty reporting

obligations.

(4) In all other cases, the counterparty that replaced the previous

reporting counterparty by reason of the assignment or novation shall be

the reporting counterparty, unless otherwise agreed by the

counterparties.

[[Page 52577]]

(h) For all swaps executed on or pursuant to the rules of a swap

execution facility or designated contract market, the rules of the swap

execution facility or designated contract market must require each swap

counterparty to provide sufficient information to the swap execution

facility or designated contract market to enable the swap execution

facility or designated contract market to report all swap creation data

as provided in this part.

(1) To achieve this, the rules of the swap execution facility or

designated contract market must require each market participant placing

an order with respect to any swap traded on the swap execution facility

or designated contract market to include in the order, without

limitation:

(i) The legal entity identifier of the market participant placing

the order.

(ii) A yes/no indication of whether the market participant is a

swap dealer with respect to the product with respect to which the order

is placed.

(iii) A yes/no indication of whether the market participant is a

major swap participant with respect to the product with respect to

which the order is placed.

(iv) A yes/no indication of whether the market participant is a

financial entity as defined in CEA section 2(h)(7)(C).

(v) A yes/no indication of whether the market participant is a U.S.

person.

(vi) If applicable, an indication that the market participant will

elect an exception to, or an exemption from, the clearing requirement

under part 50 of this chapter for any swap resulting from the order.

(vii) If the swap will be allocated:

(A) An indication that the swap will be allocated.

(B) The legal entity identifier of the agent.

(C) An indication of whether the swap is a post-allocation swap.

(D) If the swap is a post-allocation swap, the unique swap

identifier of the initial swap transaction between the reporting

counterparty and the agent.

(2) To achieve this, the swap execution facility or designated

contract market must use the information obtained pursuant to paragraph

(h)(1) of this section to identify the counterparty that is the

reporting counterparty pursuant to the CEA and this section.

(i) Clearing swaps. Notwithstanding the provisions of paragraphs

(a) through (h) of this section, if the swap is a clearing swap, the

derivatives clearing organization that is a counterparty to such swap

shall be the reporting counterparty and shall fulfill all reporting

counterparty obligations for such swap.

0

7. Revise Sec. 45.10 to read as follows:

Sec. 45.10 Reporting to a single swap data repository.

All swap data for a given swap, which shall include all swap data

required to be reported pursuant to parts 43 and 45 of this chapter,

must be reported to a single swap data repository, which shall be the

swap data repository to which the first report of required swap

creation data is made pursuant to this part.

(a) Swaps executed on or pursuant to the rules of a swap execution

facility or designated contract market. To ensure that all swap data,

including all swap data required to be reported pursuant to parts 43

and 45 of this chapter, for a swap executed on or pursuant to the rules

of a swap execution facility or designated contract market is reported

to a single swap data repository:

(1) The swap execution facility or designated contract market that

reports required swap creation data as required by Sec. 45.3 shall

report all such data to a single swap data repository. As soon as

technologically practicable after execution, the swap execution

facility or designated contract market shall transmit to both

counterparties to the swap, and to the derivatives clearing

organization, if any, that will clear the swap, both:

(i) The identity of the swap data repository to which required swap

creation data is reported by the swap execution facility or designated

contract market; and

(ii) The unique swap identifier for the swap, created pursuant to

Sec. 45.5.

(2) Thereafter, all required swap creation data and all required

swap continuation data reported for the swap reported by any registered

entity or counterparty shall be reported to that same swap data

repository (or to its successor in the event that it ceases to operate,

as provided in part 49 of this chapter).

(b) Off-facility swaps with a swap dealer or major swap participant

reporting counterparty. To ensure that all swap data, including all

swap data required to be reported pursuant to parts 43 and 45 of this

chapter, for off-facility swaps with a swap dealer or major swap

participant reporting counterparty is reported to a single swap data

repository:

(1) If the reporting counterparty reports primary economic terms

data to a swap data repository as required by Sec. 45.3:

(i) The reporting counterparty shall report primary economic terms

data to a single swap data repository.

(ii) As soon as technologically practicable after execution, but no

later than as required pursuant to Sec. 45.3, the reporting

counterparty shall transmit to the other counterparty to the swap both

the identity of the swap data repository to which primary economic

terms data is reported by the reporting counterparty, and the unique

swap identifier for the swap created pursuant to Sec. 45.5.

(iii) If the swap will be cleared, the reporting counterparty shall

transmit to the derivatives clearing organization at the time the swap

is submitted for clearing both the identity of the swap data repository

to which primary economic terms data is reported by the reporting

counterparty, and the unique swap identifier for the swap created

pursuant to Sec. 45.5.

(2) Thereafter, all required swap creation data and all required

swap continuation data reported for the swap, by any registered entity

or counterparty, shall be reported to the swap data repository to which

swap data has been reported pursuant to paragraph (b)(1) or (2) of this

section (or to its successor in the event that it ceases to operate, as

provided in part 49 of this chapter).

(c) Off-facility swaps with a non-SD/MSP reporting counterparty. To

ensure that all swap data, including all swap data required to be

reported pursuant to parts 43 and 45 of this chapter, for such swaps is

reported to a single swap data repository:

(1) If the reporting counterparty reports primary economic terms

data to a swap data repository as required by Sec. 45.3:

(i) The reporting counterparty shall report primary economic terms

data to a single swap data repository.

(ii) As soon as technologically practicable after execution, but no

later than as required pursuant to Sec. 45.3, the reporting

counterparty shall transmit to the other counterparty to the swap the

identity of the swap data repository to which primary economic terms

data was reported by the reporting counterparty.

(iii) If the swap will be cleared, the reporting counterparty shall

transmit to the derivatives clearing organization at the time the swap

is submitted for clearing the identity of the swap data repository to

which primary economic terms data was reported by the reporting

counterparty.

(2) The swap data repository to which the swap is reported as

provided in paragraph (c) of this section shall transmit the unique

swap identifier created pursuant to Sec. 45.5 to both counterparties

and to the derivatives clearing organization, if any, as soon as

[[Page 52578]]

technologically practicable after creation of the unique swap

identifier.

(3) Thereafter, all required swap creation data and all required

swap continuation data reported for the swap, by any registered entity

or counterparty, shall be reported to the swap data repository to which

swap data has been reported pursuant to paragraph (c)(1) of this

section (or to its successor in the event that it ceases to operate, as

provided in part 49 of this chapter).

(d) Clearing swaps. To ensure that all swap data for a given

clearing swap, and for clearing swaps that replace a particular

original swap or that are created upon execution of the same

transaction and that do not replace an original swap, is reported to a

single swap data repository:

(1) The derivatives clearing organization that is a counterparty to

such clearing swap shall report all required swap creation data for

that clearing swap to a single swap data repository. As soon as

technologically practicable after acceptance of an original swap by a

derivatives clearing organization for clearing or execution of a

clearing swap that does not replace an original swap, the derivatives

clearing organization shall transmit to the counterparty to each

clearing swap the legal entity identifier of the swap data repository

to which the derivatives clearing organization reported the required

swap creation data for that clearing swap.

(2) Thereafter, all required swap creation data and all required

swap continuation data reported for that clearing swap shall be

reported by the derivatives clearing organization to the swap data

repository to which swap data has been reported pursuant to paragraph

(d)(1) of this section (or to its successor in the event that it ceases

to operate, as provided in part 49 of this chapter).

(3) For clearing swaps that replace a particular original swap, and

for equal and opposite clearing swaps that are created upon execution

of the same transaction and that do not replace an original swap, the

derivatives clearing organization shall report all required swap

creation data and all required swap continuation data for such clearing

swaps to a single swap data repository.

0

8. Revise appendix 1 to part 45 to read as follows:

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

Exhibit A–Minimum Primary Economic Terms Data–Credit Swaps and Equity

Swaps

[Enter N/A for fields that are not applicable]

————————————————————————

Data categories and fields for all

swaps Comment

————————————————————————

Asset Class………………………. Field values: credit, equity,

FX, rates, other commodity.

The Unique Swap Identifier for the swap As provided in Sec. 45.5.

The Legal Entity Identifier of the As provided in Sec. 45.6, or

reporting counterparty. substitute identifier for a

natural person.

An indication of whether the reporting Yes/No.

counterparty is a swap dealer with

respect to the swap.

An indication of whether the reporting Yes/No.

counterparty is a major swap

participant with respect to the swap.

If the reporting counterparty is not a Yes/No.

swap dealer or a major swap

participant with respect to the swap,

an indication of whether the reporting

counterparty is a financial entity as

defined in CEA section 2(h)(7)(C).

An indication of whether the reporting Yes/No.

counterparty is a derivatives clearing

organization with respect to the swap.

An indication of whether the reporting Yes/No.

counterparty is a U.S. person.

An indication that the swap will be Yes/No.

allocated.

If the swap will be allocated, or is a As provided in Sec. 45.6, or

post-allocation swap, the Legal Entity substitute identifier for a

Identifier of the agent. natural person.

An indication that the swap is a post- Yes/No.

allocation swap.

If the swap is a post-allocation swap, As provided in Sec. 45.5.

the unique swap identifier of the

initial swap transaction between the

reporting counterparty and the agent.

The Legal Entity Identifier of the non- As provided in Sec. 45.6, or

reporting party. substitute identifier for a

natural person.

An indication of whether the non- Yes/No.

reporting counterparty is a swap

dealer with respect to the swap.

An indication of whether the non- Yes/No.

reporting counterparty is a major swap

participant with respect to the swap.

If the non-reporting counterparty is Yes/No.

not a swap dealer or a major swap

participant with respect to the swap,

an indication of whether the non-

reporting counterparty is a financial

entity as defined in CEA section

2(h)(7)(C).

An indication of whether the non- Yes/No.

reporting counterparty is a U.S.

person.

The Unique Product Identifier assigned As provided in Sec. 45.7.

to the swap.

If no Unique Product Identifier is ………………………….

available for the swap because the

swap is not sufficiently standardized,

the taxonomic description of the swap

pursuant to the CFTC-approved product

classification system.

If no CFTC-approved UPI and product ………………………….

classification system is yet

available, the internal product

identifier or product description used

by the swap data repository.

An indication that the swap is a multi- Field values: Yes, Not

asset swap. applicable.

For a multi-asset class swap, an Generally, the asset class

indication of the primary asset class. traded by the desk trading the

swap for the reporting

counterparty. Field values:

credit, equity, FX, interest

rate, other commodity.

For a multi-asset class swap, an Field values: credit, equity,

indication of the secondary asset FX, interest rate, other

class(es). commodity.

[[Page 52579]]

 

An indication that the swap is a mixed Field values: Yes, Not

swap. applicable.

For a mixed swap reported to two non- Field value: LEI of the other

dually- registered swap data SDR to which the swap is or

repositories, the identity of the will be reported.

other swap data repository (if any) to

which the swap is or will be reported.

An indication of the counterparty Field values: LEI, or

purchasing protection. substitute identifier for a

natural person.

An indication of the counterparty Field values: LEI, or

selling protection. substitute identifier for a

natural person.

Information identifying the reference The entity that is the subject

entity. of the protection being

purchased and sold in the

swap. Field values: LEI, or

substitute identifier for a

natural person.

Contract type…………………….. E.g., swap, swaption, forward,

option, basis swap, index

swap, basket swap.

Block trade indicator……………… Indication (Yes/No) of whether

the swap qualifies as a block

trade or large notional swap.

Execution timestamp……………….. The date and time of the trade,

expressed using Coordinated

Universal Time (“UTC”).

Execution venue…………………… The swap execution facility or

designated contract market on

or pursuant to the rules of

which the swap was executed.

Field values: LEI of the swap

execution facility or

designated contract market, or

“off-facility” if not so

executed.

Start date……………………….. The date on which the swap

starts or goes into effect.

Maturity, termination or end date…… The date on which the swap

expires.

The price………………………… E.g., strike price, initial

price, spread.

The notional amount, and the currency ………………………….

in which the notional amount is

expressed.

The amount and currency (or currencies) ………………………….

of any up-front payment.

Payment frequency of the reporting A description of the payment

counterparty. stream of the reporting

counterparty, e.g., coupon.

Payment frequency of the non-reporting A description of the payment

counterparty. stream of the non-reporting

counterparty, e.g., coupon.

Timestamp for submission to swap data Time and date of submission to

repository. the swap data repository,

expressed using UTC, as

recorded by an automated

system where available, or as

recorded manually where an

automated system is not

available.

Clearing indicator………………… Yes/No indication of whether

the swap will be submitted for

clearing to a derivatives

clearing organization.

Clearing venue……………………. LEI of the derivatives clearing

organization.

If the swap will not be cleared, an Yes/No.

indication of whether an exception to,

or an exemption from, the clearing

requirement has been elected with

respect to the swap under part 50 of

this chapter.

The identity of the counterparty Field values: LEI, or

electing an exception or exemption to substitute identifier for

the clearing requirement under part 50 natural person.

of this chapter.

Clearing exception or exemption type… The type of clearing exception

or exemption being claimed.

Field values: End user, Inter-

affiliate or Cooperative.

Indication of collateralization…….. Is the swap collateralized, and

if so to what extent? Field

values: Uncollateralized,

partially collateralized, one-

way collateralized, fully

collateralized.

Any other term(s) of the swap matched Use as many fields as required

or affirmed by the counterparties in to report each such term.

verifying the swap.

————————————————————————

Exhibit A–Minimum Primary Economic Terms Data–Credit Swaps and Equity

Swaps

[Enter N/A for fields that are not applicable]

————————————————————————

Additional data categories and fields

for clearing swaps Comment

————————————————————————

Clearing swap USIs………………… The USIs of each clearing swap

that replaces the original

swap that was submitted for

clearing to the DCO, other

than the USI for which the PET

data is currently being

reported (as “USI” field

above).

Original swap USI…………………. The USI of the original swap

submitted for clearing to the

DCO that is replaced by

clearing swaps.

Original swap SDR…………………. LEI of SDR to which the

original swap was reported.

Clearing member LEI……………….. LEI of Clearing member.

Clearing member client account……… Clearing member client account

number.

Origin (house or customer)…………. An indication whether the

clearing member acted as

principal for a house trade or

agent for a customer trade.

Clearing receipt timestamp…………. The date and time at which the

DCO received the original swap

for clearing, expressed using

UTC.

Clearing acceptance timestamp………. The date and time at which the

DCO accepted the original swap

for clearing, expressed using

UTC.

————————————————————————

[[Page 52580]]

Exhibit B–Minimum Primary Economic Terms Data–Foreign Exchange

Transactions (Other Than Cross-Currency Swaps)

[Enter N/A for fields that are not applicable]

————————————————————————

Data fields for all swaps Comments

————————————————————————

Asset Class………………………. Field values: credit, equity,

FX, rates, other commodity.

The Unique Swap Identifier for the swap As provided in Sec. 45.5.

The Legal Entity Identifier of the As provided in Sec. 45.6, or

reporting counterparty. substitute identifier for a

natural person.

An indication of whether the reporting Yes/No.

counterparty is a swap dealer with

respect to the swap.

An indication of whether the reporting Yes/No.

counterparty is a major swap

participant with respect to the swap.

If the reporting counterparty is not a Yes/No.

swap dealer or a major swap

participant with respect to the swap,

an indication of whether the reporting

counterparty is a financial entity as

defined in CEA section 2(h)(7)(C).

An indication of whether the reporting Yes/No.

counterparty is a derivatives clearing

organization with respect to the swap.

An indication of whether the reporting Yes/No.

counterparty is a U.S. person.

An indication that the swap will be Yes/No.

allocated.

If the swap will be allocated, or is a As provided in Sec. 45.6, or

post-allocation swap, the Legal Entity substitute identifier for a

Identifier of the agent. natural person.

An indication that the swap is a post- Yes/No.

allocation swap.

If the swap is a post-allocation swap, As provided in Sec. 45.5.

the unique swap identifier of the

initial swap transaction between the

reporting counterparty and the agent.

The Legal Entity Identifier of the non- As provided in Sec. 45.6, or

reporting party. substitute identifier for a

natural person.

An indication of whether the non- Yes/No.

reporting counterparty is a swap

dealer with respect to the swap.

An indication of whether the non- Yes/No.

reporting counterparty is a major swap

participant with respect to the swap.

If the non-reporting counterparty is Yes/No.

not a swap dealer or a major swap

participant with respect to the swap,

an indication of whether the non-

reporting counterparty is a financial

entity as defined in CEA section

2(h)(7)(C).

An indication of whether the non- Yes/No.

reporting counterparty is a U.S.

person.

The Unique Product Identifier assigned As provided in Sec. 45.7.

to the swap.

If no Unique Product Identifier is ………………………….

available for the swap because the

swap is not sufficiently standardized,

the taxonomic description of the swap

pursuant to the CFTC-approved product

classification system.

If no CFTC-approved UPI and product ………………………….

classification system is yet

available, the internal product

identifier or product description used

by the swap data repository.

An indication that the swap is a multi- Field values: Yes, Not

asset swap. applicable.

For a multi-asset class swap, an Generally, the asset class

indication of the primary asset class. traded by the desk trading the

swap for the reporting

counterparty. Field values:

credit, equity, FX, interest

rate, other commodity.

For a multi-asset class swap, an Field values: credit, equity,

indication of the secondary asset FX, interest rate, other

class(es). commodity.

An indication that the swap is a mixed Field values: Yes, Not

swap. applicable.

For a mixed swap reported to two non- Field value: LEI of the other

dually- registered swap data SDR to which the swap is or

repositories, the identity of the will be reported.

other swap data repository (if any) to

which the swap is or will be reported.

Contract type…………………….. E.g., forward, non-deliverable

forward (NDF), non-

deliverable option (NDO),

vanilla option, simple exotic

option, complex exotic option.

Block trade indicator……………… Indication (Yes/No) of whether

the swap qualifies as a block

trade or large notional swap.

Execution timestamp……………….. The date and time of the trade,

expressed using Coordinated

Universal Time (“UTC”).

Execution venue…………………… The swap execution facility or

designated contract market on

or pursuant to the rules of

which the swap was executed.

Field values: LEI of the swap

execution facility or

designated contract market, or

“off-facility” if not so

executed.

Currency 1……………………….. ISO code.

Currency 2……………………….. ISO code.

Notional amount 1…………………. For currency 1.

Notional amount 2…………………. For currency 2.

Exchange rate…………………….. Contractual rate of exchange of

the currencies.

Delivery type…………………….. Physical (deliverable) or cash

(non-deliverable).

Settlement or expiration date………. Settlement date, or for an

option the contract expiration

date.

[[Page 52581]]

 

Timestamp for submission to swap data Time and date of submission to

repository. the swap data repository,

expressed using Coordinated

Universal Time (“UTC”), as

recorded by an automated

system where available, or as

recorded manually where an

automated system is not

available.

Clearing indicator………………… Yes/No indication of whether

the swap will be submitted for

clearing to a derivatives

clearing organization.

Clearing venue……………………. LEI of the derivatives clearing

organization.

If the swap will not be cleared, an Yes/No.

exception to, or an exemption from,

the clearing requirement has been

elected with respect to the swap under

part 50 of this chapter.

The identity of the counterparty Field values: LEI, or

electing an exception or exemption to substitute identifier, for a

the clearing requirement under part 50 natural person.

of this chapter.

Clearing exception or exemption type… The type of clearing exception

or exemption being claimed.

Field values: End user, Inter-

affiliate or Cooperative.

Indication of collateralization…….. Is the trade collateralized,

and if so to what extent?

Field values:

Uncollateralized, partially

collateralized, one-way

collateralized, fully

collateralized.

Any other term(s) of the trade matched E.g., for options, premium,

or affirmed by the counterparties in premium currency, premium

verifying the trade. payment date; for non-

deliverable trades, settlement

currency, valuation (fixing)

date; indication of the

economic obligations of the

counterparties. Use as many

fields as required to report

each such term.

————————————————————————

Exhibit B–Minimum Primary Economic Terms Data–Foreign Exchange

Transactions (Other Than Cross-Currency Swaps)

[Enter N/A for fields that are not applicable]

————————————————————————

Additional data categories and fields

for clearing swaps Comment

————————————————————————

Clearing swap USIs………………… The USIs of each clearing swap

that replaces the original

swap that was submitted for

clearing to the DCO, other

than the USI for which the PET

data is currently being

reported (as “USI” field

above).

Original swap USI…………………. The USI of the original swap

submitted for clearing to the

DCO that is replaced by

clearing swaps.

Original swap SDR…………………. LEI of SDR to which the

original swap was reported.

Clearing member LEI……………….. LEI of Clearing member.

Clearing member client account……… Clearing member client account

number.

Origin (house or customer)…………. An indication whether the

clearing member acted as

principal for a house trade or

agent for a customer trade.

Clearing receipt timestamp…………. The date and time at which the

DCO received the original swap

for clearing, expressed using

UTC.

Clearing acceptance timestamp………. The date and time at which the

DCO accepted the original swap

for clearing, expressed using

UTC.

————————————————————————

Exhibit C–Minimum Primary Economic Terms Data–Interest Rate Swaps

(Including Cross-Currency Swaps)

[Enter N/A for fields that are not applicable]

————————————————————————

Data fields for all swaps Comment

————————————————————————

Asset Class………………………. Field values: credit, equity,

FX, rates, other commodity.

The Unique Swap Identifier for the swap As provided in Sec. 45.5.

The Legal Entity Identifier of the As provided in Sec. 45.6, or

reporting counterparty. substitute identifier for a

natural person.

An indication of whether the reporting Yes/No.

counterparty is a swap dealer with

respect to the swap.

An indication of whether the reporting Yes/No.

counterparty is a major swap

participant with respect to the swap.

If the reporting counterparty is not a Yes/No.

swap dealer or a major swap

participant with respect to the swap,

an indication of whether the reporting

counterparty is a financial entity as

defined in CEA section 2(h)(7)(C).

An indication of whether the reporting Yes/No.

counterparty is a derivatives clearing

organization with respect to the swap.

An indication of whether the reporting Yes/No.

counterparty is a U.S. person.

An indication that the swap will be Yes/No.

allocated.

[[Page 52582]]

 

If the swap will be allocated, or is a As provided in Sec. 45.6, or

post-allocation swap, the Legal Entity substitute identifier for a

Identifier of the agent. natural person.

An indication that the swap is a post- Yes/No.

allocation swap.

If the swap is a post-allocation swap, As provided in Sec. 45.5.

the unique swap identifier of the

initial swap transaction between the

reporting counterparty and the agent.

The Legal Entity Identifier of the non- As provided in Sec. 45.6, or

reporting counterparty. substitute identifier for a

natural person.

An indication of whether the non- Yes/No.

reporting counterparty is a swap

dealer with respect to the swap.

An indication of whether the non- Yes/No.

reporting counterparty is a major swap

participant with respect to the swap.

If the non-reporting counterparty is Yes/No.

not a swap dealer or a major swap

participant with respect to the swap,

an indication of whether the non-

reporting counterparty is a financial

entity as defined in CEA section

2(h)(7)(C).

An indication of whether the non- Yes/No.

reporting counterparty is a U.S.

person.

The Unique Product Identifier assigned As provided in Sec. 45.7.

to the swap.

If no Unique Product Identifier is

available for the swap because the

swap is not sufficiently standardized,

the taxonomic description of the swap

pursuant to the CFTC-approved product

classification system.

If no CFTC-approved UPI and product

classification system is yet

available, the internal product

identifier or product description used

by the swap data repository.

An indication that the swap is a multi- Field values: Yes, Not

asset swap. applicable.

For a multi-asset class swap, an Generally, the asset class

indication of the primary asset class. traded by the desk trading the

swap for the reporting

counterparty. Field values:

credit, equity, FX, interest

rate, other commodity.

For a multi-asset class swap, an Field values: credit, equity,

indication of the secondary asset FX, interest rate, other

class(es). commodity.

An indication that the swap is a mixed Field values: Yes, Not

swap. applicable.

For a mixed swap reported to two non- Field value: LEI of the other

dually- registered swap data SDR to which the swap is or

repositories, the identity of the will be reported.

other swap data repository (if any) to

which the swap is or will be reported.

Contract type…………………….. E.g., swap, swaption, option,

basis swap, index swap.

Block trade indicator……………… Indication (Yes/No) of whether

the swap qualifies as a block

trade or large notional swap.

Execution timestamp……………….. The date and time of the trade,

expressed using Coordinated

Universal Time (“UTC”).

Execution venue…………………… The swap execution facility or

designated contract market on

or pursuant to the rules of

which the swap was executed.

Field values: LEI of the swap

execution facility or

designated contract market, or

“off-facility” if not so

executed.

Start date……………………….. The date on which the swap

starts or goes into effect.

Maturity, termination or end date…… The date on which the swap

expires or ends.

Day count convention……………….

Notional amount (leg 1)……………. The current active notional

amount.

Notional currency (leg 1)………….. ISO code.

Notional amount (leg 2)……………. The current active notional

amount.

Notional currency (leg 2)………….. ISO code.

Payer (fixed rate)………………… Is the reporting party a fixed

rate payer? Yes/No/Not

applicable.

Payer (floating rate leg 1)………… If two floating legs, the payer

for leg 1.

Payer (floating rate leg 2)………… If two floating legs, the payer

for leg 2.

Direction………………………… For swaps: whether the

principal is paying or

receiving the fixed rate. For

float-to-float and fixed-to-

fixed swaps: indicate N/A.

For non-swap instruments and

swaptions: indicate the

instrument that was bought or

sold.

Option type………………………. E.g., put, call, straddle.

Fixed rate………………………..

Fixed rate day count fraction………. E.g., actual 360.

Floating rate payment frequency……..

Floating rate reset frequency……….

Floating rate index name/rate period… E.g., USD-Libor-BBA.

Timestamp for submission to swap data Time and date of submission to

repository. the swap data repository,

expressed using UTC, as

recorded by an automated

system where available, or as

recorded manually where an

automated system is not

available.

Clearing indicator………………… Yes/No indication of whether

the swap will be submitted for

clearing to a derivatives

clearing organization.

Clearing venue……………………. LEI of the derivatives clearing

organization.

[[Page 52583]]

 

If the swap will not be cleared, an Yes/No.

indication of whether an exception to,

or an exemption from, the clearing

requirement has been elected with

respect to the swap under part 50 of

this chapter.

The identity of the counterparty Field values: LEI, or

electing an exception or exemption to substitute identifier, for a

the clearing requirement under part 50 natural person.

of this chapter.

Clearing exception or exemption type… The type of clearing exception

or exemption being claimed.

Field values: End user, Inter-

affiliate or Cooperative.

Indication of collateralization…….. Is the swap collateralized, and

if so to what extent? Field

values: Uncollateralized,

partially collateralized, one-

way collateralized, fully

collateralized.

Any other term(s) of the swap matched E.g., early termination option

or affirmed by the counterparties in clause. Use as many fields as

verifying the swap. required to report each such

term.

————————————————————————

Exhibit C–Minimum Primary Economic Terms Data–Interest Rate Swaps

(Including Cross-Currency Swaps)

[Enter N/A for fields that are not applicable]

————————————————————————

Additional data categories and fields

for clearing swaps Comment

————————————————————————

Clearing swap USIs………………… The USIs of each clearing swap

that replaces the original

swap that was submitted for

clearing to the DCO, other

than the USI for which the PET

data is currently being

reported (as “USI” field

above).

Original swap USI…………………. The USI of the original swap

submitted for clearing to the

DCO that is replaced by

clearing swaps.

Original swap SDR…………………. LEI of SDR to which the

original swap was reported.

Clearing member LEI……………….. LEI of Clearing member.

Clearing member client acct………… Clearing member client account

number.

Origin (house or customer)…………. An indication whether the

clearing member acted as

principal for a house trade or

agent for a customer trade.

Clearing receipt timestamp…………. The date and time at which the

DCO received the original swap

for clearing, expressed using

UTC.

Clearing acceptance timestamp………. The date and time at which the

DCO accepted the original swap

for clearing, expressed using

UTC.

————————————————————————

Exhibit D–Minimum Primary Economic Terms Data–Other Commodity Swaps

[Enter N/A for fields that are not applicable]

————————————————————————

Data field for all swaps Comment

————————————————————————

Asset Class………………………. Field values: credit, equity,

FX, rates, other commodity.

The Unique Swap Identifier for the swap As provided in Sec. 45.5.

The Legal Entity Identifier of the As provided in Sec. 45.6, or

reporting counterparty. substitute identifier for a

natural person.

An indication of whether the reporting Yes/No.

counterparty is a swap dealer with

respect to the swap.

An indication of whether the reporting Yes/No.

counterparty is a major swap

participant with respect to the swap.

If the reporting counterparty is not a Yes/No.

swap dealer or a major swap

participant with respect to the swap,

an indication of whether the reporting

counterparty is a financial entity as

defined in CEA section 2(h)(7)(C).

An indication of whether the reporting Yes/No.

counterparty is a derivatives clearing

organization with respect to the swap.

An indication of whether the reporting Yes/No.

counterparty is a U.S. person.

An indication that the swap will be Yes/No.

allocated.

If the swap will be allocated, or is a As provided in Sec. 45.6, or

post-allocation swap, the Legal Entity substitute identifier for a

Identifier of the agent. natural person.

An indication that the swap is a post- Yes/No.

allocation swap.

If the swap is a post-allocation swap, As provided in Sec. 45.5.

the unique swap identifier of the

initial swap transaction between the

reporting counterparty and the agent.

The Legal Entity Identifier of the non- As provided in Sec. 45.6, or

reporting party. substitute identifier for a

natural person.

An indication of whether the non- Yes/No.

reporting counterparty is a swap

dealer with respect to the swap.

An indication of whether the non- Yes/No.

reporting counterparty is a major swap

participant with respect to the swap.

[[Page 52584]]

 

If the non-reporting counterparty is Yes/No.

not a swap dealer or a major swap

participant with respect to the swap,

an indication of whether the non-

reporting counterparty is a financial

entity as defined in CEA section

2(h)(7)(C).

An indication of whether the non- Yes/No.

reporting counterparty is a U.S.

person.

The Unique Product Identifier assigned As provided in Sec. 45.7.

to the swap.

If no Unique Product Identifier is

available for the swap because the

swap is not sufficiently standardized,

the taxonomic description of the swap

pursuant to the CFTC-approved product

classification system.

If no CFTC-approved UPI and product

classification system is yet

available, the internal product

identifier or product description used

by the swap data repository.

An indication that the swap is a multi- Field values: Yes, Not

asset swap. applicable.

For a multi-asset class swap, an Generally, the asset class

indication of the primary asset class. traded by the desk trading the

swap for the reporting

counterparty. Field values:

credit, equity, FX, interest

rate, other commodity.

For a multi-asset class swap, an Field values: credit, equity,

indication of the secondary asset FX, interest rate, other

class(es). commodity.

An indication that the swap is a mixed Field values: Yes, Not

swap. applicable.

For a mixed swap reported to two non- Field value: LEI of the other

dually- registered swap data SDR to which the swap is or

repositories, the identity of the will be reported.

other swap data repository (if any) to

which the swap is or will be reported.

Contract type…………………….. E.g., swap, swaption, option,

basis swap, index swap.

Block trade indicator……………… Indication (Yes/No) of whether

the swap qualifies as a

“block trade” or “large

notional off-facility swap”

as defined in part 43 of the

CFTC’s regulations.

Execution timestamp……………….. The date and time of the trade,

expressed using Coordinated

Universal Time (“UTC”), as

recorded by an automated

system where available, or as

recorded manually where an

automated system is not

available.

Execution venue…………………… The swap execution facility or

designated contract market on

or pursuant to the rules of

which the swap was executed.

Field values: LEI of the swap

execution facility or

designated contract market, or

“off-facility” if not so

executed.

Timestamp for submission to swap data Time and date of submission to

repository. the swap data repository,

expressed using UTC, as

recorded by an automated

system where available, or as

recorded manually where an

automated system is not

available.

Start date……………………….. The date on which the swap

commences or goes into effect

(e.g., in physical oil, the

pricing start date).

Maturity, termination, or end date….. The date on which the swap

expires or ends (e.g., in

physical oil, the pricing end

date).

Buyer……………………………. The counterparty purchasing the

product: (E.g., the payer of

the fixed price (for a swap),

or the payer of the floating

price on the underlying swap

(for a put swaption), or the

payer of the fixed price on

the underlying swap (for a

call swaption). Field values:

LEI, if available, or

substitute identifier, for a

natural person.

Seller…………………………… The counterparty offering the

product: (E.g., the payer of

the floating price (for a

swap), the payer of the fixed

price on the underlying swap

(for a put swaption), or the

payer of the floating price on

the underlying swap (for a

call swaption). Field values:

LEI, or substitute identifier,

for a natural person.

Quantity unit…………………….. The unit of measure applicable

for the quantity on the swap.

E.g., barrels, bushels,

gallons, pounds, tons.

Quantity…………………………. The amount of the commodity

(the number of quantity units)

quoted on the swap.

Quantity frequency………………… The rate at which the quantity

is quoted on the swap. E.g.,

hourly, daily, weekly,

monthly.

Total quantity……………………. The quantity of the commodity

for the entire term of the

swap.

Settlement method…………………. Physical delivery or cash.

Price……………………………. The price of the swap. For

options, the strike price.

Price unit……………………….. The unit of measure applicable

for the price of the swap.

Price currency……………………. ISO code.

Buyer pay index…………………… The published price as paid by

the buyer (if applicable). For

swaptions, applies to the

underlying swap.

Buyer pay averaging method…………. The averaging method used to

calculate the index of the

buyer pay index. For

swaptions, applies to the

underlying swap.

Seller pay index………………….. The published price as paid by

the seller (if applicable).

For swaptions, applies to the

underlying swap.

[[Page 52585]]

 

Seller pay averaging method………… The averaging method used to

calculate the index of the

seller pay index. For

swaptions, applies to the

underlying swap.

Grade……………………………. If applicable, the grade of the

commodity to be delivered,

e.g., the grade of oil or

refined product.

Option type………………………. Descriptor for the type of

option transaction. E.g., put,

call, straddle.

Option style……………………… E.g., American, European,

European Daily, European

Monthly, Asian.

Option premium……………………. The total amount paid by the

option buyer.

Hours from through………………… For electric power, the hours

of the day for which the swap

is effective.

Hours from through time zone……….. For electric power, the time

zone prevailing for the hours

during which electricity is

transmitted.

Days of week……………………… For electric power, the profile

applicable for the delivery of

power.

Load type………………………… For electric power, the load

profile for the delivery of

power.

Clearing indicator………………… Yes/No indication of whether

the swap will be submitted for

clearing to a derivatives

clearing organization.

Clearing venue……………………. LEI of the derivatives clearing

organization.

If the swap will not be cleared, an Yes/No.

indication of whether an exception to,

or an exemption from, the clearing

requirement has been elected with

respect to the swap under part 50 of

this chapter.

The identity of the counterparty Field values: LEI, or

electing an exception or exemption to substitute identifier, for a

the clearing requirement under part 50 natural person.

of this chapter.

Clearing exception or exemption type… The type of clearing exception

or exemption being claimed.

Field values: End user, Inter-

affiliate or Cooperative.

Indication of collateralization…….. Is the swap collateralized, and

if so to what extent? Field

values: Uncollateralized,

partially collateralized, one-

way collateralized, fully

collateralized.

Any other term(s) of the swap matched Use as many fields as required

or affirmed by the counterparties in to report each such term.

verifying the swap.

————————————————————————

Exhibit D–Minimum Primary Economic Terms Data–Other Commodity Swaps

[Enter N/A for fields that are not applicable]

————————————————————————

Additional data categories and fields

for clearing swaps Comment

————————————————————————

Clearing swap USIs………………… The USIs of each clearing swap

that replaces the original

swap that was submitted for

clearing to the DCO, other

than the USI for which the PET

data is currently being

reported (as “USI” field

above).

Original swap USI…………………. The USI of the original swap

submitted for clearing to the

DCO that is replaced by

clearing swaps.

Original swap SDR…………………. LEI of SDR to which the

original swap was reported.

Clearing member LEI……………….. LEI of Clearing member.

Clearing member client acct………… Clearing member client account

number.

Origin (house or customer)…………. An indication whether the

clearing member acted as

principal for a house trade or

agent for a customer trade.

Clearing receipt timestamp…………. The date and time at which the

DCO received the original swap

for clearing, expressed using

UTC.

Clearing acceptance timestamp………. The date and time at which the

DCO accepted the original swap

for clearing, expressed using

UTC.

————————————————————————

Issued in Washington, DC, on August 20, 2015, by the Commission.

Christopher J. Kirkpatrick,

Secretary of the Commission.

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

Federal Regulations.

Appendices to Amendments to Swap Data Recordkeeping and Reporting

Requirements for Cleared Swaps–Commission Voting Summary, Chairman’s

Statement, and Commissioners’ Statements

Appendix 1–Commission Voting Summary

On this matter, Chairman Massad and Commissioners Bowen and

Giancarlo voted in the affirmative. No Commissioner voted in the

negative. Commissioner Wetjen did not participate in this matter.

Appendix 2–Statement of Chairman Timothy G. Massad

One of the most important requirements of the Dodd-Frank Wall

Street Reform and Consumer Protection Act is the reporting of data

on the swaps market. In 2008 during the global financial crisis,

regulators had little information about this market or the exposures

of major institutions, but difficult policy choices still had to be

made. Today, that has changed. Today, all swap transactions, whether

cleared or uncleared, must be reported to swap data repositories

(SDRs). The availability of accurate data is allowing the CFTC to

move forward with the important work of monitoring the market and

understanding its potential risks.

While we have made great progress in this area, there is still

more we need to do to make sure that we obtain useful and timely

data as efficiently as possible. Today’s proposal is one big step

toward that end. If adopted, it will improve data quality and reduce

compliance costs, by clarifying and simplifying some requirements

and eliminating unnecessary reporting obligations.

This proposal would ensure there is a simple, consistent process

surrounding the reporting workflows for cleared swaps. For example,

the proposal would clarify the reporting obligations of the

clearinghouse where the swap is cleared. It would help ensure that

there are not multiple records of

[[Page 52586]]

a swap that can lead to erroneous double counting, and that accurate

valuations of swaps are provided on an ongoing basis. It would

eliminate unnecessary reporting requirements for swap dealers and

major swap participants. And it will improve the Commission’s

ability to trace swaps from execution through clearing.

This proposal reflects a careful consideration of the feedback

received from the CFTC’s request for comment on this regulation in

2014. It combines the best elements of those suggested by various

stakeholders concerning the reporting of cleared swaps.

I believe the proposal will help simplify compliance obligations

for market participants while improving the accuracy, quality and

usefulness of the data that is reported. This is an important part

of the ongoing process of simplifying, fine-tuning and harmonizing

our rules, and we will continue to look for ways to improve our

recordkeeping, reporting, and data quality rules and practices.

I look forward to reviewing comments to this proposal, and I

encourage all market participants to provide feedback on this

proposal.

Appendix 3–Statement of Commissioner Sharon Y. Bowen

I strongly support this proposed rulemaking because reporting is

one of the key pillars of the financial reform mandated by the Dodd-

Frank Wall Street Reform and Consumer Protection Act. The Dodd-Frank

Act was intended to stabilize our financial system after the 2008

crisis by reducing systemic risk, increasing transparency, and

promoting market integrity within the financial system. Having

accurate, comprehensive data is essential to meeting all of these

goals. Without useful data about our markets, the Commission is

unable to fully assess systemic risk and monitor market integrity.

Accurate data does not only support financial reform, accurate data

is itself a critical part of financial reform.

This proposed rulemaking represents a major step toward making

our data more accurate. With this rulemaking, we intend to provide

clarity to swap counterparties, exchanges, clearing organizations,

and swap data repositories about the part 45 reporting obligations

with respect to cleared swaps. This rulemaking is also intended to

improve the efficiency of data collection and maintenance associated

with the reporting of cleared swaps.

I have a keen interest in systemic risk and market structure

issues. I believe regulators have an obligation to do everything in

our power to gird our financial system to prevent a future financial

crisis. Nearly seven years after the 2008 financial crisis, our

economy has improved but the effects of the crisis linger. Many are

still battling long-term unemployment, underemployment, and hobbled

careers.

The Commission cannot get a perfect picture of what is happening

in our markets without accurate data. So while data collection may

not seem like the most exciting topic, in fact it is crucial. If the

devil is in the details in life, in financial regulation, the devil

is in the data.

But while I welcome this step, I realize that much more needs to

be done. Our current part 45 rules outline the broad categories of

data that the Commission needs, but market participants need much

greater clarity on, among other things, what data needs to be

submitted, how it needs to be submitted, and how data discrepancies

need to be remediated. And our swap data repositories similarly need

clarity on how to collect the data that the Commission needs to meet

its mandate. While I am heartened by the international efforts to

meet these aims, time is not on our side. The markets are active and

real-time, and we need to get the best picture of what is happening

in those markets as soon as possible.

Our amazing staff has been able to use the data that we are

currently receiving to engage in excellent market surveillance. Yet,

our staff would be able to do even more if this data was improved;

that is why I wholeheartedly support this proposal. I also hope that

the Commission makes further efforts to improve our data and

reporting regimes in the near future.

Appendix 4–Statement of Commissioner J. Christopher Giancarlo

I support the issuance of the proposed rules to amend the

cleared swaps data reporting provisions. I have been a consistent

supporter of the swap data reporting reforms in the Dodd-Frank Act

to provide regulators with increased transparency into the swaps

market. Getting the reporting rules right is critical to provide

regulators with the information they need to better understand and

oversee these highly dynamic markets.

Today’s proposal demonstrates that the Commission can revisit

Dodd-Frank rulesets and make needed adjustments based on its

implementation experience over the past few years. I urge the

Commission to take this same approach with other rulesets, including

several of its swaps trading rules, to optimize the CFTC’s swaps

regulatory framework in light of the challenges of liquidity

formation and market fragmentation that have grown since initial

implementation.

Although today’s proposal only addresses a small subset of the

issues raised in the 2014 request for comment on the Review of Swap

Data Recordkeeping and Reporting Requirements,1 it is an important

first step. I hope that the Commission tackles the other swap data

reporting issues raised in the 2014 request for comment in the near

future.

—————————————————————————

1 Review of Swap Data Recordkeeping and Reporting

Requirements, 79 FR 16689 (Mar. 26, 2014).

—————————————————————————

I commend CFTC staff, especially the Division of Market

Oversight staff, for their efforts on this proposal. I look forward

to reviewing well-considered, responsive and informative comments

from the public.

[FR Doc. 2015-21030 Filed 8-28-15; 8:45 am]

BILLING CODE 6351-01-P

 

Last Updated: August 31, 2015