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2011-18054

  • Federal Register, Volume 76 Issue 141 (Friday, July 22, 2011)[Federal Register Volume 76, Number 141 (Friday, July 22, 2011)]

    [Rules and Regulations]

    [Pages 43851-43874]

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

    [FR Doc No: 2011-18054]

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    COMMODITY FUTURES TRADING COMMISSION

    17 CFR Parts 15 and 20

    RIN 3038-AD17

    Large Trader Reporting for Physical Commodity Swaps

    AGENCY: Commodity Futures Trading Commission.

    ACTION: Final rules.

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    SUMMARY: The Commission is adopting reporting regulations (``Reporting

    Rules'') that require physical commodity swap and swaption (for ease of

    reference, collectively ``swaps'') reports. The new regulations require

    routine position reports from clearing organizations, clearing members

    and swap dealers and also apply to reportable swap trader positions.

    DATES: Effective Dates: This rulemaking shall become effective

    September 20, 2011.

    FOR FURTHER INFORMATION CONTACT: Bruce Fekrat, Senior Special Counsel,

    Office of the Director, (202) 418-5578, bfekrat@cftc.gov, or Ali

    Hosseini, Attorney-Advisor, Office of the Director, (202) 418-6144,

    ahosseini@cftc.gov, Division of Market Oversight, Commodity Futures

    Trading Commission, Three Lafayette Centre, 1155 21st Street, NW.,

    Washington, DC 20581.

    SUPPLEMENTARY INFORMATION:

    I. Background and Summary of Comments

    A. Background

    On November 2, 2010, the Commission proposed Reporting Rules that,

    in addition to establishing recordkeeping requirements, require routine

    swaps position reports from clearing organizations, clearing members

    and swap dealers and apply non-routine reporting requirements to large

    swaps traders.\1\ The Reporting Rules, as finalized and adopted herein,

    will allow the Commission to administer its regulatory responsibilities

    under the Commodity Exchange Act (``CEA or Act'') by implementing and

    conducting effective surveillance of economically equivalent physical

    commodity futures, options and swaps. The Reporting Rules will directly

    support the Commission's transparency initiatives such as its

    dissemination of Commitments of Traders and Index Investment Data

    Reports and will allow the Commission to monitor compliance with the

    trading requirements of the Act.\2\

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    \1\ 75 FR 67258, November 2, 2010. Comments and ex parte

    communications list available at http://comments.cftc.gov/PublicComments/CommentList.aspx?id=889.

    \2\ See 76 FR 4752, January 26, 2011.

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    The Commission currently receives and uses for market surveillance

    and enforcement purposes, data on large positions in all physical

    commodity futures and option contracts traded on designated contract

    markets (``DCMs''). Without the Reporting Rules, there would be no

    analogous reporting system in place for economically equivalent swaps,

    which until recently were largely unregulated financial contracts. The

    Reporting Rules, as discussed below, are reasonably necessary for the

    effective surveillance of economically equivalent futures and swaps.

    B. Proposed Reporting Rules Summary of Comments

    The Commission received approximately 130 comment letters, and

    engaged in several ex parte communications, for the proposed Reporting

    Rules. The Commission has carefully reviewed and considered the

    submitted comments. Substantive comments pertinent to specific

    provisions in the rulemaking are summarized and discussed below and in

    other sections of this notice.

    The National Futures Association (``NFA'') submitted a comment \3\

    suggesting that its issuance of trader identifications should be a part

    of the position reporting process. Although beyond the scope of this

    rulemaking as proposed, the Commission may review the feasibility of

    adopting such an approach as a part of its ongoing updating and

    revision of other transaction and position reporting requirements.

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    \3\ Letter from Thomas W. Sexton, Senior Vice President and

    General Counsel, NFA, to David A. Stawick, Secretary, CFTC (December

    2, 2010).

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    The Air Transport Association (``ATA''), Better Markets Inc.

    (``Better Markets''), the Petroleum Marketers Association of America

    (``PMAA'') and New England Fuel Institute (``NEFI''), and Robert Pollin

    and James Heintz of the Political Economy Research Institute

    [[Page 43852]]

    (``PERI'') indicated support for the proposed regulations.\4\ ATA

    supported the proposal as a practical solution to the Commission's

    current lack of swaps position data. Better Markets stated its support

    for the use of futures equivalence and the assembly of data based on

    price relationships. PMAA and NEFI argued the regulations will provide

    for a solid foundation for position limits.

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    \4\ Letter from David A. Berg, Vice President and General

    Counsel, ATA, to David A. Stawick, Secretary, CFTC (December 2,

    2010); letter from Dennis M. Kelleher, President & CEO, and Wallace

    C. Turbeville, Derivatives Specialist, Better Markets Inc., to David

    A. Stawick, Secretary, CFTC (December 2, 2010); letter from Dan

    Gilligan, President, PMAA, and Shane Sweet, President & CEO, NEFI,

    to David A. Stawick, Secretary, CFTC (December 2, 2010); and letter

    from Robert Pollin, Professor of Economics and Co-Director, and

    James Heintz, Associate Research Professor and Associate Director,

    PERI, to David A. Stawick, Secretary, CFTC (December 2, 2010).

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    Bindicap Comster, the Futures Industry Association (``FIA'') and a

    working group of commercial energy firms (``Working Group''),

    meanwhile, opposed the proposed regulations,\5\ arguing that an

    expanded special call reporting mechanism, similar to the special call

    that the Commission has issued to support its Index Investment Data and

    Commitments of Traders Reports, would be a better alternative to the

    proposed regulations while remaining consistent with the requirements

    of the Act.\6\ The Commission notes that its current special call for

    Index Investment Data Reports is a targeted collection of data. It

    gathers information related to specific products from a limited set of

    market participants. The special call was not intended to function as a

    tool for general market surveillance, including compliance with section

    4a of the Act. In order to be able to gather data of the quality needed

    to conduct market surveillance the special call would have to undergo

    substantial modifications, such as requiring much more granular data by

    counterparty in a data stream on or close to a next-day basis, which in

    effect would convert it into the Reporting Rules.

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    \5\ Letter from Bindicap Comster to David A. Stawick, Secretary,

    CFTC (December 2, 2010); letter from John M. Damgard, President,

    FIA, to David A. Stawick, Secretary, CFTC (December 2, 2010); and

    letter from R. Michael Sweeney Jr., David T. McIndoe, and Mark W.

    Menezes, Counsel for the Working Group, to David A. Stawick,

    Secretary, CFTC (December 2, 2010).

    \6\ The Commission conducts its current special call pursuant to

    Commission regulation 18.05. Swap dealers and index traders that

    receive a special call file monthly reports with the Commission

    within five business days after the end of the month.

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    FIA and the Working Group also questioned whether the Commission

    has sufficient authority to adopt such regulations. FIA argued that the

    Commission's authority is not clear because of the CEA section 2(h)

    reporting exemption for swaps on exempt commodities. The Working Group

    argued that the proposal is not required by the Dodd-Frank Act and that

    it is not necessary to comply with CEA section 4a(a)(1). The Commission

    has requisite statutory authority for the Reporting Rules based on CEA

    sections 4a, 4t and 8a(5). Specifically, section 4a of the CEA, as

    amended by the Dodd-Frank Act, directs the Commission to establish

    position limits, as appropriate, for physical commodity swaps.\7\

    Section 737 of the Dodd-Frank Act, which amended section 4a to direct

    the Commission to impose these limits, became effective on the date of

    enactment of the Dodd-Frank Act--i.e., July 21, 2010. Section 8a(5) of

    the CEA authorizes the Commission to promulgate such regulations as, in

    the judgment of the Commission, are reasonably necessary to effectuate

    any of the provisions or to accomplish any of the purposes of the CEA.

    In the Commission's judgment, the Reporting Rules are reasonably

    necessary to implement the statutory mandate in section 4a for the

    Commission to establish position limits, as appropriate, on an

    expedited basis.

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    \7\ Section 754 of the Dodd-Frank Act provides that, unless

    otherwise provided, the provisions of subtitle A of Title VII

    ``shall take effect on the later of 360 days after the date of the

    enactment of this subtitle or, to the extent a provision of this

    subtitle requires a rulemaking, not less than 60 days after

    publication of the final rule or regulation implementing such

    provisions of this subtitle.'' CEA section 4a, as amended by Dodd-

    Frank section 737, requires the Commission to establish position

    limits for exempt commodities within 180 days after the date of

    enactment, and position limits for agricultural commodities within

    270 days after the date of enactment. The Commission is proceeding

    deliberatively to meet this Congressional mandate. As previously

    noted, on November 2, 2010, the Commission proposed these Reporting

    Rules, and on January 26, 2011, the Commission proposed position

    limits, including aggregate limits, for 28 major physical commodity

    DCM contracts and economically equivalent swaps.

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    In addition, section 4t of the Act authorizes the Commission to

    establish a large trader reporting system for significant price

    discovery function swaps, of which economically equivalent swaps are a

    subset. Swaps position reports are a necessary component of an

    effective surveillance program. Accordingly, the Commission is adopting

    the subject swap reporting requirements pursuant to its authority in

    sections 4a and 4t of the CEA, as described above.

    With regard to the future establishment of swap data repositories

    (``SDRs'') and whether the Commission should wait for SDRs to provide

    swaps position data instead of adopting the regulations, ATA argued

    that the Commission should proceed with the regulations and not wait

    for SDRs to become operational. FIA and the Working Group, on the other

    hand, argued that the future role of SDRs makes adoption of the

    regulations unnecessary. The Commission has determined that the

    Reporting Rules are reasonably necessary for several reasons. It is

    likely that physical commodity SDRs will require the most time to

    become operational since, unlike for swaps in the interest rate, equity

    and credit default asset categories, there currently is no functional

    and accepted data repository for swaps in the energy, metal or

    agricultural commodity asset categories. In addition, even after SDRs

    have been established, because they are fundamentally transaction

    repositories, it may be a considerable time before SDRs are able to

    reliably convert transaction data into positional data. Thus, in view

    of the considerable time before physical commodity swap SDRs are likely

    to be operational and have the ability to convert transactions to

    positions, the Commission has determined to adopt the Reporting Rules.

    In order to address concerns raised about the possibility of redundant

    regulatory obligations, however, the Reporting Rules do include, in

    final regulation 20.9, a sunset provision.

    Better Markets, FIA and the Working Group, as well as a not-for-

    profit electric end-user coalition (``Electric End User

    Coalition''),\8\ argued that the proposed regulations should not be

    adopted by the Commission until regulations defining the terms ``swap

    dealer'' and ``swap'' are adopted first. As further explained below,

    the Commission has determined to tie the compliance date of the

    regulations for swap dealers that are not clearing members to the

    effective date of the ``swap dealer'' definition final rulemaking.\9\

    With regard to the ``swap'' definition, the Commission has determined

    to utilize, on a transitional basis and until final definitional

    regulations become effective, a definition of ``swap'' that is based on

    the

    [[Page 43853]]

    reference to ``commodity swap'' within the definition of ``swap

    agreement'' in part 35 of the Commission's regulations. Swap market

    participants have relied on the definition of ``swap agreement'' for

    exempting transactions from the CEA since 1993. As a result, market

    participants have an understanding of the general nature of the

    definition of commodity swap. The swaps that would be subject to the

    Reporting Rules would be the same under both definitions.

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    \8\ Letter from Russell Wasson, Director, Tax, Finance and

    Accounting Policy, National Rural Electric Cooperative Association,

    Susan N. Kelly, Senior Vice President of Policy Analysis and General

    Counsel, American Public Power Association, and Noreen Roche-Carter,

    Chair, Tax & Finance Task Force, Large Public Power Council, to

    David A. Stawick, Secretary, CFTC (December 2, 2010).

    \9\ Further Definition of ``Swap Dealer,'' ``Security-Based Swap

    Dealer,'' ``Major Swap Participant,'' ``Major Security-Based Swap

    Participant'' and ``Eligible Contract Participant,'' 75 FR 80174,

    December 21, 2010.

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    With regard to the definition of ``reporting entity,'' FIA and the

    Working Group argued that it is overly broad. Bindicap Comster argued

    that the definition is appropriate. In the Commission's judgment, the

    Reporting Rules have been narrowly tailored to obtain the information

    reasonably necessary from clearing organizations, clearing members and

    swap dealers in order to implement and conduct an effective initial

    surveillance program for swaps.

    With regard to the proposed definition of ``paired swaps,'' the

    Working Group argued that it would not always appropriately capture the

    concept of economic equivalence because, for example, different

    delivery locations may have periods of high correlation followed by

    periods where such correlations break down. Better Markets argued that

    it was too narrow because it did not consider criteria such as market

    hedging practices, margin netting offered by clearing organizations or

    historical price correlation. The proposed regulations identified three

    categories of swaps that would be economically equivalent to DCM

    contracts and thereby subject to reporting under the proposed rules:

    (1) Swaps directly or indirectly linked to the price of a referenced

    DCM contract; (2) swaps directly or indirectly linked to the price of

    the same commodity for delivery at the same location as that of a

    referenced DCM contract; and (3) swaps based on the same commodity as

    that of a referenced DCM contract which are deliverable at different

    locations that nonetheless have the same supply and demand fundamentals

    as the referenced DCM contract's delivery point. The first two

    categories of the definition of economically equivalent swaps are

    appropriately tailored and objectively defined, do not require case by

    case Commission analysis, and would provide sufficient data for the

    Commission to meet its responsibility under sections 4a and 4t of the

    Act. To further the objectives of clear applicability of the

    regulations and the submission of accurate reports, as well as to lower

    the burden on reporting entities by limiting the set of reportable

    swaps, the Commission has amended the definition to remove the third

    category.

    With regard to the reporting mechanics and data fields of the

    proposed regulations, Better Markets suggested additional reporting

    fields, arguing that reporting entities should be required to specify

    their role with respect to the execution of reported trades and that

    clearing organizations should be required to report net position

    information as well as gross positions and delta values. The Commission

    has determined that the data fields specified in the regulations will

    provide the Commission with sufficient data to begin its initial

    surveillance of the swaps markets for physical commodities, while

    minimizing the burden on reporting entities. Such identification data,

    including trader categorization, will be collected in 102S and 40S

    filings which include other trader identifying information and are

    submitted to the Commission much less frequently than positional data.

    The Commission can later broaden the scope of the reporting

    requirements or frequency of reporting identifying data if necessary

    based on its administrative experience.

    The final Reporting Rules do, however, harmonize the data fields

    required to be reported by swap dealers for cleared and non-cleared

    swaptions. As proposed, certain fields were required for cleared

    swaptions that were not required for non-cleared swaptions and vice-

    versa. Although certain data fields may be more relevant for cleared or

    non-cleared swaptions, the harmonization of required data fields will

    simplify the reporting of swaptions and thereby will likely decrease

    (and not increase) any burden associated with reporting swaptions under

    the Reporting Rules as finalized.

    FIA argued that reporting entities' trade capture systems are not

    readily adaptable to the data fields specified in the proposed

    regulations. It also argued that data for cleared swaps should only be

    submitted by clearing members in order to prevent double counting. The

    reporting of cleared positions by swap dealers and clearing members was

    intentionally incorporated into the regulations. As with the collection

    of any data, there is a need to verify submitted information.

    FIA also argued that reporting entities, because certain

    counterparty data may not be available to them or organized as

    described by the Reporting Rules, should only be required to report

    their positions and the names of counterparties, not all the specified

    data related to consolidated accounts in the proposed regulations.

    The Commission has amended the proposed regulations, which

    initially required a reporting entity to identify information about the

    controller of a reportable account, to partially address this concern

    by requiring that data be provided by a clearing member's or swap

    dealer's direct legal counterparty. Data is no longer required to be

    provided by account controller. In addition, the final Reporting Rules

    do not require reporting by actual swap and swaption accounts. All of

    these amendments will serve to streamline the reporting process while

    preserving the Commission's regulatory interests.

    With regard to the reporting threshold of futures equivalent

    contracts for economically equivalent swaps, Better Markets suggested

    that the threshold reporting level should be 25 contracts instead of

    the 50-contract threshold specified in the proposed regulations.

    Bindicap Comster stated that the threshold reporting level of 50

    contracts is generally suitable while the FIA stated that the threshold

    reporting level for a particular swap should depend upon its liquidity.

    The Commission determined the 50-contract threshold for reporting

    based on industry inquiries regarding a reporting level that would make

    95% of the economically equivalent swaps markets visible to the

    Commission. In order to streamline reporting and give reporting

    entities the option of avoiding a complex reporting level calculation,

    however, the final Reporting Rules allow reporting entities to deem a

    reporting level of one or more swaps to be a reportable position. Thus

    the final Reporting Rules allow reporting entities the option of not

    conducting any potentially complex or costly reporting threshold

    analysis prior to transmitting reports to the Commission.

    The Commission is aware that a reporting level of one contract

    could potentially expand the Reporting Rules' books and records

    obligations to additional swap market participants. Therefore, final

    regulation 20.6 applies a books and records requirement to swap

    counterparties only if such persons' swaps positions meet or exceed a

    simplified 50 futures contract equivalent reporting level. Also, final

    regulation 20.6 provides that persons with swaps positions meeting or

    exceeding the aforementioned threshold may keep and reproduce books and

    records for transactions resulting in such swaps positions in the

    record retention format that such person has developed in the normal

    course of business. Regulation 20.6 also provides

    [[Page 43854]]

    that such persons may keep and reproduce books and records for, among

    other things, the cash commodity underlying such swaps positions in

    accordance with the record retention format developed in the normal

    course of business.

    In connection with the submission of swaps position data, FIA

    expressed concern about the confidential treatment of data submitted

    should the Commission determine to require the submission of data to

    third parties. This concern is not relevant as the regulations only

    involve the submission of position and identifying data to the

    Commission. The Commission will protect proprietary information

    according to the Freedom of Information Act and 17 CFR part 145,

    ``Commission Records and Information.'' In addition, section 8(a)(1) of

    the Act strictly prohibits the Commission, unless specifically

    authorized by the Act, from making public ``data and information that

    would separately disclose the business transactions or market positions

    of any person and trade secrets or names of customers.'' The Commission

    also is required to protect certain information contained in a

    government system of records according to the Privacy Act of 1974, 5

    U.S.C. 552a.

    FIA and the Working Group argued that the costs placed by the

    proposed regulations would be significant and that the Commission

    significantly underestimated the costs to clearing members and swap

    dealers. FIA stated that some of its members believe the costs to be

    very substantial and in some cases exceeding millions of dollars, while

    acknowledging that it is difficult to estimate costs with any

    precision. The Working Group stated that some of its members estimate

    the total compliance costs to range up to $80,000 to $750,000 per year,

    inclusive of capital costs, and that the upfront costs could be as high

    as $1.5 million. The Commission has carefully considered the costs on

    market participants. In response, the Commission notes that the

    Reporting Rules are tailored to collect routine reports only from

    clearing organizations, clearing members, and swap dealers. Based on

    discussions with potential reporting entities, the Commission has

    determined that the costs that would be imposed by the regulations on

    reporting entities is reasonable given the trade capture and

    information technology resources of such entities and their familiarity

    with limiting and managing complex price risks. Clearing organizations

    and clearing members should have appropriate systems in place and

    currently likely provide or collect market and large trader reports.

    The compliance date for swap dealers that are not clearing members

    will be delayed until the Commission further defines the term swap

    dealer. In order to address concerns relating to the ability of

    reporting entities to comply with the requirements of part 20 by the

    compliance date set forth in final regulation 20.10(a), final

    regulation 20.10(c) authorizes the Commission (or staff members

    delegated with such authority) to permit, for a period not to exceed

    six calendar months following the effective date of the Reporting

    Rules, the submission of reports that differ in content, form, or

    manner from that mandated in part 20, provided that there is a good

    faith attempt at compliance with part 20.

    In addition, in order to address the possibility of certain firms

    that may not be able to comply expediently with the requirements of

    part 20 should they fall within the definition of swap dealer,

    regulation 20.10(e) allows the Commission to defer compliance for such

    firms for a period not to exceed six calendar months following the

    effective date of final regulations further defining the term swap

    dealer. The Commission's consideration of costs and burdens is

    discussed in more detail below.

    The Electric End User Coalition also argued that the recordkeeping

    burden imposed by the proposed regulations on commercial entities would

    be significant. In particular it argued that the recordkeeping

    requirements should not apply to end-users and that the Commission

    should defer to other regulators, specifically the Federal Energy

    Regulatory Commission (``FERC''), with regard to recordkeeping

    obligations. In the Commission's judgment, the recordkeeping

    requirements for end-users with swaps positions that meet or exceed the

    relevant thresholds are consistent with requirements under current

    Commission regulation 18.05. As described above, final regulation 20.6

    generally permits such end-users to keep and reproduce records of swaps

    positions, as well as the underlying cash commodities, in the record

    retention format that such entities have developed in the normal course

    of business.

    II. The Final Reporting Rules

    A. Covered Contracts

    With regard to the ``swap'' definition, the final part 20

    regulations utilize a definition of ``swap '' that is based on the

    reference to ``commodity swaps'' within the definition of ``swap

    agreement'' in part 35 of the Commission's regulations.\10\ Swap market

    participants have relied on the definition of ``swap agreement'' for

    exempting transactions from the CEA since 1993. As a result, market

    participants have an understanding of the general nature of the

    definition of commodity swaps. The part 35 definition will become

    effective on the effective date of this final rulemaking and will

    operate until the effective date of any swap definitional rulemaking by

    the Commission under section 1a of the CEA. Under both definitions, the

    category of the swaps that would be subject to the Reporting Rules

    remains the same.\11\ For further clarity, forwards as currently

    excluded from the CEA (i.e., prior to the effective date of the Dodd-

    Frank Act) are also outside the scope of the definition of ``swap'' as

    used in this reporting scheme.

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    \10\ 17 CFR 35.1(b)(1).

    \11\ This definition of ``swap'' is also intended to be

    generally consistent with how swaps are defined in the Commission's

    Policy Statement Concerning Swap Transactions, 54 FR 30694, July 21,

    1989. That is, a ``swap'' as used in this rulemaking refers to an

    agreement between two parties to exchange one or more cash flows

    measured by different rates or prices with payments calculated by

    reference to a principle base (notional amount).

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    Regulation 20.2 lists the 46 DCM-listed futures contracts covered

    by the Reporting Rules (``Covered Futures Contracts''), as well as an

    additional line item for diversified commodity indices.\12\ The

    Commission, through the definition of paired swap or paired swaption

    (for ease of reference, collectively ``paired swaps'') in regulation

    20.1, defines a subset of swaps as economically equivalent to the

    Covered Futures Contracts. The definition of paired swaps (i.e.,

    economically equivalent swaps) identifies two distinct categories of

    instruments.

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    \12\ For the purpose of reporting in futures equivalents, paired

    swaps and swaptions using commodity reference prices that are

    commonly known diversified indices with publicly available

    weightings may be reported as if such indices underlie a single

    futures contract with monthly expirations for each calendar month

    and year.

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    First, the definition includes those paired swaps that are directly

    or indirectly linked to the price of a Covered Futures Contract. This

    category includes swaps that are partially or fully settled or priced

    at a differential to a Covered Futures Contract. The following are

    examples of these types of paired swaps:

    1. Directly linked to a listed contract--A swap settled to the

    price of the New York Mercantile Exchange (``NYMEX'') Heating Oil

    Calendar Swap Futures Contract is directly linked to a Covered

    Futures Contract because the floating price of the futures contract

    is equal to the monthly average settlement price

    [[Page 43855]]

    of the first nearby contract month for the NYMEX New York Harbor No.

    2 Heating Oil Futures Contract.

    2. Indirectly linked to a listed contract--The ICE WTI Average

    Price Option is indirectly linked to a Covered Futures Contract

    because the floating price of the swap references the ICE WTI 1st

    Line Swap Contract which in turn is equal to the monthly average

    settlement price of the NYMEX Front Month WTI Crude Futures

    Contract.

    3. Partially settled to a listed contract--A swap settled to the

    Argus Sour Crude Index (``ASCI'') (which also underlies the Chicago

    Mercantile Exchange (``CME'') Argus WTI Formula Basis Calendar Month

    Swap Futures Contract) is partially settled to a Covered Futures

    Contract.\13\ Because the ASCI index uses both a physical cash

    market component and the NYMEX WTI Futures Contract to establish the

    level of the index, it would partially settle to a Covered Futures

    Contract and would be a paired swap under the first paragraph of the

    definition.\14\

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    \13\ The floating price of the CME futures contract is equal to

    the arithmetic average of the ASCI (1st month) outright price from

    Argus Media for each business day that the ASCI is determined during

    the contract month.

    \14\ For a description of the ASCI methodology, see, e.g.,

    http://web04.us.argusmedia.com/ArgusStaticContent//Meth/ASCI.pdf.

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    4. Priced at a differential to a listed contract--The ICE Henry

    Physical Basis LD1 Contract is priced at a differential to a Covered

    Futures Contract because the settlement price is the final

    settlement price for natural gas futures (a Covered Futures

    Contract) as reported by NYMEX for the specified month plus the

    contract price.

    The second category of swaps captured by the paired swap definition

    includes swaps that directly or indirectly link to, including being

    partially or fully settled or priced at a differential to, the price of

    the same commodity for delivery at the same location or locations as

    that of a Covered Futures Contract. As opposed to the first category of

    paired swaps, the second category looks to a swap's connection to the

    commodity underlying a Covered Futures Contract, and to the delivery

    locations specified in a Covered Futures Contract, as opposed to the

    price of the contract itself. Therefore, the linkage for contracts in

    this second category is to the price of the underlying commodity and

    its physical marketing channels.

    As proposed, a paired swap would have also included swaps that are

    based on the same commodity \15\ as that of a Covered Futures Contract

    but deliverable at locations that are different than a Covered Futures

    Contract's delivery locations, so long as such locations have

    substantially the same supply and demand fundamentals as that of a

    Covered Futures Contract reference delivery location. In response to

    comments, the Commission has determined not to include this proposed

    category in the final definition of paired swaps. The final definition

    thereby narrows the scope of the swaps that are subject to position

    reporting.

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    \15\ A commodity is considered to be the same (for the purposes

    of reporting under these regulations) if such commodity has the same

    economic characteristics with respect to grade and quality

    specifications as those referenced by a Covered Futures Contract.

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    B. Reporting Under the Final Regulations

    1. Clearing Organizations

    Regulation 20.3 requires paired swap reports from clearing

    organizations. Clearing organizations are defined in regulation 20.1 as

    persons or organizations that act as a medium between clearing members

    for the purpose of clearing swaps or effecting settlements of swaps or

    swaptions. The definition is adopted as proposed and is modeled after

    the definition used in current Commission regulation 15.00 (the

    definitional section for the Commission's large trader reporting rules)

    solely for the purposes of reporting under part 20. The definition is

    intended to cover entities that qualify as clearing organizations,

    regardless of their registration status with the Commission, should for

    example there exist a mutual recognition regime. It is not meant to

    apply to financial institutions or parties to swaps that provide

    counterparties with financing, credit support, or hold collateral to

    facilitate or to ensure that payments are made under the terms of a

    paired swap.

    Pursuant to regulation 20.3, clearing organizations, for paired

    swap positions, are required to report the aggregate proprietary and

    aggregate customer accounts of each clearing member of that clearing

    organization. Regulation 20.1 defines clearing member as any person who

    is a member of, or enjoys the privilege of clearing trades in its own

    name through, a clearing organization. The paired swap positions must

    be reported to the Commission as futures equivalent positions in terms

    of a swap's related Covered Futures Contract. Appendix A to this part

    provides several examples of the methods used for converting swap

    positions into futures equivalent positions. The regulations call for

    reporting in futures equivalents because such conversions are made by

    entities that deal in swaps to effectively manage residual price risks

    by entering into Covered Futures Contracts. Reporting in futures

    equivalents provides a measure of equivalency between positions in

    paired swaps and their related Covered Futures Contracts, which allows

    for more effective market surveillance and the monitoring of trading

    across futures and swaps.

    As required under paragraphs (a) and (b) of regulation 20.3, each

    clearing organization is required to submit to the Commission a data

    record that identifies either gross long and gross short futures

    equivalent positions if the data record corresponds to a paired swap

    position, or gross long and gross short futures equivalent positions on

    a non-delta-adjusted basis if the data record corresponds to a paired

    swaption position. A data record (for the purposes of this rulemaking)

    can be thought of as a grouped subset of data elements that

    communicates a unique (non-repetitive) positional message to the

    Commission.

    Clearing organizations are required to report a data record for

    each clearing member for each reporting day, which is defined in

    regulation 20.1 as the daily period of time between a clearing

    organization or reporting entity's usual and customary last internal

    valuation of paired swaps and the next such period. In order to provide

    clearing organizations with some flexibility in determining daily

    operational cycles that would coincide with their obligation to provide

    clearing member reports on a daily basis, the proposed definition would

    permit such cycles of time to vary for different clearing

    organizations, so long as the daily period of time is consistently

    observed and the Commission is notified, upon its request, of the

    manner by which a cycle is calculated. Data records would be reported

    electronically in a manner consistent with current Commission practice.

    The positional data elements in paragraphs (a) and (b) of

    regulation 20.3 require daily reports for each aggregated proprietary

    account and each aggregated customer account, by each cleared product,

    and by each futures equivalent month. Each data record would indicate

    the commodity reference price with which each cleared product is

    associated. As defined in regulation 20.1, a commodity reference price

    is the price series used by the parties to a swap or swaption to

    determine payments made, exchanged, or accrued under the terms of that

    swap or swaption. In addition, data records for swaptions are required

    to be broken down further by expiration date, put or call indicator,

    and strike price. Appendix B to part 20 includes examples of data

    records that would be required of clearing organizations.

    In addition to reports for clearing members, clearing organizations

    are, pursuant to regulation 20.3(c), required to provide to the

    Commission, for each

    [[Page 43856]]

    futures equivalent month, end of reporting day settlement prices for

    each cleared product and deltas for every unique swaption put and call,

    expiration date, and strike price. This second daily report will allow

    the Commission to assign an appropriate weight to unadjusted positions.

    2. Reporting Entities

    Regulation 20.4 requires reporting entities to report principal

    \16\ and direct legal counterparty paired swap positions to the

    Commission when such positions become reportable. Reporting entities

    are required to follow the same procedure for determining if their

    principal or counterparty positions are reportable to the Commission.

    Regulation 20.1 identifies a reporting entity as a clearing member or a

    swap dealer as defined in section 1a of the CEA and as subject to

    definitional changes that will be made through Commission regulations

    further defining the term swap dealer. The compliance date of any

    provisions relating to swap dealers will be the effective date of a

    final swap dealer definition.\17\

    ---------------------------------------------------------------------------

    \16\ The Reporting Rules, as proposed, used the term proprietary

    to refer to principal positions in the context of reporting by

    clearing members and swap dealers.

    \17\ The Reporting Rules render a swap dealer in any paired swap

    to be a reporting entity with the responsibility to provide data on

    all reportable positions, regardless of the specific types of paired

    swaps that render the entity a statutory swap dealer under the CEA.

    ---------------------------------------------------------------------------

    Regulation 20.4 requires reporting entities to provide positional

    reports when reporting entities have principal and counterparty

    reportable paired swap positions. The final Reporting Rules amend

    regulation 20.1 to define a reportable position in two distinct ways.

    First, regulation 20.1, as proposed and finalized, defines a reportable

    position as a position, in any one futures equivalent month, comprised

    of 50 or more futures equivalent paired swaps or swaptions based on the

    same commodity. This proposed level is calibrated to capture data on a

    sufficiently large percentage of paired swap positions and was arrived

    at after consultation with multiple market participants.\18\ Once a

    paired swap position attributable to the reporting entity as principal

    or to its counterparty meets or exceeds the 50 futures equivalent

    contract threshold, all other paired swaps in the same commodity

    attributable to such trader becomes part of that trader's reportable

    position.\19\

    ---------------------------------------------------------------------------

    \18\ See http://comments.cftc.gov/PublicComments/CommentList.aspx?id=889.

    \19\ In order to verify that a reporting entity's paired swap

    positions are no longer above the threshold, the proposed definition

    of reportable position would also encompass positions in paired

    swaps held by the reporting entity on the first day after which the

    reporting entity's paired swap positions are no longer reportable.

    ---------------------------------------------------------------------------

    Alternatively the Reporting Rules, as amended and finalized, allow

    reporting entities to identify a reportable position as all positions

    on a gross basis in a consolidated account (as described in regulation

    20.4(a)) that are based on the same commodity, so long as this approach

    is consistently applied to all consolidated accounts for reporting

    purposes. This amended definition of a reportable position allows

    reporting entities to forgo the 50-contract threshold calculation,

    which may be complex or costly, prior to submitting reports to the

    Commission.

    As with reports that are required to be provided by clearing

    organizations to the Commission under regulation 20.3, regulation 20.4

    requires paired swap positions to be represented and reported in

    futures equivalents. A common method of accounting for positions in

    swaps and futures allows for more effective market surveillance. The

    data collected by the Reporting Rules could be used to determine

    aggregate open interest levels for economically equivalent derivatives.

    For example, such ``size-of-the-market'' calculations could in turn

    serve as a basis for computing non-spot-month position limits, should

    the Commission determine to adopt such limits.

    Under final regulation 20.11, for the purpose of reporting in

    futures equivalents, paired swaps and swaptions that are based on

    commonly known diversified indices with publicly available weightings

    must be reported as if such indices underlie a single futures contract

    with monthly expirations for each calendar month and year. Bespoke

    indices, however, must be decomposed into their futures equivalent

    components and reported along with a commodity reference price which

    allows the Commission to match such components to the bespoke index.

    The term commodity reference price is defined in regulation 20.1 as the

    price series (including derivatives contract and cash market prices or

    price indices) used by the parties to a swap or swaption to determine

    payments made, exchanged, or accrued under the terms of such contracts.

    To determine what to report under regulation 20.4, reporting

    entities are required to separately consider principal and counterparty

    positions on a gross basis. Reporting entities are required to provide

    for each reporting day a data record that either identifies long and

    short paired swap positions (if the record pertains to swap positions)

    or long and short non-delta-adjusted paired swaption positions and long

    and short delta-adjusted swaption positions (if the record pertains to

    swaptions positions). For uncleared paired swaps, the regulations

    require a reporting entity to use economically reasonable and

    analytically supported deltas.

    More specifically, regulation 20.4, as proposed and finalized,

    requires that this information be grouped separately by principal or

    counterparty positions, by futures equivalent month, by cleared or

    uncleared contracts, by commodity reference price, and by clearing

    organization if the data record pertains to cleared swaps. Data records

    pertaining to swaption positions under the final regulations are to be

    further grouped by put or call, expiration date, and strike price. The

    reports provided under regulation 20.4 are required to also include

    identifiers for the commodity underlying the reportable position, the

    counterparties of the account and the 102S filing identifier, as

    described in more detail below, assigned by the reporting entity to its

    counterparty.

    3. Series S Filings

    Regulation 20.5(a) requires a 102S filing for the identification of

    a reporting entity's counterparty when such counterparty holds a

    reportable position. The 102S filing consists of the ``name, address,

    and contact information of the counterparty with the reportable

    account'' and a ``brief description of the nature of such person's

    paired swaps and swaptions' market activity.'' The reporting entity is

    required to submit a 102S filing only once for each person associated

    with a reportable account unless prior filed information is no longer

    accurate.

    Once an account counterparty is reportable, the Commission may

    contact the trader directly and require that the trader file a more

    detailed identification report, a 40S filing. The Commission would

    require a 40S filing if a trader has become reportable for the first

    time and is not known to the Commission. A 40S filing consists of the

    submission of a CFTC Form 40 ``Statement of Reporting Trader.'' As the

    current version of Form 40 covers information on positions in futures

    and options, traders would be required to complete the form as if the

    form covered information related to positions in paired swaps and

    swaptions.

    The 102S filing and the 40S filing together would allow the

    Commission to identify the person(s) owning or controlling the trading

    of a reportable account, the person to contact regarding

    [[Page 43857]]

    trading, the nature of the trading, whether the reportable account is

    related--by financial interest or control--to another account, and the

    principal occupation or business of the account owner. The filings also

    would provide the Commission information on whether the account is

    being used for hedging cash market exposure.

    Commission staff would use the information in these two filings to

    determine if the reported account corresponds to a new trader or is an

    additional account of an existing trader. If the account is an

    additional one of an existing trader, it would then be aggregated with

    that of other related accounts currently being reported.

    The Commission plans to update, streamline and make electronic its

    current Form 102 and Form 40 in the near term. The Commission intends

    for such revised forms to include sections specifically for swap and

    swaptions. When updated, regulation 20.5 will be amended to reflect

    these revisions and to require reports electronically through updated

    Forms 102 and 40.

    4. Maintenance of Books and Records

    Regulation 20.6 imposes recordkeeping requirements on clearing

    organizations, reporting entities, and persons with positions in paired

    swaps above a certain futures equivalent threshold. Regulations 20.6(a)

    and 20.6(b) require clearing organizations and reporting entities,

    respectively, to keep records of transactions in paired swaps or

    swaptions as well as methods used to convert paired swaps or swaptions

    into futures equivalents. In addition, regulation 20.6(c) requires

    every person with greater than 50 all-months-combined futures

    equivalent positions on a gross basis in paired swaps or swaptions on

    the same commodity to keep books and records for transactions resulting

    in such swaps positions and, among other things, the cash commodity

    underlying such positions. In general, such person may keep and

    reproduce such books and records in the record retention format that

    such person has developed in the normal course of business.

    Furthermore, in order to clarify the Commission's authority to issue

    special calls for books and records, the Commission is including an

    explicit special call provision with respect to reportable positions in

    regulation 20.6(d).

    The recordkeeping duties imposed by regulations 20.6(a) and 20.6(b)

    are in accordance with the requirements of regulation 1.31. Regulation

    1.31(a)(1) requires that these transaction records be kept for five

    years, the first two of which they ``shall be readily accessible.''

    Such books and records ``shall be open to inspection by any

    representative of the Commission.''

    These recordkeeping requirements allow the Commission to have ready

    access to records that would enable Commission staff to reconstruct the

    transaction history of reported positions. These requirements would

    ensure that data records submitted to the Commission could be audited.

    In addition, these records enable Commission staff to better

    reconstruct trading activity that may have had a material impact on the

    price discovery process.

    The recordkeeping burden imposed by regulation 20.6 is not

    anticipated to be unduly significant. These requirements are not unlike

    the recordkeeping requirements imposed by Congress in new CEA section

    4r(c)(2) on all swap market participants, and by the Commission on

    those entities with reportable futures accounts under the existing

    recordkeeping provision of regulation 18.05.

    5. Form and Manner of Reporting

    Regulation 20.7(a) provides that the Commission would specify, in

    writing to persons required to report, the format, coding structure,

    and electronic data transmission procedures for these reports and

    submissions. The purpose of this provision is to provide notice on how

    the Commission would determine the means by which the part 20 reports

    are to be formatted and submitted. The Commission notes that subsequent

    to the commencement of reporting, and from time to time thereafter, it

    will provide standardized codes for data elements such as commodity

    reference prices and require that submitted position reports use such

    standard codes instead of proprietary codes. Such information will be

    disseminated on the Commission's Web site.\20\

    ---------------------------------------------------------------------------

    \20\ As section II.(B).(8) herein describes, the Commission

    anticipates consulting with clearing organizations and reporting

    entities before determining the format, coding structure, and

    electronic data transmission procedures referenced in final

    regulation 20.7.

    ---------------------------------------------------------------------------

    6. Delegation of Authority

    Regulation 20.8, as proposed and finalized, delegates certain of

    the Commission's part 20 authorities to the Director of the Division of

    Market Oversight and through the Director to other employee or

    employees as designated by the Director. The delegated authority

    extends to: (1) Issuing a special call for a 40S or 102S filing and

    books and records; (2) providing instructions or determining the

    format, coding structure, and electronic data transmission procedures

    for submitting data records and any other information required under

    this part; and (3) determining the compliance schedules described in

    regulation 20.10. The purpose of these delegations is to facilitate the

    ability of the Commission to respond to changing market and

    technological conditions for the purpose of ensuring timely and

    accurate data reporting.

    7. Sunset Provision

    Regulation 20.9, as proposed and finalized, includes a sunset

    provision that would render the Reporting Rules ineffective and

    unenforceable upon the Commission's finding (through the issuance of an

    order) that operating SDRs are capable of processing positional data in

    a manner that would enable the Commission to effectively oversee and

    surveil paired swaps trading and paired swap markets. Regulation 20.9

    also states that the Commission may retain the effectiveness and

    enforceability of any or all requirements in part 20, such as the

    reporting of deltas for uncleared paired swaps or the reporting of

    paired swap positions in futures equivalents, should the Commission

    determine through an order that such reporting is of material value to

    conducting market surveillance.

    8. Compliance Schedule

    Under regulation 20.10, the compliance date for reporting

    requirements for clearing organizations under regulation 20.3 and

    clearing members under regulation 20.4 is sixty days after the

    publication of this notice in the Federal Register. The compliance date

    with regulation 20.4 for swap dealers that are not clearing members is

    the effective date of final regulations defining the term swap

    dealer.\21\ All special call provisions must be complied with sixty

    days following the date of publication of this notice in the Federal

    Register.

    ---------------------------------------------------------------------------

    \21\ See 75 FR 80174, December 21, 2010.

    ---------------------------------------------------------------------------

    Regulation 20.10 also allows the Commission to permit for a period,

    not to exceed six calendar months following the effective date of this

    part, during which a clearing organization or reporting entity or

    trader may provide reports that differ in content or are submitted in a

    form and manner which is other than prescribed by the provisions of

    part 20, provided that the submitter coordinates with the Commission

    and is making a good faith attempt to comply with all of the provisions

    of part 20. Furthermore, upon the passage of the full compliance

    [[Page 43858]]

    schedule outlined above, all paired swaps and swaptions position and

    market reports that are currently reported under a Commission order or

    parts 15 through 19 and 21 of the Commission's regulations must instead

    be reported exclusively under part 20.

    In order to address the possibility of certain firms that may not

    be able to comply expediently with the requirements of part 20 should

    they fall within the definition of swap dealer, regulation 20.10(e)

    allows the Commission to defer compliance for such firms for a period

    not to exceed six calendar months following the effective date of final

    regulations further defining the term swap dealer.

    A deferred compliance period of six months is appropriate to reduce

    potential compliance costs for such reporting entities because they may

    not have procedures in place for routine reporting of swaps data as

    they currently are not regulated as financial firms. The deferred

    compliance period would provide these affected entities with additional

    time to determine whether they need to make any arrangements to

    implement the reporting regime, and to make any such arrangements. Once

    the swap dealer definition is final, a party that is uncertain as to

    whether or not they are a swap dealer would not be foreclosed from

    asking CFTC staff or the Commission for additional relief under the CEA

    or Commission regulations.

    The Commission also notes that it expects to consult with clearing

    organizations and reporting entities with respect to the manner of

    reporting before determining the format, coding structure, and

    electronic data transmission procedures that must be used to transmit

    information to the Commission pursuant to regulation 20.7.

    III. Related Matters

    A. Cost-Benefit Analysis

    1. Introduction

    Section 15(a) of the Act requires that the Commission, before

    promulgating a regulation under the Act or issuing an order, consider

    the costs and benefits of its action. By its terms, CEA section 15(a)

    does not require the Commission to quantify the costs and benefits of a

    new regulation or determine whether the benefits of the regulation

    outweigh its costs. Rather, CEA section 15(a) requires the Commission

    to ``consider the costs and benefits'' of its action.

    CEA section 15(a) specifies that costs and benefits shall be

    evaluated in light of the following considerations: (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. Accordingly, the Commission could, in its discretion,

    give greater weight to any of the five considerations and could, in its

    discretion, determine that, notwithstanding its costs, a particular

    regulation was necessary or appropriate to protect the public interest

    or to effectuate any of the provisions or to accomplish any of the

    purposes of the Act.

    2. Costs

    As mentioned above, under CEA section 4a(a)(2), the Commission has

    been directed to establish position limits for exempt and agricultural

    commodities, as appropriate. Section 4t of the Act authorizes the

    Commission to establish a large trader reporting system for significant

    price discovery function swaps, of which economically equivalent swaps

    are a subset. As discussed in more detail above, swaps position reports

    are a necessary component of an effective surveillance program,

    including monitoring compliance with any limits that may be established

    by the Commission under section 4a of the Act.

    Through the public comment process, alternatives to the Reporting

    Rules were presented to and reviewed by the Commission. Some commenters

    indicated that their respective alternatives would provide the

    Commission with the data it needs and would be less burdensome than the

    Reporting Rules. Bindicap Comster, the FIA, and the Working Group

    opposed the proposed regulations, and suggested an expanded special

    call reporting mechanism would be a better alternative. The

    Commission's current Index Investment Data Reports special call is a

    targeted collection of data. It gathers information related to specific

    products from a limited set of market participants. The special call

    was not intended to function as a tool for general market surveillance.

    In order to be able to gather positional data of the quality needed to

    conduct market surveillance, the special call would have to undergo

    substantial modifications which in effect would convert it into the

    Reporting Rules. In light of the broad areas of cost and benefit

    evaluation specified by CEA section 15(a), in particular section

    15(a)(2)(B), the Commission has determined that the alternative

    presented by Bindicap Comster, FIA, and the Working Group is less

    viable than the Reporting Rules and would not reduce costs to persons

    subject to this part or provide additional benefits.

    With regard to the future establishment of SDRs and whether the

    Commission should wait for SDRs to provide swaps position data instead

    of adopting the regulations, ATA argued that the Commission should

    proceed with the regulations and not wait for SDRs to become

    operational. FIA and the Working Group, meanwhile, argued that the

    future role of SDRs makes adoption of the regulations unnecessary. The

    Commission has determined that the Reporting Rules are necessary for

    several reasons. It is likely that physical commodity SDRs will require

    the most time to become operational since, unlike for swaps in the

    interest rate, equity and credit default asset categories, there

    currently is no functional and accepted data repository for energy,

    metal and agricultural commodities. In addition, even after SDRs have

    been established, because they are fundamentally transaction

    repositories, it may be a considerable amount of time before SDRs are

    able to reliably convert transaction data into positional data. Thus,

    in view of the considerable time before physical commodity swap SDRs

    are likely to be operational and have the ability to convert

    transactions to positions, the Commission has determined to adopt the

    Reporting Rules instead of the proposed alternative, consistent with

    the objectives outlined in CEA section 15(a)(2). Without a

    comprehensive and operational market surveillance system in the near

    term, the Commission would not be able to administer the CEA as amended

    by the Dodd-Frank Act.

    The Electric End User Coalition also argued that the recordkeeping

    burden imposed by the proposed regulations would be significant. In

    particular it argued that the recordkeeping requirements should not

    apply to end-users and that the Commission should defer to other

    regulators, specifically FERC, with regard to recordkeeping

    obligations. In the Commission's judgment, the recordkeeping

    requirements of the regulations are not unduly burdensome and are

    consistent with the recordkeeping requirements of current Commission

    regulations 1.31 and 18.05. In addition, as the regulations have been

    narrowly tailored to collect routine data only from clearing

    organizations, clearing members and swap dealers, the Reporting Rules

    will not have a significant negative impact on a substantial number of

    end-users. The Commission has thus determined to proceed with the

    Reporting Rules.

    [[Page 43859]]

    In developing the Reporting Rules, the Commission has aimed to

    minimize the cost and burden associated with reporting positional data

    to the Commission. As discussed above, the Commission has tailored the

    Reporting Rules to conform to the market structure for cleared and

    uncleared paired swaps. The cost of the part 20 regulations will be

    borne by firms that are clearing organizations reporting under

    regulation 20.3 and reporting entities reporting under regulation 20.4.

    For such firms, the additional cost to implement a reporting system is

    expected to be reasonable since the Commission understands these firms

    track their counterparties' positions for risk management purposes.

    Although the Reporting Rules establish a reporting system for

    cleared paired swaps that resembles the large trader reporting system,

    they establish a structurally different reporting system for uncleared

    paired swaps. The structure of the uncleared paired swaps market is not

    as centralized as the cleared paired swaps market: there is no central

    counterparty that corresponds to a clearing organization in the

    uncleared paired swaps market. The Commission believes that swap

    dealers may be counterparties to a significant portion of the market

    for uncleared paired swaps and swaptions.

    Accordingly, the Reporting Rules require position reporting from

    swap dealers. These firms are to report their reportable positions as

    well as those of their counterparties. As is the case for clearing

    member reporting entities, it is likely that creating or purchasing an

    information technology system that can present such a firm's net

    position exposures on a daily basis will not be an overly burdensome

    marginal expense, since the Commission understands swap dealers track

    their exposures for risk management purposes.

    For counterparties that will be subject to the recordkeeping

    requirements of regulation 20.6, it should be noted that these

    requirements will place new burdens (in terms of reporting and

    retaining information on cash market transactions) only on persons that

    are reportable solely in paired swaps. This is because Congress, in new

    CEA section 4r(c)(2), has extended recordkeeping requirements to all

    swaps irrespective of any reporting requirement. Likewise,

    counterparties that hold reportable futures positions (in addition to

    reportable paired swaps positions) are currently subject to existing

    recordkeeping requirements under regulation 18.05. Thus, the Commission

    believes that these additional burdens, in marginal terms, are not

    expected to be overly burdensome, given that firms collect information

    on their commercial activities in the normal course of business

    operations. The Commission also notes its adoption of regulation 20.10,

    which staggers implementation of the Reporting Rules. The flexible

    implementation process should reduce compliance costs in general.

    As described in detail below, the Commission held several meetings

    with potential reporting entities and conducted analysis to estimate

    the reporting and recordkeeping burdens imposed by the Reporting Rules

    annually for the next five years. For clearing organizations, the

    reporting burden is estimated to be approximately 950 hours and

    $100,000 spread across 5 entities, or 190 hours and $20,000 per entity.

    The recordkeeping burden for clearing organizations is estimated to be

    100 hours and $100,000 spread across 5 entities, or 20 hours and

    $20,000 per entity. Each clearing organization, then, is estimated to

    have a total annual burden of 207 hours and $40,000.

    For clearing members, the reporting burden is estimated to be

    25,000 hours and $6,000,000 spread across 100 entities (80 swap dealers

    and 20 non-swap dealers), or 250 hours and $60,000 per entity. The

    recordkeeping burden for clearing members is estimated to be 2,000

    hours and $2,000,000 spread across 100 entities, or 20 hours and

    $20,000 per entity. In addition, clearing members have a burden in

    connection with 102S submissions. The burden for 102S submissions is

    estimated to be 1,800 hours and $1,000,000 spread across 200 entities

    (of which 100 are clearing members), or 9 hours and $5,000 per entity.

    Each clearing member, then, is estimated to have a total annual burden

    of 279 hours and $85,000.

    For non-clearing member swap dealers, the reporting burden is

    estimated to be 37,500 hours and $8,000,000 spread across 100 entities,

    or 375 hours and $80,000 per entity. The recordkeeping burden for non-

    clearing member swap dealers is estimated to be 2,000 hours and

    $2,000,000 spread across 100 entities, or 20 hours and $20,000 per

    entity. In addition, non-clearing member swap dealers have a burden in

    connection with 102S submissions. The burden for 102S submissions is

    estimated to be 1,800 hours and $1,000,000 spread across 200 entities

    (of which 100 are non-clearing member swap dealers), or 9 hours and

    $5,000 per entity. Each non-clearing member swap dealer, then, is

    estimated to have a total annual burden of 404 hours and $105,000.

    For persons with reportable positions, the reporting burden in

    connection with 40S submissions is estimated to be 165 hours and

    $4,500,000 spread across 500 entities, or .33 hours and $9,000 per

    entity. The recordkeeping burden for persons with reportable positions

    is estimated to be 10,000 hours and $11,500,000 spread across 500

    entities, or 20 hours and $23,000 per entity. Each person with

    reportable positions, then, is estimated to have a total annual burden

    of 20.33 hours and $32,000.

    Two commenters to the proposing release, FIA and the Working Group,

    argued that the Commission underestimated the costs imposed by the

    Reporting Rules. FIA stated that some of its members believe the costs

    to be very substantial and in some cases exceeding millions of dollars.

    The Working Group stated that some of its members estimate the total

    compliance costs to range up to $80,000 to $750,000 per year, inclusive

    of capital costs, and that the upfront costs could be as high as $1.5

    million. In light of these comments, the Commission has carefully

    reviewed its analysis and estimates, and it has determined its

    estimates to be reasonable and satisfactory in accordance with CEA

    section 15(a)(2) for the purpose of cost-benefit analysis of the

    Reporting Rules.

    3. Benefits

    In addition to providing increased market transparency through the

    reporting of paired swap positions to the Commission, the Commission

    will be better able to first, protect market participants and the

    public (CEA section 15(a)(2)(A)) and second, increase the efficiency

    and competitiveness of the markets (CEA section 15(a)(2)(B)). The

    extension of the Commission's surveillance activities to these paired

    swap markets will enhance the deterrence and detection of problematic

    activities and, thus, help ensure the integrity of these markets and

    protect market participants and the public from disruptive trading,

    price manipulation, and the effects of market congestion. Further, with

    this extension, the Commission will be able to expand its Commitments

    of Traders Reports, for example, to include aggregate position data on

    the paired swaps markets, and thus will provide the public, including

    market participants, greater transparency into the constitution of

    markets covered by part 20. This increased transparency may reduce the

    informational asymmetries in the paired swap markets and thereby

    improve the efficiency of the market and promote competition.

    [[Page 43860]]

    As discussed above, implementing part 20 will enable the Commission

    to monitor and enforce position limits, if established by the

    Commission, to diminish, eliminate, or prevent excessive speculation;

    to deter and prevent market manipulation; ensure sufficient market

    liquidity for bona fide hedgers; and to ensure that the price discovery

    function of the underlying market is not disrupted. By enabling the

    Commission to monitor compliance with position limits, if established

    by the Commission, to address these concerns, the Commission would be

    better able to protect the price discovery process (CEA section

    15(a)(2)(C)) and market participants and the public from the threats of

    excessive speculation and price manipulation (CEA section 15(a)(2)(A)).

    4. Conclusion

    The Commission, after considering the CEA section 15(a) factors,

    finds that the Reporting Rules are reasonably necessary and appropriate

    to protect the public interest and effectuate and accomplish purposes

    and goals of the CEA. The Commission also finds that the expected

    incremental cost imposed by part 20 is outweighed by the expected

    benefit. Accordingly, the Commission has determined to adopt the

    Reporting Rules.

    B. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA'') requires Federal agencies,

    in proposing regulations, to consider the impact of those regulations

    on ``small entities.'' \22\ In response to the Reporting Rules, the

    Electric End User Coalition argued that the recordkeeping burden

    imposed by the proposed regulations would be significant. In particular

    it argued that the recordkeeping requirements should not apply to end-

    users and that the Commission should defer to other regulators,

    specifically FERC, with regard to recordkeeping obligations. In the

    Commission's judgment, the recordkeeping requirements of the

    regulations are consistent with the recordkeeping requirements of

    current Commission regulations 1.31 and 18.05. In addition, as the

    regulations have been narrowly tailored to collect routine data only

    from clearing organizations, clearing members and swap dealers, the

    Commission has determined that the Commission does not expect the

    Reporting Rules to have a significant impact on a substantial number of

    small entities. The Commission has thus determined to proceed with the

    Reporting Rules.

    ---------------------------------------------------------------------------

    \22\ 5 U.S.C. 601 et seq.

    ---------------------------------------------------------------------------

    The Reporting Rules will affect organizations including registered

    derivatives clearing organization (``DCOs''), clearing members (many of

    whom are registered with the Commission already as futures commission

    merchants (``FCMs'')), swap dealers, and persons who have books and

    records obligations under regulation 20.6.

    The Commission has previously determined that DCOs \23\ and FCMs

    \24\ are not ``small entities'' for purposes of the RFA. As noted

    above, a person with non-discretionary reporting or books and records

    obligations under final regulations 20.3, 20.4 and 20.6 will either be

    a clearing organization, clearing member, swap dealer, or a person with

    at least 50 or more gross paired swaps positions in the same commodity

    on a futures equivalent and all-months-combined basis. The Commission

    notes this threshold is comparable to the minimum 25-contract reporting

    levels in effect for futures positions under regulation 15.03.

    Previously, the Commission had determined that the reporting levels in

    regulation 15.03, which determine which positions are reportable, would

    not affect small entities.\25\ The Commission does not believe that

    entities who meet the Reporting Rules' non-discretionary quantitative

    threshold will constitute small entities for RFA purposes.

    ---------------------------------------------------------------------------

    \23\ 66 FR 45604, 45609, August 29, 2001.

    \24\ Policy Statement and Establishment of Definitions of

    ``Small Entities'' for Purposes of the Regulatory Flexibility Act,

    47 FR 18618, 18619, April 30, 1982.

    \25\ Id. at 18620 (excluding large traders from the definition

    of small entity).

    ---------------------------------------------------------------------------

    Accordingly, the Commission does not expect the Reporting Rules to

    have a significant impact on a substantial number of small entities.

    Therefore, the Chairman, on behalf of the Commission, hereby certifies,

    pursuant to 5 U.S.C. 605(b), that the Reporting Rules will not have a

    significant economic impact on a substantial number of small entities.

    C. Paperwork Reduction Act

    1. Overview

    The Paperwork Reduction Act (``PRA'') \26\ imposes certain

    requirements on Federal agencies in connection with their conducting or

    sponsoring any collection of information as defined by the PRA. The

    Reporting Rules will result in new collection of information

    requirements within the meaning of the PRA. The Commission submitted

    the proposing release to the Office of Management and Budget (``OMB'')

    for review in accordance with 44 U.S.C. 3507(d) and 5 CFR 1320.11. The

    Commission requested that OMB approve, and assign a new control number

    for, the collections of information covered by the proposing release.

    The information collection burdens created by the Commission's proposed

    rules, which were discussed in detail in the proposing release, are

    identical to the collective information collection burdens of the final

    rules.

    ---------------------------------------------------------------------------

    \26\ 44 U.S.C. 3501 et seq.

    ---------------------------------------------------------------------------

    The Commission invited the public and other Federal agencies to

    comment on any aspect of the information collection requirements

    discussed above. Pursuant to 44 U.S.C. 3506(c)(2)(B), the Commission

    solicited comments in order to: (i) Evaluate whether the proposed

    collections of information were necessary for the proper performance of

    the functions of the Commission, including whether the information will

    have practical utility; (ii) evaluate the accuracy of the Commission's

    estimates of the burden of the proposed collections of information;

    (iii) determine whether there are ways to enhance the quality, utility

    and clarity of the information to be collected; and (iv) minimize the

    burden of the collections of information on those who are to respond,

    including through the use of automated collection techniques or other

    forms of information technology.

    The Commission received two comments on the burden estimates and

    information collection requirements contained in its proposing release.

    FIA and the Working Group argued that the costs placed by the proposed

    regulations would be significant and that the Commission significantly

    underestimated the costs to clearing members and swap dealers. FIA

    stated that some of its members believe the costs to be very

    substantial and in some cases exceeding millions of dollars, while

    acknowledging that it is difficult to estimate costs with any

    precision. The Working Group stated that some of its members estimate

    the total compliance costs to range up to $80,000 to $750,000 per year,

    inclusive of capital costs, and that the upfront costs could be as high

    as $1.5 million. The Commission has carefully considered the costs on

    market participants. Some comments regarding significant industry

    burdens assumed that a substantial number of end-users would be swept

    up into the definition of swap dealer. In response, the Commission

    notes that the Reporting Rules are tailored to collect routine reports

    only from clearing

    [[Page 43861]]

    organizations, clearing members, and swap dealers. In addition, based

    on numerous meetings with potential reporting entities, the Commission

    has determined that the costs that would be imposed by the proposed

    regulations on reporting entities is reasonable given the trade capture

    and information technology resources of such entities.

    The title for this collection of information is ``Part 20--Large

    Trader Reporting for Physical Commodity Swaps.'' OMB has approved

    assigned OMB control number 3038-[--] to this collection of

    information.

    2. Information Provided and Recordkeeping Duties

    Part 20 establishes reporting requirements for clearing

    organizations and reporting entities and recordkeeping requirements for

    these firms in addition to firms that become reportable because of a

    reportable paired swap or swaption positions. Accordingly, the

    Commission is seeking a new and separate control number for reporting

    from clearing organizations and reporting entities (collectively

    ``respondents'') and recordkeeping for firms that become reportable

    because of a reportable paired swap or swaption position operating in

    compliance with the requirements of part 20.

    Part 20 will result in the collection of information on ``paired

    swaps and swaptions'' positions as defined in regulation 20.1.

    Specifically, part 20 provides for three new kinds of reports:

    1. Under regulation 20.3, swap clearing organizations will provide

    daily reports of relevant position and clearing data.

    2. Under regulation 20.4, reporting entities will produce daily

    position reports on a second-day basis on their own and individual

    counterparty accounts. There are two categories of reporting entities:

    (a) Clearing members and (b) swap dealers that are not clearing

    members. The former category, clearing members, will include many firms

    that are currently registered as FCMs with the Commission. The

    Commission estimates that a total of 180 swap dealers transact in

    physical commodity swaps and thereby may be reporting entities under

    part 20 (clearing members and non-clearing members combined).

    3. Finally, under regulation 20.5, all reporting entities will

    submit identifying information to the Commission on new reportable

    accounts through a 102S filing.

    In addition to creating these reporting requirements, regulation

    20.6 imposes recordkeeping requirements for (1) clearing organizations,

    (2) reporting entities, and (3) persons with paired swaps positions as

    specified in regulation 20.6(c). The Commission estimates that the

    recordkeeping requirements of regulation 20.6 will not be overly

    burdensome. For the firms subject to the reporting and recordkeeping

    requirements of regulation 20.6, it should be noted that these

    requirements are not unlike the recordkeeping requirements imposed by

    Congress in new CEA section 4r(c)(2) and by existing recordkeeping

    regulation 18.05. If a firm subject to these recordkeeping requirements

    was previously reportable due to a futures position in the relevant

    commodity above the ``reporting level'' (see regulation 15.03), then

    the regulation 20.6(b) recordkeeping burdens would not be new, as that

    firm would already be subject to these requirements under regulation

    18.05. If a firm becomes subject to the regulation 20.6 recordkeeping

    requirements only because of a reportable paired swaps position (and

    not because of a futures position above the reportable level), then the

    requirements contained in the Reporting Rules add only the duty to keep

    records on all commercial activities that a reporting entity or person

    hedges to the swaps-related recordkeeping duties imposed by CEA section

    4r(c)(2). These additional burdens are not expected to be substantial,

    given that in the normal course of business firms would collect this

    information on their commercial activities.

    The Commission estimates that implementing part 20 will create a

    total annual reporting and recordkeeping hour burden of 79,503 hours

    across 705 firms. Based on a weighted average wage rate of $74.36,\27\

    this will amount to an annualized labor cost of $5.9 million. In

    addition, the Commission estimates that total annualized capital/start-

    up, operating, and maintenance costs \28\ will amount to a combined

    $35.2 million (a typographical error in the proposed Reporting Rules

    indicated a $32.7 cost). This overall total reporting and recordkeeping

    hour burden is the sum of estimated burdens for the three reporting

    categories and the three recordkeeping categories mentioned above.

    ---------------------------------------------------------------------------

    \27\ The Commission staff's estimates concerning the wage rates

    are based on salary information for the securities industry compiled

    by the Securities Industry and Financial Markets Association

    (``SIFMA''). The $74.36 per hour is derived from figures from a

    weighted average of salaries and bonuses across different

    professions from the SIFMA Report on Management & Professional

    Earnings in the Securities Industry 2009, modified to account for an

    1,800-hour work year and multiplied by 1.3 to account for overhead

    and other benefits. The wage rate is a weighted national average of

    salary and bonuses for professionals with the following titles (and

    their relative weight): ``programmer (senior)'' (60% weight),

    ``compliance advisor (intermediate)'' (20%), ``systems analyst''

    (10%), and ``assistant/associate general counsel'' (10%).

    \28\ The capital/start-up cost component of ``annualized

    capital/start-up, operating, and maintenance costs'' is based on an

    initial capital/start-up cost that is straight-line depreciated over

    five years.

    ---------------------------------------------------------------------------

    Reporting burdens:

    1. Regulation 20.3 clearing organization reports will account for

    938 of these annual reporting and recordkeeping hours. These hours will

    be spread across 5 respondents. Annualized capital/start-up, operating,

    and maintenance costs for all affected clearing organizations combined

    will be approximately $100,000.\29\

    ---------------------------------------------------------------------------

    \29\ All of the capital cost estimates in these estimates are

    based on a five-year, straight-line depreciation.

    ---------------------------------------------------------------------------

    2. Regulation 20.4 reporting entity reports will have two separate

    burden estimates based on the kind of reporting entity providing the

    report:

    a. Clearing member (80 clearing member/swap dealers plus 20

    clearing member/non-swap dealers) reporting entity reports will create

    an annual reporting and recordkeeping burden of 25,000 hours spread

    across 100 respondents. Annualized capital/start-up, operating, and

    maintenance costs for all firms in this category combined will be

    approximately $6 million.

    b. Swap dealer non-clearing member reporting entity reports will

    create an annual reporting and recordkeeping burden of 37,500 hours

    spread across 100 respondents. Annualized capital/start-up, operating,

    and maintenance costs for all firms in this category combined will be

    approximately $8 million.

    3. Regulation 20.5 reporting entity 102S submissions will create an

    annual reporting and recordkeeping burden of 1,800 hours spread across

    200 firms. Annualized capital/start-up, operating, and maintenance

    costs for all reporting entities combined providing these reports will

    be approximately $1 million.

    4. 40S submissions by persons with reportable positions under

    regulation 20.5(b) in paired swaps will create an annual reporting and

    recordkeeping burden of 165 hours and will affect 500 firms. Annualized

    capital/start-up, operating, and combined maintenance costs for all

    firms providing 40S filings will be approximately $4.5 million.

    Recordkeeping burdens:

    1. Regulation 20.6(a) recordkeeping duties for clearing

    organizations will account for 100 of these annual

    [[Page 43862]]

    reporting and recordkeeping hours. These hours will be spread across 5

    firms. Annualized capital/start-up, operating, and maintenance costs to

    meet the recordkeeping requirements of regulation 20.6(a) will be

    approximately $100,000.

    2. Regulation 20.6(b) reporting entity recordkeeping duties will

    have two separate burden estimates based on the kind of reporting

    entity providing the report:

    a. Clearing member (80 clearing member/swap dealers plus 20

    clearing member/non-swap dealers) reporting entity recordkeeping will

    create an annual reporting and recordkeeping burden of 2,000 hours

    spread across 100 respondents. Annualized capital/start-up, operating,

    and maintenance costs for all firms in this category of recordkeeping

    reporting entities will be approximately $2 million.

    b. Swap dealer non-clearing member reporting entity recordkeeping

    will create an annual reporting and recordkeeping burden of 2,000 hours

    spread across 100 respondents. Annualized capital/start-up, operating,

    and maintenance costs for all firms in this category of recordkeeping

    reporting entities will be approximately $2 million.

    3. Regulation 20.6(c) recordkeeping duties for persons with paired

    swaps positions will create an annual reporting and recordkeeping

    burden of 10,000 hours spread across 500 firms. Annualized capital/

    start-up, operating, and maintenance costs for all traders in this

    category combined will be approximately $11.5 million.

    3. Confidentiality

    The Commission will protect proprietary information according to

    the Freedom of Information Act and 17 CFR part 145, ``Commission

    Records and Information.'' In addition, section 8(a)(1) of the Act

    strictly prohibits the Commission, unless specifically authorized by

    the Act, from making public ``data and information that would

    separately disclose the business transactions or market positions of

    any person and trade secrets or names of customers.'' \30\ The

    Commission also is required to protect certain information contained in

    a government system of records according to the Privacy Act of 1974, 5

    U.S.C. 552a.

    ---------------------------------------------------------------------------

    \30\ 7 U.S.C. 12(a)(1).

    ---------------------------------------------------------------------------

    List of Subjects

    17 CFR Part 15

    Brokers, Commodity futures, Reporting and recordkeeping

    requirements.

    17 CFR Part 20

    Physical commodity swaps, Swap dealers, Reporting and recordkeeping

    requirements.

    For the reasons stated in the preamble, the Commodity Futures

    Trading Commission amends 17 CFR chapter I as follows:

    PART 15--REPORTS--GENERAL PROVISIONS

    0

    1. The authority citation for part 15 is revised to read as follows:

    Authority: 7 U.S.C. 2, 5, 6a, 6c, 6f, 6g, 6i, 6k, 6m, 6n, 7,

    7a, 9, 12a, 19, and 21, as amended by Title VII of the Dodd-Frank

    Wall Street Reform and Consumer Protection Act, Pub. L. 111-203, 124

    Stat. 1376 (2010).

    0

    2. Revise the heading and introductory text in Sec. 15.00 to read as

    follows:

    Sec. 15.00 Definitions of terms used in parts 15 to 19, and 21 of

    this chapter.

    As used in parts 15 to 19, and 21 of this chapter:

    * * * * *

    0

    3. Add part 20 to read as follows:

    PART 20--LARGE TRADER REPORTING FOR PHYSICAL COMMODITY SWAPS

    Sec.

    20.1 Definitions.

    20.2 Covered contracts.

    20.3 Clearing organizations.

    20.4 Reporting entities.

    20.5 Series S filings.

    20.6 Maintenance of books and records.

    20.7 Form and manner of reporting and submitting information or

    filings.

    20.8 Delegation of authority to the Director of the Division of

    Market Oversight.

    20.9 Sunset provision.

    20.10 Compliance schedule.

    20.11 Diversified commodity indices.

    Appendix A to Part 20--Guidelines on Futures Equivalency

    Appendix B to Part 20--Explanatory Guidance on Data Record Layouts

    Authority: 7 U.S.C. 1a, 2, 5, 6, 6a, 6c, 6f, 6g, 6t, 12a, 19,

    as amended by Title VII of the Dodd-Frank Wall Street Reform and

    Consumer Protection Act, Pub. L. 111-203, 124 Stat. 1376 (2010).

    Sec. 20.1 Definitions.

    As used in, and solely for the purposes of, this part:

    Business day means ``business day'' as that term is defined in

    Sec. 1.3 of this chapter.

    Cleared product means a paired swap or swaption that a clearing

    organization offers or accepts for clearing.

    Clearing member means any person who is a member of, or enjoys the

    privilege of, clearing trades in its own name through a clearing

    organization.

    Clearing organization means the person or organization that acts as

    a medium between clearing members for the purpose of clearing swaps or

    swaptions or effecting settlements of swaps or swaptions.

    Closed swap or closed swaption means a swap or swaption that has

    been settled, exercised, closed out or terminated.

    Commodity reference price means the price series (including

    derivatives contract and cash market prices or price indices) used by

    the parties to a swap or swaption to determine payments made,

    exchanged, or accrued under the terms of the contracts.

    Counterparty means, from the perspective of one side to a contract,

    the person that is the direct legal counterparty corresponding to the

    other side of the contract.

    Clearing member customer means any person for whom a reporting

    entity clears a swap or swaption position.

    Futures equivalent means an economically equivalent amount of one

    or more futures contracts that represents a position or transaction in

    one or more paired swaps or swaptions consistent with the conversion

    guidelines in Appendix A of this part.

    Open swap or swaption means a swap or swaption that has not been

    closed.

    Paired swap or paired swaption means an open swap or swaption that

    is:

    (1) Directly or indirectly linked, including being partially or

    fully settled on, or priced at a differential to, the price of any

    commodity futures contract listed in Sec. 20.2; or

    (2) Directly or indirectly linked, including being partially or

    fully settled on, or priced at a differential to, the price of the same

    commodity for delivery at the same location or locations.

    Person means any ``person'' as that term is defined in Sec. 1.3 of

    this chapter.

    Reportable account or consolidated account that is reportable means

    a consolidated account that includes a reportable position.

    Reportable position means:

    (1)(i) A position, in any one futures equivalent month, comprised

    of 50 or more futures equivalent paired swaps or swaptions based on the

    same commodity underlying a futures contract listed in Sec. 20.2,

    grouped separately by swaps and swaptions, then grouped by gross long

    contracts on a futures equivalent basis or gross short contracts on a

    futures equivalent basis;

    (ii) For a consolidated account (described in Sec. 20.4(a)) that

    includes a reportable position as defined in paragraph (1)(i) of this

    definition, all other positions in that account that are

    [[Page 43863]]

    based on the commodity that renders the account reportable; and

    (iii) The first reporting day on which a consolidated account

    (described in Sec. 20.4(a)) no longer includes a reportable position

    as described in paragraph (1)(i) of this definition (because on such

    day, the reporting entity's consolidated account shall continue to be

    considered and treated as if it in fact included reportable positions

    as described in paragraph (1)(i) of this definition); or

    (2) At the discretion of a reporting entity, and as an alternative

    to paragraph (1) of this definition, so long as the same method is

    consistently applied to all consolidated accounts (as described in

    Sec. 20.4(a)) of the reporting entity, all positions on a gross basis

    in a consolidated account that are based on the same commodity.

    Reporting day means the period of time between a clearing

    organization or reporting entity's usual and customary last internal

    valuation of paired swaps or swaptions and the next such period, so

    long as the period of time is consistently observed on a daily basis

    and the Commission is notified, upon its request, of the manner by

    which such period is calculated and any subsequent changes thereto.

    Reporting entity means:

    (1) A clearing member; or

    (2) A swap dealer in one or more paired swaps or swaptions as that

    term is defined in section 1a of the Act and any Commission

    definitional regulations adopted thereunder.

    Swap means:

    (1) Until the effective date of any definitional rulemaking

    regarding ``swap'' by the Commission under section 1a of the Act, an

    agreement (including terms and conditions incorporated by reference

    therein) which is a commodity swap (including any option to enter into

    such swap) within the meaning of ``swap agreement'' under Sec.

    35.1(b)(1) of this chapter, or a master agreement for a commodity swap

    together with all supplements thereto; or

    (2) ``Swap'' as defined in section 1a of the Act and any Commission

    definitional regulations adopted thereunder, upon the effective date of

    such regulations.

    Swaption means an option to enter into a swap or a swap that is an

    option.

    Sec. 20.2 Covered contracts.

    The futures and option contracts listed by designated contract

    markets for the purpose of reports filed and information provided under

    this part are as follows:

    Covered Agricultural and Exempt Futures Contracts

    ------------------------------------------------------------------------

    -------------------------------------------------------------------------

    Chicago Board of Trade (``CBOT'') Corn.

    CBOT Ethanol.

    CBOT Oats.

    CBOT Rough Rice.

    CBOT Soybean Meal.

    CBOT Soybean Oil.

    CBOT Soybeans.

    CBOT Wheat.

    Chicago Mercantile Exchange (``CME'') Butter.

    CME Cheese.

    CME Dry Whey.

    CME Feeder Cattle.

    CME Hardwood Pulp.

    CME Lean Hogs.

    CME Live Cattle.

    CME Milk Class III.

    CME Non Fat Dry Milk.

    CME Random Length Lumber.

    CME Softwood Pulp.

    COMEX (``CMX'') Copper Grade 1.

    CMX Gold.

    CMX Silver.

    ICE Futures U.S. (``ICUS'') Cocoa.

    ICUS Coffee C.

    ICUS Cotton No. 2.

    ICUS Frozen Concentrated Orange Juice.

    ICUS Sugar No. 11.

    ICUS Sugar No. 16.

    Kansas City Board of Trade (``KCBT'') Wheat.

    Minneapolis Grain Exchange (``MGEX'') Wheat.

    NYSELiffe (``NYL'') Gold, 100 Troy Oz.

    NYL Silver, 5000 Troy Oz.

    New York Mercantile Exchange (``NYMEX'') Cocoa.

    NYMEX Brent Financial.

    NYMEX Central Appalachian Coal.

    NYMEX Coffee.

    NYMEX Cotton.

    NYMEX Crude Oil, Light Sweet.

    NYMEX Gasoline Blendstock (RBOB).

    NYMEX Hot Rolled Coil Steel.

    NYMEX Natural Gas.

    NYMEX No. 2 Heating Oil, New York Harbor.

    NYMEX Palladium.

    NYMEX Platinum.

    NYMEX Sugar No. 11.

    NYMEX Uranium.

    Diversified Commodity Index (See Sec. 20.11).

    ------------------------------------------------------------------------

    Sec. 20.3 Clearing organizations.

    (a) Reporting data records. For each reporting day, with respect to

    paired swaps or swaptions, clearing organizations shall report to the

    Commission, separately for each clearing member's proprietary and

    clearing member customer account, unique groupings of the data elements

    in paragraph (b) of this section (to the extent that there are such

    corresponding elements), in a single data record, so that each reported

    record is distinguishable from every other reported record (because of

    differing data values, as opposed to the arrangement of the elements).

    (b) Populating reported data records with data elements. Data

    records reported under paragraph (a) of this section shall include the

    following data elements:

    (1) An identifier assigned by the Commission to the clearing

    organization;

    (2) The identifier assigned by the clearing organization to the

    clearing member;

    (3) The identifier assigned by the clearing organization for a

    cleared product;

    (4) The reporting day;

    (5) A proprietary or clearing member customer account indicator;

    (6) The futures equivalent month;

    (7) The commodity reference price;

    (8) Gross long swap positions;

    (9) Gross short swap positions;

    (10) A swaption put or call side indicator;

    (11) A swaption expiration date;

    (12) A swaption strike price;

    (13) Gross long non-delta-adjusted swaption positions; and

    (14) Gross short non-delta-adjusted swaption positions.

    (c) End of reporting day data. For all futures equivalent months,

    clearing organizations shall report end of reporting day settlement

    prices for each cleared product and deltas for every unique swaption

    put and call, expiration date, and strike price.

    Sec. 20.4 Reporting entities.

    (a) Consolidated accounts. Each reporting entity shall combine all

    paired swap and swaption positions:

    (1) That are principal positions (swaps and swaptions to which the

    reporting entity is a direct legal counterparty), in a single

    consolidated account that it shall attribute to itself; and

    (2) That are positions of the reporting entity's counterparty in a

    single consolidated account that it shall attribute to that specific

    counterparty.

    (b) Reporting data records. Reporting entities shall report to the

    Commission, for each reporting day, and separately for each reportable

    position in a consolidated account described in paragraphs (a)(1) and

    (a)(2) of this section, unique groupings of the data elements in

    paragraph (c) of this section (to the extent that there are such

    corresponding elements), in a single data record, so that each reported

    record is distinguishable from every other reported record (because of

    differing data values, as opposed to the arrangement of the elements).

    (c) Populating reported data records with data elements. Data

    records reported under paragraph (b) of this

    [[Page 43864]]

    section shall include the following data elements:

    (1) An identifier assigned by the Commission to the reporting

    entity;

    (2) An identifier indicating that a principal or counterparty

    position is being reported;

    (3) A 102S identifier assigned by the reporting entity to its

    counterparty;

    (4) The name of the counterparty whose position is being reported;

    (5) The reporting day;

    (6) If cleared, the identifier for the cleared product assigned by

    the clearing organization;

    (7) The commodity underlying the reportable positions;

    (8) The futures equivalent month;

    (9) A cleared or uncleared indicator;

    (10) A clearing organization identifier;

    (11) The commodity reference price;

    (12) An execution facility indicator;

    (13) Long paired swap positions;

    (14) Short paired swap positions;

    (15) A swaption put or call side indicator;

    (16) A swaption expiration date;

    (17) A swaption strike price;

    (18) Long non-delta-adjusted paired swaption positions;

    (19) Short non-delta-adjusted paired swaption positions;

    (20) Long delta-adjusted paired swaption positions (using

    economically reasonable and analytically supported deltas);

    (21) Short delta-adjusted paired swaption positions (using

    economically reasonable and analytically supported deltas);

    (22) Long paired swap or swaption notional value; and

    (23) Short paired swap or swaption notional value.

    Sec. 20.5 Series S filings.

    (a) 102S filing.

    (1) When a counterparty consolidated account first becomes

    reportable, the reporting entity shall submit a 102S filing, which

    shall consist of the name, address, and contact information of the

    counterparty and a brief description of the nature of such person's

    paired swaps and swaptions market activity.

    (2) A reporting entity may submit a 102S filing only once for each

    counterparty, even if such persons at various times have multiple

    reportable positions in the same or different paired swaps or

    swaptions; however, reporting entities must update a 102S filing if the

    information provided is no longer accurate.

    (3) Reporting entities shall submit a 102S filing within three days

    following the first day a consolidated account first becomes reportable

    or at such time as instructed by the Commission upon special call.

    (b) 40S filing. Every person subject to books or records under

    Sec. 20.6 shall after a special call upon such person by the

    Commission file with the Commission a 40S filing at such time and place

    as directed in the call. A 40S filing shall consist of the submission

    of a Form 40, which shall be completed by such person as if any

    references to futures or option contracts were references to paired

    swaps or swaptions as defined in Sec. 20.1.

    Sec. 20.6 Maintenance of books and records.

    (a) Every clearing organization shall keep all records of

    transactions in paired swaps or swaptions, and methods used to convert

    paired swaps or swaptions into futures equivalents, in accordance with

    the requirements of Sec. 1.31 of this chapter.

    (b) Every reporting entity shall keep all records of transactions

    in paired swaps or swaptions, and methods used to convert paired swaps

    or swaptions into futures equivalents, in accordance with the

    requirements of Sec. 1.31 of this chapter.

    (c) Every person with equal to or greater than 50 gross all-months-

    combined futures equivalent positions in paired swaps or swaptions on

    the same commodity shall:

    (1) Keep books and records showing all records for transactions

    resulting in such positions, which may be kept and reproduced for

    Commission inspection in the record retention format that such person

    has developed in the normal course of its business operations; and

    (2) Keep books and records showing transactions in the cash

    commodity underlying such positions or its products and byproducts, and

    all commercial activities that are hedged or which have risks that are

    mitigated by such positions, which may be kept in accordance with the

    recordkeeping schedule and reproduced for Commission inspection in the

    record retention format that such person has developed in the normal

    course of its business operations.

    (d) All books and records required to be kept by paragraphs (a)

    through (c) of this section shall be furnished upon request to the

    Commission along with any pertinent information concerning such

    positions, transactions, or activities.

    Sec. 20.7 Form and manner of reporting and submitting information or

    filings.

    Unless otherwise instructed by the Commission, a clearing

    organization or reporting entity shall submit data records and any

    other information required under this part to the Commission as

    follows:

    (a) Using the format, coding structure, and electronic data

    transmission procedures approved in writing by the Commission;

    (b) For clearing organizations, not later than 9:00 a.m. eastern

    time on the next business day following the reporting day or at such

    other time as instructed by the Commission; and

    (c) For clearing members and swap dealers, not later than 12:00

    p.m. eastern time on the second (T+2) business day following the

    reporting day or at such other time as instructed by the Commission.

    Sec. 20.8 Delegation of authority to the Director of the Division of

    Market Oversight.

    (a) The Commission hereby delegates, until it orders otherwise, to

    the Director of the Division of Market Oversight or such other employee

    or employees as the Director may designate from time to time, the

    authority:

    (1) In Sec. 20.5(a)(3) for issuing a special call for a 102S

    filing;

    (2) In Sec. 20.5(b) for issuing a special call for a 40S filing;

    (3) In Sec. 20.6(d) for issuing a special call;

    (4) In Sec. 20.7 for providing instructions or determining the

    format, coding structure, and electronic data transmission procedures

    for submitting data records and any other information required under

    this part; and

    (5) In Sec. 20.10 for determining the described compliance

    schedules.

    (b) The Director of the Division of Market Oversight may submit to

    the Commission for its consideration any matter which has been

    delegated in this section.

    (c) Nothing in this section prohibits the Commission, at its

    election, from exercising the authority delegated in this section.

    Sec. 20.9 Sunset provision.

    (a) Except as otherwise provided in paragraph (b) of this section,

    the sections of this part shall become ineffective and unenforceable

    upon a Commission finding that, through the issuance of an order,

    operating swap data repositories are processing positional data and

    that such processing will enable the Commission to effectively surveil

    trading in paired swaps and swaptions and paired swap and swaption

    markets.

    (b) The Commission may determine, in its discretion, to maintain

    the effectiveness and enforceability of any section of this part, or

    any requirement therein, in an order issued under paragraph (a) of this

    section, upon finding that such sections, or requirements therein,

    provide the

    [[Page 43865]]

    Commission with positional data or data elements that materially

    improves the accuracy and surveillance utility of the positional data

    processed by swap data repositories.

    Sec. 20.10 Compliance schedule.

    (a) Clearinghouses, clearing members and persons with books and

    records obligations shall comply with the requirements of this part

    upon the effective date of this part.

    (b) Swap dealers that are not clearing members shall comply with

    the requirements of this part upon the effective date of final

    regulations further defining the term swap dealer.

    (c) The Commission may permit, for a period not to exceed six

    calendar months following the effective date specified in paragraph (a)

    of this section, the submission of reports pursuant to Sec. Sec. 20.3

    and 20.4 that differ in content, or are submitted in a form and manner

    which is other than prescribed by the provisions of this part, provided

    that the submitter is making a good faith attempt to comply with all of

    the provisions of this part.

    (d) Unless determined otherwise by the Commission, paired swap and

    swaption position and market reports submitted under parts 15 through

    19, or 21 of this chapter, or any order of the Commission, shall

    continue to be submitted under those parts or orders until swap dealers

    are required to comply with Sec. 20.4.

    (e) The Commission may extend the compliance date established in

    paragraph (b) of this section by an additional six calendar months

    based on resource limitations or lack of experience in reporting

    transactions to the Commission for a swap dealer that is not an

    affiliate of a bank holding company and:

    (1) Is not registered with the Commission as a futures commission

    merchant and is not an affiliate of a futures commission merchant;

    (2) Is not registered with the Securities and Exchange Commission

    as a broker or dealer and is not an affiliate of a broker or dealer;

    and

    (3) Is not supervised by any Federal prudential regulator.

    Sec. 20.11 Diversified commodity indices.

    For the purpose of reporting in futures equivalents, paired swaps

    and swaptions using commodity reference prices that are commonly known

    diversified indices with publicly available weightings may be reported

    as if such indices underlie a single futures contract with monthly

    expirations for each calendar month and year.

    Appendix A to Part 20--Guidelines on Futures Equivalency

    The following examples illustrate how swaps should be converted

    into futures equivalents. In general the total notional quantity for

    each swap should be apportioned to referent futures months based on

    the fraction of days remaining in the life of the swap during each

    referent futures month to the total duration of the swap, measured

    in days. The terms used in the examples are to be understood in a

    manner that is consistent with industry practice.

    Example 1--Fixed for Floating WTI Crude Oil Swap Linked to a DCM

    Contract

    ------------------------------------------------------------------------

    ------------------------------------------------------------------------

    Reference Price................... Daily official next to expire

    contract price for the NYMEX Light

    Sweet Crude Oil Futures Contract

    (``WTI'') in $/bbl through the

    NYMEX spot month.

    Fixed Price....................... $80.00 per barrel.

    Floating Price.................... The arithmetic average of the

    reference price during the pricing

    period.

    Notional Quantity................. 100,000 bbls/month.

    Calculation Period................ One month.

    Fixed Price Payer................. Company A.

    Floating Price Payer.............. Company B.

    Settlement Type................... Financial.

    Swap Term......................... Six full months from January 1 to

    June 30.

    Floating Amount................... Floating Price * Notional Quantity.

    Fixed Amount...................... Fixed Price * Notional Quantity.

    ------------------------------------------------------------------------

    NYMEX WTI trading in the next to expire futures contract ceases

    on the third business day prior to the 25th of the calendar month

    preceding the contract month. For simplicity in this example, the

    last trading day in each WTI futures contract is shown as the 22nd

    of the month.

    Futures Equivalent Position on January 1

    Total Notional Quantity = 6 months * 100,000 bbls/month = 600,000

    bbls

    1,000 bbl = 1 futures contract

    Therefore 600,000 bbls/1,000 bbls/contract = 600 futures equivalent

    contracts

    Total number of days in swap term = 31 + 28 + 31 + 30 + 31 + 30 =

    181

    Futures Equivalent Position of Swap on January 1

    ----------------------------------------------------------------------------------------------------------------

    Company A Company B

    Fraction of position position

    Dates swap in force Referent futures month days (long) (short)

    [dagger] [dagger]

    ----------------------------------------------------------------------------------------------------------------

    January 1--January 22..................... February..................... 22/181 73 -73

    January 23--February 22................... March........................ 31/181 103 -103

    February 23--March 22..................... April........................ 28/181 93 -93

    March 23--April 22........................ May.......................... 31/181 103 -103

    April 23--May 22.......................... June......................... 30/181 99 -99

    May 23--June 22........................... July......................... 31/181 103 -103

    June 23--June 30th........................ August....................... 8/181 27 -27

    ---------------------------------------------------------------------

    Total................................. ............................. 181/181 601 -601

    ----------------------------------------------------------------------------------------------------------------

    [dagger] Contracts rounded to the nearest integer.

    [[Page 43866]]

    Futures equivalent position on January 2

    Total Notional Quantity = Remaining swap term * 100,000 bbls/month =

    596,685 bbls

    1,000 bbl = 1 futures contract

    Therefore 596,685 bbls/1,000 bbls/contract = 597 futures equivalent

    contracts

    Total number of days = 30 + 28 + 31 + 30 + 31 + 30 = 180

    Futures Equivalent Position of Swap on January 2 (Example 1 Continued)

    ----------------------------------------------------------------------------------------------------------------

    Company A Company B

    Fraction of position position

    Dates swap in force Referent futures month days (long) (short)

    [dagger] [dagger]

    ----------------------------------------------------------------------------------------------------------------

    January 2--January 22..................... February..................... 21/180 70 -70

    January 23--February 22................... March........................ 31/180 103 -103

    February 23--March 22..................... April........................ 28/180 93 -93

    March 23--April 22........................ May.......................... 31/180 103 -103

    April 23--May 22.......................... June......................... 30/180 99 -99

    May 23--June 22........................... July......................... 31/180 103 -103

    June 23--June 30th........................ August....................... 8/180 27 -27

    --------------------------------------

    Total................................. ............................. 180/180 597 -597

    ----------------------------------------------------------------------------------------------------------------

    [dagger] Contracts rounded to the nearest integer.

    Example 2--Fixed for Floating Corn Swap

    ------------------------------------------------------------------------

    ------------------------------------------------------------------------

    Reference Price................... Daily official next to expire

    contract price for the CBOT Corn

    Futures Contract in $/bushel

    through the CBOT spot month.

    Fixed Price....................... $5.00 per bushel per month.

    Floating Price.................... The arithmetic average of the

    reference price during the pricing

    period.

    Calculation Period................ One month.

    Notional Quantity................. 1,000,000 bushels/month.

    Fixed Price Payer................. Company A.

    Floating Price Payer.............. Company B.

    Settlement Type................... Financial.

    Swap Term......................... Six full months from January 1 to

    June 30.

    Floating Amount................... Floating Price * Notional Quantity.

    Fixed Amount...................... Fixed Price * Notional Quantity.

    ------------------------------------------------------------------------

    Last trading day in the nearby CBOT Corn futures contract is the

    business day preceding the 15th of the contract month. For

    simplicity in this example, the last trading day in each Corn

    futures contract is shown as the 14th of the month. Futures contract

    months for corn are March, May, July, September, and December.

    Futures Equivalent Position on January 1

    Total Notional Quantity = 6 contract months * 1,000,000 bushels/

    month = 6,000,000 bushels

    5,000 bushels = 1 futures contract

    Therefore 6,000,000 bushels/5,000 bushels/contract = 1,200 futures

    equivalent contracts

    Total days = 31 + 28 + 31 + 30 + 31 + 30 = 181

    Futures Equivalent Position of Swap on January 1

    ----------------------------------------------------------------------------------------------------------------

    Company A Company B

    Dates swap in force Referent futures Fraction of days position (long) position (short)

    month [dagger] [dagger]

    ----------------------------------------------------------------------------------------------------------------

    January 1-March 14............... March............... 73/181 483 -483

    March 15-May 14.................. May................. 61/181 404 -404

    May 15-June 30................... July................ 47/181 311 -311

    --------------------------------------------------------

    Total........................ .................... 181/181 1,198 -1,198

    ----------------------------------------------------------------------------------------------------------------

    [dagger] Contracts rounded to the nearest integer.

    Example 3--Fixed for Floating NY RBOB (Platts) Calendar Swap Futures

    ------------------------------------------------------------------------

    ------------------------------------------------------------------------

    Reference Price................... Platts Oilgram next to expire

    contract Price Report for New York

    RBOB (Barge) through the NYMEX spot

    month.

    Fixed Price....................... $1.8894 per gallon.

    Floating Price.................... For each contract month, the

    floating price is equal to the

    arithmetic average of the high and

    low quotations from Platts Oilgram

    Price Report for New York RBOB

    (Barge) for each business day that

    it is determined during the

    contract month.

    Calculation Period................ One quarter.

    Notional Quantity................. 84 million gallons/quarter.

    Fixed Price Payer................. Company A.

    Floating Price Payer.............. Company B.

    Settlement Type................... Financial.

    Swap Term......................... Six full months from January 1 to

    June 30.

    [[Page 43867]]

    Floating Amount................... Floating Price * Notional Quantity.

    Fixed Amount...................... Fixed Price * Notional Quantity.

    ------------------------------------------------------------------------

    NYMEX NY RBOB (Platts) Calendar Swap Futures Contract month ends

    on the final business day of the contract month. For simplicity in

    this example, the last trading day in each futures contract is shown

    as the final day of the month.

    Futures Equivalent Position on January 1

    Total Notional Quantity = 2 quarters * 84 million = 168 million

    gallons

    42,000 gallons = 1 futures contract

    Therefore 168 million/42,000 gallons/futures contract = 4,000

    futures equivalent contracts

    Total number of days = 31 + 28 + 31 + 30 + 31 + 30 = 181

    Futures Equivalent Position of Swap on January 1

    ----------------------------------------------------------------------------------------------------------------

    Company A Company B

    Dates swap in force Referent futures Fraction of days position (long) position (short)

    month [dagger] [dagger]

    ----------------------------------------------------------------------------------------------------------------

    January 1-March 31............... April............... 90/181 1989 -1989

    April 1-June 30.................. July................ 91/181 2011 -2011

    --------------------------------------------------------

    Total........................ .................... 181/181 4000 -4000

    ----------------------------------------------------------------------------------------------------------------

    [dagger] Contracts rounded to the nearest integer.

    Example 4--Calendar Spread Swap

    ------------------------------------------------------------------------

    ------------------------------------------------------------------------

    Reference Price................... The difference between the next to

    expire contract price for the NYMEX

    WTI Futures contract and the

    deferred contract price for the

    NYMEX WTI Futures contract.

    Fixed Price....................... $80 per barrel.

    Floating Price.................... The arithmetic average of the

    reference price during the pricing

    period.

    Calculation Period................ One month.

    Notional Quantity................. 100,000 bbls/month.

    Fixed Price Payer................. Company A.

    Floating Price Payer.............. Company B.

    Settlement Type................... Financial.

    Swap Term......................... Six full months from January 1 to

    June 30.

    Floating Amount................... Floating Price * Notional Quantity.

    Fixed Amount...................... Fixed Price * Notional Quantity.

    ------------------------------------------------------------------------

    NYMEX WTI trading in the next to expire futures contract ceases

    on the third business day prior to the 25th of the calendar month

    preceding the contract month. For simplicity in this example, the

    last trading day in each WTI futures contract is shown as the 22nd

    of the month.

    Futures Equivalent Position on January 1

    Total Notional Quantity = 6 months * 100,000 bbls/month = 600,000

    bbls

    1,000 bbl = 1 futures contract

    Therefore 600,000 bbls/1,000 bbls/contract = 600 futures equivalent

    contracts

    Total number of days = 31 + 28 + 31 + 30 + 31 + 30 = 181

    Futures Equivalent Position of Swap on January 1

    --------------------------------------------------------------------------------------------------------------------------------------------------------

    Applicable next Company A Company B Applicable Company A Company B

    Dates swap in force Fraction of to expire futures position position deferred futures position position

    days month (long)[dagger] (short)[dagger] month (short)[dagger] (long)[dagger]

    --------------------------------------------------------------------------------------------------------------------------------------------------------

    January 1--January 22......... 22/181 February.......... 73 -73 March............. -73 73

    January 23--February 22....... 31/181 March............. 103 -103 April............. -103 103

    February 23--March 22......... 28/181 April............. 93 -93 May............... -93 93

    March 23--April 22............ 31/181 May............... 103 -103 June.............. -103 103

    April 23--May 22.............. 30/181 June.............. 99 -99 July.............. -99 99

    May 23--June 22............... 31/181 July.............. 103 -103 August............ -103 103

    June 23--June 30th............ 8/181 August............ 27 -27 September......... -27 27

    -------------------------------------------------------------------------------------------------------------------------

    ,n,s♥,s♥,n,s♥Total........ 181/181 .................. 601 -601 .................. -601 601

    --------------------------------------------------------------------------------------------------------------------------------------------------------

    [dagger] Contracts rounded to the nearest integer.

    [[Page 43868]]

    Example 5--Columbia Gulf, Mainline Midpoint (``Midpoint') Basis Swap

    ------------------------------------------------------------------------

    ------------------------------------------------------------------------

    Reference Price................... The Platts Gas Daily Columbia Gulf,

    Mainline Midpoint (``Midpoint'')

    and the next to expire NYMEX (Henry

    Hub) Natural Gas Futures contract.

    Fixed Price....................... $0.05 per MMBtu.

    Floating Price.................... The Floating Price will be equal to

    the arithmetic average of the daily

    value of the Platts Gas Daily

    Columbia Gulf, Mainline Midpoint

    (``Midpoint'') minus the NYMEX

    (Henry Hub) Natural Gas Futures

    contract daily settlement price.

    Calculation Period................ Monthly.

    Notional Quantity................. 10,000 MMBtu/calendar day.

    Fixed Price Payer................. Company A.

    Floating Price Payer.............. Company B.

    Settlement type................... Financial.

    Swap Term......................... One month from January 1 to January

    31.

    Floating Amount................... Floating Price * Notional Quantity *

    calendar days in the month.

    Fixed Amount...................... Fixed Price * Notional Quantity *

    calendar days in the month.

    ------------------------------------------------------------------------

    NYMEX Henry Hub Natural Gas Futures Contract trading ceases

    three business days prior to the first day of the delivery month.

    For simplicity in this example, the last trading day in the futures

    contract is shown as the 28th of the month.

    Futures Equivalent Position on January 1

    Total Notional Quantity for each leg = 1 month * 31 days/month *

    10,000 MMBtu/day = 310,000 MMBtu

    10,000 MMBtu = 1 futures contract

    Therefore 310,000 MMBtu/10,000 MMBtu/contract = 31 futures

    equivalent contracts

    Total number of days = 31

    Futures Equivalent Position of Swap on January 1

    --------------------------------------------------------------------------------------------------------------------------------------------------------

    Company A Company B

    position in position in

    Columbia Company A Columbia Company B

    Gulf, Position in Gulf, position in

    Dates swap in force Fraction of Referent futures month Mainline NYMEX (Henry Mainline NYMEX (Henry

    days Midpoint Hub) natural Midpoint Hub) natural

    (``Midpoint'') gas futures (``Midpoint'') gas futures

    natural gas (short) natural gas (long)

    (long) MMBtu (short) MMBtu

    --------------------------------------------------------------------------------------------------------------------------------------------------------

    January 1--January 28.................... 28/31 February..................... [dagger][dagge -28 [dagger][dagge 28

    r][dagger] r][dagger]

    January 29--January 31................... 3/31 March........................ .............. -3 .............. 3

    --------------------------------------------------------------------------------------------------------------

    ,n,s♥Total........................... 31/31 ............................. .............. -31 .............. 31

    --------------------------------------------------------------------------------------------------------------------------------------------------------

    [dagger][dagger][dagger] Note: Because there is no underlying position taken in a basis contract, for reporting purposes, only enter the futures

    equivalent contract quantities into the corresponding futures.

    Example 6--WTI Swaption (Call)

    ------------------------------------------------------------------------

    ------------------------------------------------------------------------

    Swaption Style.................... American.

    Option Type....................... Call.

    Swaption Start Date............... Jan 1 of the current year.

    Swaption End Date................. June 30 of the current year.

    Strike Price...................... $80.50/bbl.

    Notional Quantity................. 100,000 bbl/month.

    Calculation Period................ One month.

    Reference Price................... Daily official next to expire

    contract price for WTI NYMEX Crude

    Oil Futures Contract in $/bbl

    through the NYMEX spot month.

    Fixed Price....................... $80.00 per barrel per month.

    Floating Price.................... The arithmetic average of the

    reference price during the pricing

    period.

    Settlement Type................... Financial.

    Swap Term......................... One month from July 1 to July 31 of

    the current year.

    Floating Amount................... Floating Price * Notional Quantity.

    Fixed Amount...................... Fixed Price * Notional Quantity.

    ------------------------------------------------------------------------

    NYMEX WTI trading ceases on the third business day prior to the

    25th of the calendar month preceding the delivery month. For

    simplicity in this example, the last trading day in each WTI futures

    contract is shown as the 22nd of the month.

    Futures Equivalent Position on January 1

    Total Notional Quantity = 1 month*100,000 bbls/month=100,000 bbls

    1,000 bbl = 1 futures contract

    Therefore 100,000 bbls/1,000 bbls/contract = 100 futures equivalent

    contracts

    Total number of days = 31

    [[Page 43869]]

    Gross Position on January 1

    ----------------------------------------------------------------------------------------------------------------

    Company A Company B

    Dates swap in force Referent futures month Fraction of position position

    days (long)[dagger] (short)[dagger]

    ----------------------------------------------------------------------------------------------------------------

    July 1 -July 22........................ August................... 22/31 70 -70

    July 23--July 31....................... September................ 9/31 29 -29

    ---------------------------------------------

    Total.............................. ......................... 31/31 99 -99

    ----------------------------------------------------------------------------------------------------------------

    [dagger] Contracts rounded to the nearest integer.

    Delta[dagger][dagger] Adjusted Position and Futures Equivalent Position on January 1

    ----------------------------------------------------------------------------------------------------------------

    August September

    Date ------------------------------------------------------------------------------

    Delta Position Delta Position

    ----------------------------------------------------------------------------------------------------------------

    January 1........................ .2.................. 14 .2 5

    ----------------------------------------------------------------------------------------------------------------

    [dagger][dagger] Deltas should be calculated in an economically reasonable and analytically supportable basis.

    Example 7--WTI Collar Swap

    ------------------------------------------------------------------------

    ------------------------------------------------------------------------

    Swaption Style.................... American.

    Swaption Start Date............... Jan 1 of the current year.

    Swaption End Date................. June 30 of the current year.

    Call strike Price................. $70.00 per bbl.

    Put strike price.................. $90.00 per bbl.

    Notional Quantity................. 100,000 barrels per month.

    Calculation Period................ One month.

    Reference Price................... Daily official next to expire

    contract price for WTI NYMEX Crude

    Oil in $/bbl through the NYMEX spot

    month.

    Fixed Price....................... $80.00 per barrel.

    Floating Price.................... The arithmetic average of the

    reference price during the pricing

    period.

    Settlement Type................... Financial.

    Swap Term......................... One month from July 1 to July 31 of

    the current year.

    Floating Amount................... Floating Price * Notional Quantity.

    Fixed Amount...................... Fixed Price * Notional Quantity.

    ------------------------------------------------------------------------

    NYMEX WTI trading ceases on the third business day prior to the

    25th of the calendar month preceding the delivery month. For

    simplicity in this example, the last trading day in each WTI futures

    contract is shown as the 22nd of the month.

    Futures Equivalent Position on January 1

    Total Notional Quantity = 1 month * 100,000 bbls/month = 100,000

    bbls

    1,000 bbl = 1 futures contract

    Therefore 100,000 bbls/1,000 bbls/contract = 100 futures equivalent

    contracts

    Total number of days = 31

    Gross Position on January 1

    --------------------------------------------------------------------------------------------------------------------------------------------------------

    Company A position Company B position

    Dates swap in force Referent futures month Fraction of -----------------------------------------------------------------------

    days Call Put Call Put

    --------------------------------------------------------------------------------------------------------------------------------------------------------

    July 1-July 22....................... August.................. 22/31 70.97 70.97 -70.97 -70.97

    July 23-July 31...................... September............... 9/31 29.03 29.03 -29.03 -29.03

    ----------------------------------------------------------------------------------------

    Total............................ ........................ 31/31 100 100 -100 -100

    --------------------------------------------------------------------------------------------------------------------------------------------------------

    Company (A) Delta[dagger] Adjusted Position on January 1

    --------------------------------------------------------------------------------------------------------------------------------------------------------

    August September

    -------------------------------------------------------------------------------------------------------

    Date Long call Short put Long call Short put

    -------------------------------------------------------------------------------------------------------

    Delta Position Delta Position Delta Delta Position

    --------------------------------------------------------------------------------------------------------------------------------------------------------

    January 1....................................... .7 49 .3 -21 .7 20 .3 -8

    --------------------------------------------------------------------------------------------------------------------------------------------------------

    [dagger] Deltas should be calculated in an economically reasonable and analytically supportable basis.

    [[Page 43870]]

    Futures Equivalent Position on January 1

    ----------------------------------------------------------------------------------------------------------------

    August[dagger][dagger] September[dagger][dagger]

    Date ---------------------------------------------------------------------------

    Long Short Long Short

    ----------------------------------------------------------------------------------------------------------------

    January 1........................... 70 0 28 0

    ----------------------------------------------------------------------------------------------------------------

    [dagger][dagger] Contracts rounded to the nearest integer.

    Appendix B to Part 20--Explanatory Guidance on Data Record Layouts

    Record Layout Examples for Sec. 20.3

    The following example (in Tables 1, 2 and 3) covers reporting

    for a particular clearing organization. ``Clearing Organization

    One'' would report, for the 27th of September 2010, the following

    eleven unique data record submissions. Each data record submission

    represents a unique position, as indicated by Sec. 20.3, held by a

    clearing member of Clearing Organization One. Paragraph (a) of Sec.

    20.3 broadly outlines the data elements that determine unique

    positions for reports on clearing member positions. Paragraphs (b)

    of Sec. 20.3 present all of the data elements that should be

    submitted in reference to a particular data record for a particular

    clearing member (in Table 1). Paragraph (c) identifies data elements

    that would comprise end of day record data on cleared products (in

    Tables 2 and 3). Therefore, paragraphs (b) and (c) of Sec. 20.3

    present all of the data elements that should be submitted in

    reference to a particular data record.

    Because CFTC designated Clearing Organization One (in this

    example) currently has two clearing members, ``Clearing Member One''

    and ``Clearing Member Two,'' positions cleared for these two

    distinct clearing members would be subdivided.

    In the following example it is assumed that the clearing member

    accounts are either proprietary or customer (but not both) and

    therefore data record submissions do not have to be delineated by

    these account types. However, if clearing members did have both

    proprietary and customer accounts, then a clearing organization

    would have to further subdivide these clearing member data records

    by these two account types.

    Clearing Member One currently has five positions with multiple

    cleared product IDs and futures equivalent months/years, and

    therefore these positions also constitute separate data records.

    Clearing Member Two currently has six positions with the

    following varying characteristics: Cleared product IDs; futures

    equivalent months/years; commodity reference prices; swaption

    positions that involve both puts and calls; and multiple strike

    prices. Accordingly, these positions must be reported in separate

    data records. An illustration of how these records would appear is

    included in Table 1 below. Clearing Organization One would also have

    to report the corresponding swaption position deltas, strike prices,

    expiration dates, and settlement prices and swap settlement prices.

    An illustration of these submissions is included in Tables 2 and 3

    below.

    Table 1--Data Records Reported Under Paragraphs (a) and (b) of Sec. 20.3

    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Clearing org clearing Clearing org cleared Proprietary/ customer Futures equivalent Commodity reference

    Data records CFTC clearing org ID member ID product ID Reporting day account indicator month and year price

    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Data record 1.................... CCO--ID--1........... CM--ID--2............ CP--04............... 9/27/2010............ C.................... Nov-10.............. NYMEX NY Harbor

    No.2.

    Data record 2.................... CCO--ID--1........... CM--ID--2............ CP--04............... 9/27/2010............ C.................... Oct-10.............. NYMEX NY Harbor

    No.2.

    Data record 3.................... CCO--ID--1........... CM--ID--2............ CP--02............... 9/27/2010............ C.................... Nov-10.............. NYMEX Henry Hub.

    Data record 4.................... CCO--ID--1........... CM--ID--2............ CP--02............... 9/27/2010............ C.................... Oct-10.............. NYMEX Henry Hub.

    Data record 5.................... CCO--ID--1........... CM--ID--2............ CP--02............... 9/27/2010............ C.................... Nov-10.............. NYMEX Henry Hub.

    Data record 6.................... CCO--ID--1........... CM--ID--2............ CP--02............... 9/27/2010............ C.................... Oct-10.............. NYMEX Henry Hub.

    Data record 7.................... CCO--ID--1........... CM--ID--1............ CP--03............... 9/27/2010............ P.................... Mar-11.............. NYMEX Light Sweet.

    Data record 8.................... CCO--ID--1........... CM--ID--1............ CP--03............... 9/27/2010............ P.................... Feb-11.............. NYMEX Light Sweet.

    Data record 9.................... CCO--ID--1........... CM--ID--1............ CP--01............... 9/27/2010............ P.................... Mar-11.............. NYMEX Light Sweet.

    Data record 10................... CCO--ID--1........... CM--ID--1............ CP--01............... 9/27/2010............ P.................... Feb-11.............. NYMEX Light Sweet.

    Data record 11................... CCO--ID--1........... CM--ID--1............ CP--01............... 9/27/2010............ P.................... Jan-11.............. NYMEX Light Sweet.

    ����������������������������������--------------------------------------------------------------------------------------------------------------------------------------------------------------

    NDR.............................. Yes.................. Yes.................. Yes.................. Yes.................. Yes.................. Yes................. No.

    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Data records Long swap position Short swap position Put/call indicator Swaption expiration Swaption strike price Non-delta adjusted Non-delta adjusted

    date long swaption short swaption

    position position

    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Data record 1.................... 0.................... 5000

    Data record 2.................... 0.................... 2000

    Data record 3.................... ..................... ..................... C.................... 7/29/2011............ 5.59................. 2000................ 0

    [[Page 43871]]

    Data record 4.................... ..................... ..................... C.................... 7/29/2011............ 5.59................. 18000............... 0

    Data record 5.................... ..................... ..................... P.................... 7/29/2011............ 5.50................. 100................. 30

    Data record 6.................... ..................... ..................... P.................... 7/29/2011............ 5.50................. 900................. 270

    Data record 7.................... 5000................. 0

    Data record 8.................... 5000................. 0

    Data record 9.................... 429.................. 1286

    Data record 10................... 2281................. 6843

    Data record 11................... 1290................. 3871

    NDR.............................. No................... No................... Yes.................. Yes.................. Yes.................. No.................. No.

    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Note: The bottom row of Table 1 indicates whether data elements

    for which any difference in one of the elements constitutes a reason

    for a new data record (NDR).

    Table 2--Example of Data Records Required Under Sec. 20.3(c) for Cleared Swaption Products

    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Clearing

    org Swaption Swaption Swaption

    Data records CFTC clearing org cleared Reporting Futures equivalent month Commodity reference price expiration strike Put/call Delta daily

    ID product day and year date price indicator settlement

    ID price

    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Data record 1.......................... CCO--ID--1 CP--02 9/27/2010 Nov-10.................... NYMEX Henry Hub.......... 7/29/2011 5.59 C .5 6.25

    Data record 2.......................... CCO--ID--1 CP--02 9/27/2010 Oct-10.................... NYMEX Henry Hub.......... 7/29/2011 5.59 C .5 5.50

    Data record 3.......................... CCO--ID--1 CP--02 9/27/2010 Nov-10.................... NYMEX Henry Hub.......... 7/29/2011 5.50 P .2 4.53

    Data record 4.......................... CCO--ID--1 CP--02 9/27/2010 Oct-10.................... NYMEX Henry Hub.......... 7/29/2011 5.50 P .2 4.78

    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Table 3--Example of Data Records Required Under Sec. 20.3(c) for Cleared Swap Products

    --------------------------------------------------------------------------------------------------------------------------------------------------------

    Clearing org Swap daily

    Data records CFTC clearing cleared Reporting day Futures equivalent month Commodity reference settlement

    org ID product ID and year price price

    --------------------------------------------------------------------------------------------------------------------------------------------------------

    Data record 1........................ CCO--ID--1 CP--04 9/27/2010 Nov-10.................. NYMEX NY Harbor No. 2.. 20.35

    Data record 2........................ CCO--ID--1 CP--04 9/27/2010 Oct-10.................. NYMEX NY Harbor No. 2.. 10.50

    Data record 3........................ CCO--ID--1 CP--03 9/27/2010 Mar-11.................. NYMEX Light Sweet...... 15.00

    Data record 4........................ CCO--ID--1 CP--03 9/27/2010 Feb-11.................. NYMEX Light Sweet...... 21.00

    Data record 5........................ CCO--ID--1 CP--01 9/27/2010 Mar-11.................. NYMEX Light Sweet...... 17.50

    Data record 6........................ CCO--ID--1 CP--01 9/27/2010 Feb-11.................. NYMEX Light Sweet...... 21.65

    Data record 7........................ CCO--ID--1 CP--01 9/27/2010 Jan-11.................. NYMEX Light Sweet...... 12.50

    --------------------------------------------------------------------------------------------------------------------------------------------------------

    First Record Layout Example for Sec. 20.4:

    This first example shows the data records generated under Sec.

    20.4 by a single reporting firm for report date September 27, 2011.

    Each data record represents a unique part of a reportable position

    in heating oil and natural gas by the reporting entity and its

    counterparties. Paragraph (b) of Sec. 20.4 outlines the data

    elements that determine unique positions.

    In this example, the reporting entity clears with one clearing

    organization and therefore the data records do not have to be

    delineated by clearing organization (there is a reportable position

    stemming from an uncleared transaction included as well). However,

    if the reporting entity in this example used multiple clearing

    organizations, then it would have to further subdivide its data

    submissions by each clearing organization.

    The reporting entity reports fifteen records; six principal

    positions and nine counterparty positions. The reported positions

    constitute separate data records because they vary by the following

    characteristics: swap counterparties; futures equivalent months/

    years; clearing organization cleared products; swaptions that were

    either cleared or uncleared; commodity reference prices; and whether

    the trade was entered into on or off execution facilities. An

    illustration of how these records would be reported is included in

    Table 4 below.

    For the calculation of notional values, assume for simplicity

    that the price of heating oil, for all contract months and for both

    reference prices, is $3/gal. Similarly, assume that the price of

    natural gas for all contract months is $4.25/MMBtu.

    Note: The bottom two rows in Table 4 indicate whether, for

    uncleared and cleared swaps and swaptions, data elements for which

    any difference in one of the elements constitutes a reason for a new

    data record (NDR).

    [[Page 43872]]

    Table 4--Example of Data Records Reported Under Sec. 20.4(c)

    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Principal/

    Commission counterparty 102S Swap Clearing org cleared Futures

    Data records reporting entity position counterparty ID Counterparty name Reporting day product ID Commodity code equivalent month

    ID indicator and year

    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Data record 1................... CRE--ID--1....... PRIN............. ................. ..................... 9/27/2011......... CPID--05............ HO............... Jan-12

    Data record 2................... CRE--ID--1....... COUNT............ CP--01........... Energy--Firm--1...... 9/27/2011......... CPID--05............ HO............... Jan-12

    Data record 3................... CRE--ID--1....... COUNT............ CP--02........... Energy--Firm--2...... 9/27/2011......... CPID--05............ HO............... Jan-12

    Data record 4................... CRE--ID--1....... PRIN............. ................. ..................... 9/27/2011......... CPID--04............ HO............... Feb-12

    Data record 5................... CRE--ID--1....... COUNT............ CP--03........... Energy--Firm--3...... 9/27/2011......... CPID--04............ HO............... Feb-12

    Data record 6................... CRE--ID--1....... PRIN............. ................. ..................... 9/27/2011......... CPID--04............ HO............... Mar-12

    Data record 7................... CRE--ID--1....... COUNT............ CP--04........... ABC--Firm............ 9/27/2011......... CPID--04............ HO............... Mar-12

    Data record 8................... CRE--ID--1....... PRIN............. ................. ..................... 9/27/2011......... CDIP--07............ NG............... Mar-12

    Data record 9................... CRE--ID--1....... COUNT............ CP--05........... XYZ--Firm............ 9/27/2011......... CDIP--07............ NG............... Mar-12

    Data record 10.................. CRE--ID--1....... COUNT............ CP--06........... WVU--Firm............ 9/27/2011......... CDIP--07............ NG............... Mar-12

    Data record 11.................. CRE--ID--1....... COUNT............ CP--01........... Energy--Firm--1...... 9/27/2011......... CDIP--07............ NG............... Mar-12

    Data record 12.................. CRE--ID--1....... PRIN............. ................. ..................... 9/27/2011......... CDIP--07............ NG............... Mar-12

    Data record 13.................. CRE--ID--1....... COUNT............ CP--07........... MNO--Firm............ 9/27/2011......... CDIP--07............ NG............... Mar-12

    Data record 14.................. CRE--ID--1....... PRIN............. ................. ..................... 9/27/2011......... UNCL................ NG............... Jan-12

    Data record 15.................. CRE--ID--1....... COUNT............ CP--02........... Energy--Firm--2...... 9/27/2011......... UNCL................ NG............... Jan-12

    NDR Uncleared................... Yes.............. Yes.............. Yes.............. No................... Yes............... N/A................. No............... Yes

    NDR Cleared..................... Yes.............. Yes.............. Yes.............. No................... Yes............... Yes................. No............... Yes

    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Cleared/uncleared CFTC clearing org Commodity reference Execution Long swap Short swap

    Data records indicator identifier price facility position position

    --------------------------------------------------------------------------------------------------------------------------------------------------------

    Data record 1.................... C................. CCO--ID--1........ Platts Oilgram Price EX1.............. 200 .................

    Report for New York

    No. 2 (Barge).

    Data record 2.................... C................. CCO--ID--1........ Platts Oilgram Price EX1.............. ................. 50

    Report for New York

    No. 2 (Barge).

    Data record 3.................... C................. CCO--ID--1........ Platts Oilgram Price EX1.............. ................. 150

    Report for New York

    No. 2 (Barge).

    Data record 4.................... C................. CCO--ID--1........ NYMEX NY Harbor No.2 EX2.............. 350 .................

    Data record 5.................... C................. CCO--ID--1........ NYMEX NY Harbor No.2 EX2.............. ................. 350

    Data record 6.................... C................. CCO--ID--1........ NYMEX NY Harbor No.2 EX1.............. 100 .................

    Data record 7.................... C................. CCO--ID--1........ NYMEX NY Harbor No.2 EX1.............. ................. 100

    Data record 8.................... C................. CCO--ID--1........ NYMEX Henry Hub..... EX3.............. 200 100

    Data record 9.................... C................. CCO--ID--1........ NYMEX Henry Hub..... EX3.............. ................. 125

    Data record 10................... C................. CCO--ID--1........ NYMEX Henry Hub..... EX3.............. ................. 75

    Data record 11................... C................. CCO--ID--1........ NYMEX Henry Hub..... EX3.............. 100 .................

    Data record 12................... C................. CCO--ID--1........ NYMEX Henry Hub..... EX1.............. ................. .................

    Data record 13................... C................. CCO--ID--1........ NYMEX Henry Hub..... EX1.............. ................. .................

    Data record 14................... U................. U................. NYMEX Henry Hub..... NOEX............. ................. .................

    Data record 15................... U................. U................. NYMEX Henry Hub..... NOEX............. ................. .................

    NDR Uncleared.................... Yes............... N/A............... Yes................. Yes.............. No No

    NDR Cleared...................... Yes............... Yes............... No.................. Yes.............. No No

    --------------------------------------------------------------------------------------------------------------------------------------------------------

    Delta

    Non-delta Non-delta Delta adjusted Long swap or Short swap or

    Data records Put/call Swaption expiration Swaption adjusted long adjusted short adjusted long short swaption notional swaption notional

    indicator date strike price swaption swaption swaption swaption value position value position

    position position position position

    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Data record 1................... ................ ................... ............. ............... ............... ............. ............. $25,200,000 ...................

    Data record 2................... ................ ................... ............. ............... ............... ............. ............. ................... $6,300,000

    Data record 3................... ................ ................... ............. ............... ............... ............. ............. ................... $18,900,000

    Data record 4................... ................ ................... ............. ............... ............... ............. ............. $44,100,000 ...................

    Data record 5................... ................ ................... ............. ............... ............... ............. ............. ................... $44,100,000

    Data record 6................... ................ ................... ............. ............... ............... ............. ............. $12,600,000 ...................

    Data record 7................... ................ ................... ............. ............... ............... ............. ............. ................... $12,600,000

    Data record 8................... ................ ................... ............. ............... ............... ............. ............. $8,500,000 $4,250,000

    Data record 9................... ................ ................... ............. ............... ............... ............. ............. ................... $5,312,500

    Data record 10.................. ................ ................... ............. ............... ............... ............. ............. ................... $3,187,500

    Data record 11.................. ................ ................... ............. ............... ............... ............. ............. $4,250,000 ...................

    Data record 12.................. C............... 2/27/2012.......... 4.00......... 100............ ............... 80........... ............. $3,400,000 ...................

    Data record 13.................. C............... 2/27/2012.......... 4.00......... ............... 100............ ............. 80........... ................... $3,400,000

    Data record 14.................. C............... 12/27/2011......... 4.25......... 100............ ............... 95........... ............. $4,037,500 ...................

    Data record 15.................. C............... 12/27/2011......... 4.25......... ............... 100............ ............. 95........... ................... $4,037,500

    NDR Uncleared................... Yes............. Yes................ Yes.......... No............. No............. No........... No........... No No

    NDR Cleared..................... Yes............. Yes................ Yes.......... No............. No............. No........... No........... No No

    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Second Record Layout Example for Sec. 20.4:

    In this second example, the data records generated by Sec.

    20.4(c) are displayed for a hypothetical swap, as detailed in

    Example 1 of Appendix A. In contrast to the above example, this

    second example of a Sec. 20.4(c) data record is simplistic in that

    it displays a situation where the position records arise from a

    single swap transaction, in one commodity, with a single

    counterparty.

    For the sake of this example, assume the swap dealer gained long

    exposure from the swap, and that the swap was cleared. The price of

    crude is assumed to be $100/bbl for all contract months on January 1

    and $95/bbl for all contract months on January 2. An illustration of

    the data records generated for January 1, 2011 and January 2, 2011

    as a result of this hypothetical swap can be found in Tables 5 and

    6, respectively.

    [[Page 43873]]

    Table 5--Example of Data Records Reported Under Sec. 20.4(c) for January 1, 2011 (Appx A, Example 1)

    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Principal/

    Commission counterparty 102S swap Clearing org cleared Futures

    Data records reporting entity position counterparty ID Counterparty Name Reporting day product ID Commodity code equivalent month

    ID indicator and year

    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Data record 1................... SD--1............ PRIN............. ................. ..................... 1/1/2011.......... CPID--03............ CL............... Feb-11

    Data record 2................... SD--1............ PRIN............. ................. ..................... 1/1/2011.......... CPID--03............ CL............... Mar-11

    Data record 3................... SD--1............ PRIN............. ................. ..................... 1/1/2011.......... CPID--03............ CL............... Apr-11

    Data record 4................... SD--1............ PRIN............. ................. ..................... 1/1/2011.......... CPID--03............ CL............... May-11

    Data record 5................... SD--1............ PRIN............. ................. ..................... 1/1/2011.......... CPID--03............ CL............... Jun-11

    Data record 6................... SD--1............ PRIN............. ................. ..................... 1/1/2011.......... CPID--03............ CL............... Jul-11

    Data record 7................... SD--1............ PRIN............. ................. ..................... 1/1/2011.......... CPID--03............ CL............... Aug-11

    Data record 8................... SD--1............ COUNT............ CP--01........... Energy--Firm--1...... 1/1/2011.......... CPID--03............ CL............... Feb-11

    Data record 9................... SD--1............ COUNT............ CP--01........... Energy--Firm--1...... 1/1/2011.......... CPID--03............ CL............... Mar-11

    Data record 10.................. SD--1............ COUNT............ CP--01........... Energy--Firm--1...... 1/1/2011.......... CPID--03............ CL............... Apr-11

    Data record 11.................. SD--1............ COUNT............ CP--01........... Energy--Firm--1...... 1/1/2011.......... CPID--03............ CL............... May-11

    Data record 12.................. SD--1............ COUNT............ CP--01........... Energy--Firm--1...... 1/1/2011.......... CPID--03............ CL............... Jun-11

    Data record 13.................. SD--1............ COUNT............ CP--01........... Energy--Firm--1...... 1/1/2011.......... CPID--03............ CL............... Jul-11

    Data record 14.................. SD--1............ COUNT............ CP--01........... Energy--Firm--1...... 1/1/2011.......... CPID--03............ CL............... Aug-11

    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Cleared/uncleared CFTC clearing org Commodity reference Execution Long swap Short swap

    Data records indicator identifier price facility position position

    --------------------------------------------------------------------------------------------------------------------------------------------------------

    Data record 1.................... C................. CCO--ID--1........ NYMEX Light Sweet... EX1.............. 73 .................

    Data record 2.................... C................. CCO--ID--1........ NYMEX Light Sweet... EX1.............. 103 .................

    Data record 3.................... C................. CCO--ID--1........ NYMEX Light Sweet... EX1.............. 93 .................

    Data record 4.................... C................. CCO--ID--1........ NYMEX Light Sweet... EX1.............. 103 .................

    Data record 5.................... C................. CCO--ID--1........ NYMEX Light Sweet... EX1.............. 99 .................

    Data record 6.................... C................. CCO--ID--1........ NYMEX Light Sweet... EX1.............. 103 .................

    Data record 7.................... C................. CCO--ID--1........ NYMEX Light Sweet... EX1.............. 27 .................

    Data record 8.................... C................. CCO--ID--1........ NYMEX Light Sweet... EX1.............. ................. 73

    Data record 9.................... C................. CCO--ID--1........ NYMEX Light Sweet... EX1.............. ................. 103

    Data record 10................... C................. CCO--ID--1........ NYMEX Light Sweet... EX1.............. ................. 93

    Data record 11................... C................. CCO--ID--1........ NYMEX Light Sweet... EX1.............. ................. 103

    Data record 12................... C................. CCO--ID--1........ NYMEX Light Sweet... EX1.............. ................. 99

    Data record 13................... C................. CCO--ID--1........ NYMEX Light Sweet... EX1.............. ................. 103

    Data record 14................... C................. CCO--ID--1........ NYMEX Light Sweet... EX1.............. ................. 27

    --------------------------------------------------------------------------------------------------------------------------------------------------------

    Non-delta Non-delta Delta Delta

    Put/call Swaption expiration Swaption adjusted long adjusted short adjusted long adjusted long Long swap or Short swap or

    Data records indicator date strike price swaption swaption swaption swaption swaption notional swaption notional

    position position position position value position value position

    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Data record 1................... ................ ................... ............. ............... ............... ............. ............. $7,300,000......... ...................

    Data record 2................... ................ ................... ............. ............... ............... ............. ............. $10,300,000........ ...................

    Data record 3................... ................ ................... ............. ............... ............... ............. ............. $9,300,000......... ...................

    Data record 4................... ................ ................... ............. ............... ............... ............. ............. $10,300,000........ ...................

    Data record 5................... ................ ................... ............. ............... ............... ............. ............. $9,900,000......... ...................

    Data record 6................... ................ ................... ............. ............... ............... ............. ............. $10,300,000........ ...................

    Data record 7................... ................ ................... ............. ............... ............... ............. ............. $2,700,000......... ...................

    Data record 8................... ................ ................... ............. ............... ............... ............. ............. ................... $7,300,000

    Data record 9................... ................ ................... ............. ............... ............... ............. ............. ................... $10,300,000

    Data record 10.................. ................ ................... ............. ............... ............... ............. ............. ................... $9,300,000

    Data record 11.................. ................ ................... ............. ............... ............... ............. ............. ................... $10,300,000

    Data record 12.................. ................ ................... ............. ............... ............... ............. ............. ................... $9,900,000

    Data record 13.................. ................ ................... ............. ............... ............... ............. ............. ................... $10,300,000

    Data record 14.................. ................ ................... ............. ............... ............... ............. ............. ................... $2,700,000

    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Table 6--Example of Data Records Reported Under Sec. 20.4(c) for January 2, 2011 (Appx A, Example 1)

    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Principal/

    Commission counterparty 102S Swap counterparty Clearing org Futures

    Data records reporting entity position ID Counterparty name Reporting day cleared product ID Commodity code equivalent month

    ID indicator and year

    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Data record 1................... SD--1............ PRIN............. ...................... .................... 1/2/2011......... CPID--03........... CL.............. Feb-11

    Data record 2................... SD--1............ PRIN............. ...................... .................... 1/2/2011......... CPID--03........... CL.............. Mar-11

    Data record 3................... SD--1............ PRIN............. ...................... .................... 1/2/2011......... CPID--03........... CL.............. Apr-11

    Data record 4................... SD--1............ PRIN............. ...................... .................... 1/2/2011......... CPID--03........... CL.............. May-11

    Data record 5................... SD--1............ PRIN............. ...................... .................... 1/2/2011......... CPID--03........... CL.............. Jun-11

    Data record 6................... SD--1............ PRIN............. ...................... .................... 1/2/2011......... CPID--03........... CL.............. Jul-11

    Data record 7................... SD--1............ PRIN............. ...................... .................... 1/2/2011......... CPID--03........... CL.............. Aug-11

    Data record 8................... SD--1............ COUNT............ Counterparty--1....... Energy Firm......... 1/2/2011......... CPID--03........... CL.............. Feb-11

    Data record 9................... SD--1............ COUNT............ Counterparty--1....... Energy Firm......... 1/2/2011......... CPID--03........... CL.............. Mar-11

    Data record 10.................. SD--1............ COUNT............ Counterparty--1....... Energy Firm......... 1/2/2011......... CPID--03........... CL.............. Apr-11

    Data record 11.................. SD--1............ COUNT............ Counterparty--1....... Energy Firm......... 1/2/2011......... CPID--03........... CL.............. May-11

    Data record 12.................. SD--1............ COUNT............ Counterparty--1....... Energy Firm......... 1/2/2011......... CPID--03........... CL.............. Jun-11

    Data record 13.................. SD--1............ COUNT............ Counterparty--1....... Energy Firm......... 1/2/2011......... CPID--03........... CL.............. Jul-11

    Data record 14.................. SD--1............ COUNT............ Counterparty--1....... Energy Firm......... 1/2/2011......... CPID--03........... CL.............. Aug-11

    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Cleared/uncleared CFTC clearing org Commodity reference Execution Long swap

    Data records indicator identifier price facility position Short swap position

    --------------------------------------------------------------------------------------------------------------------------------------------------------

    Data record 1.................... C................. CCO--ID--1....... NYMEX Light Sweet.. EX1.............. 70 ...................

    [[Page 43874]]

    Data record 2.................... C................. CCO--ID--1....... NYMEX Light Sweet.. EX1.............. 103 ...................

    Data record 3.................... C................. CCO--ID--1....... NYMEX Light Sweet.. EX1.............. 93 ...................

    Data record 4.................... C................. CCO--ID--1....... NYMEX Light Sweet.. EX1.............. 103 ...................

    Data record 5.................... C................. CCO--ID--1....... NYMEX Light Sweet.. EX1.............. 99 ...................

    Data record 6.................... C................. CCO--ID--1....... NYMEX Light Sweet.. EX1.............. 103 ...................

    Data record 7.................... C................. CCO--ID--1....... NYMEX Light Sweet.. EX1.............. 27 ...................

    Data record 8.................... C................. CCO--ID--1....... NYMEX Light Sweet.. EX1.............. ................. 70

    Data record 9.................... C................. CCO--ID--1....... NYMEX Light Sweet.. EX1.............. ................. 103

    Data record 10................... C................. CCO--ID--1....... NYMEX Light Sweet.. EX1.............. ................. 93

    Data record 11................... C................. CCO--ID--1....... NYMEX Light Sweet.. EX1.............. ................. 103

    Data record 12................... C................. CCO--ID--1....... NYMEX Light Sweet.. EX1.............. ................. 99

    Data record 13................... C................. CCO--ID--1....... NYMEX Light Sweet.. EX1.............. ................. 103

    Data record 14................... C................. CCO--ID--1....... NYMEX Light Sweet.. EX1.............. ................. 27

    --------------------------------------------------------------------------------------------------------------------------------------------------------

    Non-delta Non-delta Delta

    Put/call Swaption expiration Swaption adjusted long adjusted short Delta adjusted adjusted long Long swap or Short swap or

    Data records indicator date strike price swaption swaption long swaption swaption swaption notional swaption notional

    position position position position value position value position

    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Data record 1................... ................ ................... .............. ................ ................ .............. ............. $6,650,000 .................

    Data record 2................... ................ ................... .............. ................ ................ .............. ............. $9,785,000 .................

    Data record 3................... ................ ................... .............. ................ ................ .............. ............. $8,835,000 .................

    Data record 4................... ................ ................... .............. ................ ................ .............. ............. $9,785,000 .................

    Data record 5................... ................ ................... .............. ................ ................ .............. ............. $9,405,000 .................

    Data record 6................... ................ ................... .............. ................ ................ .............. ............. $9,785,000 .................

    Data record 7................... ................ ................... .............. ................ ................ .............. ............. $2,565,000 .................

    Data record 8................... ................ ................... .............. ................ ................ .............. ............. ................. $6,650,000

    Data record 9................... ................ ................... .............. ................ ................ .............. ............. ................. $9,785,000

    Data record 10.................. ................ ................... .............. ................ ................ .............. ............. ................. $8,835,000

    Data record 11.................. ................ ................... .............. ................ ................ .............. ............. ................. $9,785,000

    Data record 12.................. ................ ................... .............. ................ ................ .............. ............. ................. $9,405,000

    Data record 13.................. ................ ................... .............. ................ ................ .............. ............. ................. $9,785,000

    Data record 14.................. ................ ................... .............. ................ ................ .............. ............. ................. $2,565,000

    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Issued by the Commission this 7th day of July, 2011 in

    Washington, DC.

    David Stawick,

    Secretary of the Commission.

    Appendices to Large Trader Reporting for Physical Commodity Swaps--

    Commission Voting Summary and Statements of Commissioners

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

    Federal Regulations.

    Appendix 1--Commission Voting Summary

    On this matter, Chairman Gensler and Commissioners Dunn,

    Sommers, O'Malia and Chilton voted in the affirmative; no

    Commissioner voted in the negative.

    Appendix 2--Statement of Chairman Gary Gensler

    I support the final rulemaking to establish large trader

    reporting for physical commodity swaps. This is a significant

    rulemaking that, for the first time, enables the CFTC to receive

    data from large traders in the commodity swaps markets.

    The American public has benefited for decades by the

    Commission's ability to gather large trader data in the futures

    market and use that data to police the markets. Today's large trader

    reporting rulemaking establishes that clearinghouses and swap

    dealers will have to report to the CFTC about the swaps activities

    of large traders in the physical swaps markets.

    Over time, as a result of the Dodd-Frank Act, the markets will

    benefit from swap data repositories. Today's rulemaking will enable

    the Commission to gather important swaps data until there are

    robust, well-regulated swap data repositories. This data will be

    useful for the Commission to monitor and police the markets,

    including establishing and enforcing position limits.

    [FR Doc. 2011-18054 Filed 7-21-11; 8:45 am]

    BILLING CODE P

    Last Updated: July 22, 2011



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