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2011-33173

  • Federal Register, Volume 77 Issue 5 (Monday, January 9, 2012)[Federal Register Volume 77, Number 5 (Monday, January 9, 2012)]

    [Rules and Regulations]

    [Pages 1182-1266]

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

    [FR Doc No: 2011-33173]

    [[Page 1181]]

    Vol. 77

    Monday,

    No. 5

    January 9, 2012

    Part III

    Commodity Futures Trading Commission

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    17 CFR Part 43

    Real-Time Public Reporting of Swap Transaction Data; Final Rule

    Federal Register / Vol. 77 , No. 5 / Monday, January 9, 2012 / Rules

    and Regulations

    [[Page 1182]]

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    COMMODITY FUTURES TRADING COMMISSION

    17 CFR Part 43

    RIN 3038-AD08

    Real-Time Public Reporting of Swap Transaction Data

    AGENCY: Commodity Futures Trading Commission.

    ACTION: Final rule.

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    SUMMARY: The Commodity Futures Trading Commission (``CFTC'' or

    ``Commission'') is adopting regulations to implement certain statutory

    provisions enacted by the Dodd-Frank Wall Street Reform and Consumer

    Protection Act (``Dodd-Frank Act''). Specifically, in accordance with

    the Dodd-Frank Act, the Commission is adopting rules to implement a

    framework for the real-time public reporting of swap transaction and

    pricing data for all swap transactions.

    DATES: Effective date: March 9, 2012.

    FOR FURTHER INFORMATION CONTACT: Thomas Leahy, Associate Director,

    Division of Market Oversight (``DMO'') at (202) 418-5278 or

    tleahy@cftc.gov; Jeffrey L. Steiner, Special Counsel, DMO at (202) 418-

    5482 or jsteiner@cftc.gov; Susan Nathan, Senior Special Counsel, DMO at

    (202) 418-5133 or snathan@cftc.gov; Jason Shafer, Attorney-Advisor,

    Office of General Counsel at (202) 418-5097 or jshafer@cftc.gov; or

    Laurie Gussow, Attorney-Advisor, DMO at (202) 418-7623 or

    lgussow@cftc.gov; Commodity Futures Trading Commission, Three Lafayette

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

    SUPPLEMENTARY INFORMATION:

    Table of Contents

    I. Background

    A. Overview

    B. Summary of the Proposed Part 43 Regulations

    1. Proposed Sec. 43.3--Method and Timing for Real-Time Public

    Reporting

    2. Proposed Sec. 43.4--Swap Transaction and Pricing Data To Be

    Publicly Disseminated in Real-Time

    3. Proposed Sec. 43.5--Block Trades and Large Notional Swaps

    for Particular Markets and Transactions

    4. Proposed Appendix A to Part 43

    C. Overview of Comments Received

    D. Proposed Sec. 43.5--Block Trades and Large Notional Swaps

    II. Part 43 of the Commission's Regulations--Final Rules

    A. Section 43.1--Purpose, Scope and Rules of Construction

    1. Scope--Generally

    2. Swaps Between Affiliates and Portfolio Compression Exercises

    3. Uncleared or Bespoke Swaps

    4. Foreign Exchange (``FX'') Asset Class

    5. Limitations and Special Accommodations

    6. Liquidity

    7. International Issues

    8. Final Rule Text of Sec. 43.1

    B. Section 43.2--Definitions

    1. Harmonization

    2. Defined Terms

    3. Additional Issues Relating to Defined Terms

    C. Section 43.3--Method and Timing for Real-Time Public

    Reporting

    1. Responsibilities of Parties to a Swap (Sec. 43.3(a))

    2. Public Dissemination of Swap Transaction and Pricing Data

    (Sec. 43.3(b))

    3. Requirements for Registered Swap Data Repositories in

    Providing the Public Dissemination of Swap Transaction and Pricing

    Data (Sec. 43.3(c))

    4. Requirements for Third-Party Service Providers (Proposed

    Sec. 43.3(d))

    5. Availability of Swap Transaction and Pricing Data to the

    Public (Sec. 43.3(d))

    6. Errors and Omissions (Sec. 43.3(e))

    7. Hours of Operation of Registered Swap Data Repositories

    (Sec. 43.3(f))

    8. Acceptance of Data During Closing Hours (Sec. 43.3(g))

    9. Timestamp Requirements (Sec. 43.3(h))

    10. Fees Charged by SDRs (Sec. 43.3(i))

    D. Section 43.4--Swap Transaction and Pricing Data to be

    Publicly Disseminated in Real-Time

    1. In General (Sec. 43.4(a))

    2. Public Dissemination of Data Fields (Sec. 43.4(b))

    3. Additional Swap Information (Sec. 43.4(c))

    4. Amendments to Data Fields (Proposed Sec. 43.4(d))

    5. Anonymity of the Parties to a Publicly Reportable Swap

    Transaction (Sec. 43.4(d))

    6. Unique Product Identifier (Sec. 43.4(e))

    7. Reporting of Notional or Principal Amounts to a Registered

    Swap Repository (Sec. 43.4(f))

    8. Public Dissemination of Rounded Notional or Principal Amounts

    (Sec. 43.4(g))

    9. Public Dissemination Caps on Notional or Principal Amounts

    (Sec. 43.4(h))

    E. Section 43.5--Time Delays for Public Dissemination of Swap

    Transaction and Pricing Data

    F. Appendix A to Part 43 (``Data Fields for Public

    Dissemination'')

    III. Effectiveness/Implementation and Interim Period

    IV. Paperwork Reduction Act

    V. Cost-Benefit Considerations

    VI. Regulatory Flexibility Act

    VII. List of Commenters

    I. Background

    A. Overview

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

    Wall Street Reform and Consumer Protection Act (the ``Dodd-Frank Act'')

    \1\ Title VII of which amended the Commodity Exchange Act (``CEA'' or

    the ``Act'') \2\ to establish a comprehensive new regulatory framework

    for swaps and security-based swaps. The legislation was intended to

    reduce risk, increase transparency and promote market integrity within

    the financial system by, among other things: (1) Providing for the

    registration and comprehensive regulation of swap dealers (``SDs'') and

    major swap participants (``MSPs''); (2) imposing clearing and trade

    execution requirements on standardized derivative products; (3)

    creating robust recordkeeping and real-time reporting regimes; and (4)

    enhancing the Commission's rulemaking and enforcement authorities with

    respect to, among others, all registered entities and intermediaries

    subject to the Commission's oversight.

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    \1\ Public Law 111-203, 124 Stat. 1376 (2010), available at

    http://www.cftc.gov/LawRegulation/OTCDERIVATIVES/index.htm. Pursuant

    to section 701 of the Dodd-Frank Act, Title VII may be cited as the

    ``Wall Street Transparency and Accountability Act of 2010.''

    \2\ 7 U.S.C. 1, et seq.

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    Section 727 of the Dodd-Frank Act added to the CEA new section

    2(a)(13), which establishes standards and requirements related to real-

    time reporting and the public availability of swap transaction and

    pricing data. This section directs the Commission to promulgate rules

    providing for the public availability of such data in real-time,\3\ in

    such form and at such times as the Commission deems appropriate to

    enhance price discovery.\4\ CEA section 2(a)(13)(C) establishes the

    four types of swaps for which transaction and pricing data must be

    reported to the public in real-time.\5\ Because these categories

    together comprise all swaps, the real-time reporting requirements apply

    to all swaps, including those swaps executed on or pursuant to the

    rules of a registered swap execution facility (``SEF'') or a designated

    contract market (``DCM''), and those swaps executed bilaterally between

    counterparties and

    [[Page 1183]]

    not pursuant to the rules of a SEF or DCM (``off-facility swaps'').\6\

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    \3\ New Section 2(a)(13)(A) of the CEA defines real-time public

    reporting as reporting ``data relating to a swap transaction,

    including price and volume, `as soon as technologically practicable'

    after the time at which the swap transaction has been executed.''

    \4\ CEA section 2(a)(13)(B) states that ``[t]he purpose of this

    section is to authorize the Commission to make swap transaction and

    pricing data available to the public in such form and at such times

    as the Commission determines appropriate to enhance price

    discovery.''

    \5\ The four categories are: (i) Swaps that are subject to the

    mandatory clearing requirement in CEA section 2(h)(1) [added by

    Section 723(a)(3) of the Dodd-Frank Act]; (ii) swaps that are not

    subject to the mandatory clearing requirement but are nonetheless

    cleared at a registered derivatives clearing organization (``DCO'');

    (iii) swaps that are not cleared at a registered DCO and which are

    reported to a registered swap data repository (``SDR'') or to the

    Commission pursuant to CEA section 2(h)(6); and (iv) swaps that are

    ``determined to be required to be cleared'' under CEA section

    2(h)(2) but are not cleared.

    \6\ As explained more fully in the Commission's Notice of

    Proposed Rulemaking, the legislative history of the Dodd-Frank Act

    suggests that the real-time reporting requirements of CEA section

    2(a)(13) apply to all swaps. See Commission, Notice of Proposed

    Rulemaking: Real-Time Public Reporting of Swap Transaction Data, 75

    FR 76140 (Dec. 7, 2010) (``Real-Time NPRM'' or ``Proposing

    Release'').

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    With regard to swaps that are subject to the mandatory clearing

    requirement (or excepted from such requirement) and those that are not

    required to be cleared by a registered DCO but are cleared, CEA section

    2(a)(13)(E) directs the Commission to prescribe rules that (i) ensure

    that publicly disclosed information does not identify the participants;

    (ii) specify the criteria for determining what constitutes a large

    notional swap transaction (block trade) for particular markets and

    contracts; (iii) specify the appropriate time delay for reporting large

    notional swap transactions (block trades) to the public; and (iv) take

    into account whether public disclosure will materially reduce market

    liquidity. CEA section 2(a)(13)(E) does not require explicitly that the

    rules promulgated by the Commission contain similar provisions for the

    uncleared swaps described in CEA section 2(a)(13)(C)(iii) and (iv).

    However, in exercising its authority under CEA section 2(a)(13)(B) to

    ``make swap transaction and pricing data available to the public in

    such form and at such times as the Commission determines appropriate to

    enhance price discovery,'' the Commission is authorized to prescribe

    rules similar to those provisions in CEA section 2(a)(13)(E) for

    uncleared swaps described in CEA sections 2(a)(13)(C)(iii) and (iv).\7\

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    \7\ In addition, the Commission is required by CEA section

    2(a)(13)(C)(iii) to prescribe real-time public reporting

    requirements for uncleared swaps, other than those uncleared swaps

    described in CEA section 2(a)(13)(C)(iv), ``in a manner that does

    not disclose the business transactions and market positions of any

    person.''

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    B. Summary of the Proposed Part 43 Regulations

    On December 7, 2010, the Commission published for comment proposed

    part 43 of its regulations to implement the real-time reporting mandate

    of the Dodd-Frank Act.\8\ At the foundation of these regulations was

    the Commission's belief that real-time public dissemination of swap

    transaction and pricing data supports the fairness and efficiency of

    markets and increases transparency, which in turn improves price

    discovery and decreases risk (e.g., liquidity risk). The Commission's

    Proposing Release thus introduced, in addition to definitions of terms

    and processes relevant to real-time public reporting, rules governing:

    (1) The entities or persons that shall be responsible for reporting

    swap transaction and pricing data; (2) the entities or persons that

    shall be responsible for publicly disseminating such data; (3) the data

    fields and guidance with respect to the appropriate format and manner

    for data to be reported to the public in real time; (4) the appropriate

    minimum size and time delay for block trades and large notional swaps;

    and (5) the proposed effective date and implementation schedule for the

    proposed rules.

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    \8\ See Real-Time NPRM supra note 6. Interested persons are

    directed to the Real-Time NPRM for a full discussion of each of the

    proposed part 43 rules.

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    The Commission's proposed part 43 rules reflected consultation with

    staff of both the Securities and Exchange Commission (the ``SEC'') \9\

    and the Board of Governors of the Federal Reserve.\10\ The proposed

    rules also were informed by discussions during a joint public

    roundtable to discuss swap data, SDRs and real-time reporting conducted

    by CFTC and SEC staff on September 14, 2010 (the ``Roundtable'');

    public comments received and posted on the Commission's Internet Web

    site; \11\ and meetings and discussions between CFTC staff and market

    participants.

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    \9\ Section 763 of the Dodd-Frank Act authorizes the SEC to

    promulgate rules ``to provide for the public availability of

    security-based swap transaction, volume, and pricing data * * *.''

    The SEC is adopting rules related to the real-time reporting of

    security-based swaps as required by Section 763 of the Dodd-Frank

    Act.

    \10\ Section 712(a)(1) of the Dodd-Frank Act requires staff to

    consult with the SEC and other prudential regulators.

    \11\ Comment letters received in response to the Proposing

    Release may be found on the Commission's Web site at http://comments.cftc.gov/PublicComments/CommentList.aspx?id=919.

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

    As proposed, part 43 applied to all swaps \12\ as defined in CEA

    section 1a(47) and as may be further defined by Commission regulations.

    The proposed rules applied real-time reporting requirements to

    registered entities (SEFs, DCMs and registered swap data repositories

    (``SDRs'')) and the swap counterparties--including registered or exempt

    SDs, registered or exempt MSPs and U.S.-based end-users.

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    \12\ As noted, the categories of swaps described in CEA section

    2(a)(13)(C) account for all swaps, whether cleared or uncleared and

    regardless of whether executed on or pursuant to the rules of a SEF

    or DCM, or executed off-facility.

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    1. Proposed Sec. 43.3--Method and Timing for Real-Time Public

    Reporting

    CEA section 2(a)(13) directed the Commission to prescribe rules

    specifying the method and timing for real time public reporting.

    Consistent with that mandate, the Commission proposed in Sec. 43.3 to

    require: (1) The parties to a swap transaction (including agents of the

    parties) to report swap transaction and pricing data to the appropriate

    registered entity in a timely manner; \13\ and (2) registered entities

    to publicly disseminate swap transaction and pricing data.\14\ To

    implement its authority to make swap transaction and pricing data

    available to the public in such form and at such times as it determines

    appropriate to enhance price discovery, the Commission proposed in

    Sec. 43.3 to establish the manner in which swap counterparties must

    report the swap transaction and pricing data to the appropriate

    registered entity, the manner in which registered entities must

    publicly disseminate the data in real time and the responsibilities of

    the reporting party to each swap. Proposed Sec. 43.3 also established

    requirements for acceptance and public dissemination of swap

    transaction and pricing data by SDRs and third-party service providers

    and specified standards for data recordkeeping and retention as well as

    availability and accessibility of real-time swap transaction and

    pricing data. In addition, proposed Sec. 43.3 established the process

    by which errors or omissions in publicly disseminated swap transaction

    and pricing data would be cancelled and/or corrected, the hours of

    operation for SDRs and the procedures for scheduling closing hours.

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    \13\ See CEA section 2(a)(13)(F).

    \14\ See CEA section 2(a)(13)(D).

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    2. Proposed Sec. 43.4--Swap Transaction and Pricing Data To Be

    Publicly Disseminated in Real-Time

    CEA section 2(a)(13)(B) directs the Commission to make swap

    transaction and pricing data available to the public in such form and

    at such times as the Commission determines appropriate to enhance price

    discovery. Proposed Sec. 43.4 required that swap transaction

    information be reported to a real-time disseminator and established the

    manner and format in which this data will be publicly disseminated. In

    that regard, appendix A to proposed part 43 provides a list of data

    fields which an SDR must publicly disseminate regarding swap

    transactions, and pricing data, as well as guidance on an acceptable

    public reporting format and order for the listed data fields.

    CEA sections 2(a)(13)(C) and (E) reflect Congress' intent that

    regulators ``ensure that the public reporting of swap transactions and

    pricing data does not disclose the names or identities of

    [[Page 1184]]

    the parties to the transactions.'' \15\ In response, the Commission

    proposed in Sec. 43.4(e)(1) to prohibit the public dissemination of

    swap transaction and pricing information which identifies or otherwise

    facilitates the identification of a party to a swap. This section

    further provided that an SDR may not report such data in a manner that

    discloses or otherwise facilitates the identification of a party to a

    swap. The Commission recognized that the latter prohibition may result

    in a loss of clarity with respect to the precise characteristics of

    swaps in certain circumstances, and required in proposed Sec.

    43.4(e)(2) that a reporting party or a swap market \16\ provide the

    real-time disseminator with a specific description of the underlying

    asset and tenor of a swap that is general enough to provide anonymity

    but specific enough to permit a meaningful understanding of the swap.

    For certain off-facility swaps--particularly ``other commodity'' swaps

    that have underlying assets with specific delivery or pricing points--

    market participants may be able to infer the identity of a party or

    swap counterparties based on the description of an underlying asset.

    Accordingly, proposed Sec. 43.4(e)(2) was intended to permit reporting

    parties of off-facility swaps to publicly disseminate a description of

    an underlying asset or tenor in a way that does not disclose a party to

    a swap but nonetheless provides a meaningful understanding of the swap

    for purposes of enhancing price discovery.\17\

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    \15\ 156 Cong. Rec. S5921 (daily ed. July 15, 2010) (Statement

    of Sen. Blanche Lincoln).

    \16\ The term ``swap market'' was defined in proposed Sec.

    43.2(z) as ``any registered swap execution facility or registered

    designated contract market that makes swaps available for trading.''

    As discussed below, the Commission is not adopting the term ``swap

    market'' and is, for clarity, changing such references to

    ``registered swap execution facility or designated contract

    market.''

    \17\ The Commission described a hypothetical example in which

    the underlying asset to an off-facility swap that has a specific

    delivery point at Lake Charles, Louisiana--a contract commonly known

    to be traded by only two companies. Disclosing the underlying asset

    to the public would effectively disclose that one of those two

    companies was entering into the trade. See Real-Time NPRM supra note

    6, at 76150. Proposed Sec. 43.4(e)(2) would enable the reporting

    party to use a broader geographic region in place of the specific

    delivery point.

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    In proposing Sec. 43.4(e), the Commission recognized that SEFs and

    DCMs may differ and that new types of swaps may emerge. For that

    reason, the Commission did not propose specific guidelines for

    describing an underlying asset for the purposes of this rule. Because

    the specificity of the description would vary based on particular

    markets and contracts, the proposed rules were intended to provide

    reporting parties with discretion in reporting swap transaction and

    pricing data. Proposed Sec. 43.4(e)(2) and proposed part 23 of the

    Commission's regulations \18\ would require SDs and MSPs who do not

    specifically describe an underlying asset and/or tenor because such

    disclosure would facilitate the identification of a counterparty, to

    document why the specific information was not publicly disseminated.

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    \18\ The Commission issued proposed part 23 which was published

    in the Federal Register on November 23, 2010. 75 FR 71397. Proposed

    part 23 provided, inter alia, the business conduct standards for SDs

    and MSPs. Proposed Sec. 23 establishes reporting, recordkeeping,

    and daily trading records requirements for SDs and MSPs.

    Specifically, Sec. 23.201(d) provides that SDs and MSPs would be

    required to maintain records of information required to be reported

    on a real-time basis and records of information relating to large

    notional swaps in accordance with proposed part 43 and CEA section

    (2)(a)(13). When a less specific data field is reported in order to

    protect anonymity of participants to such swap, then the record must

    contain the rationale for reporting a less specific data field. The

    comment period for proposed part 23 closed on June 3, 2011; however

    the rule has not yet been adopted.

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    The Commission anticipated that unique product identifiers may

    develop for various swap products in various markets. Proposed Sec.

    43.4(f) provided that if a unique product identifier is developed that

    sufficiently describes the information in one or more of the data

    fields for public dissemination, consistent with appendix A to proposed

    part 43, the unique product identifier may be used in lieu of such data

    fields. Absent a unique product identifier, the publicly disseminated

    swap transaction and pricing data must contain all of the appropriate

    product identification fields in appendix A to proposed part 43.

    As proposed, Sec. 43.4(g) required public dissemination of any

    swap-specific event \19\ that occurs during the life of a swap and

    affects the price of the swap (a ``price forming continuation event'').

    Proposed Sec. Sec. 43.4(h) and (i) would govern public reporting of

    the notional or principal amount for all swaps. As proposed, these

    rules would require (i) a reporting party to transmit to a SEF or DCM

    the actual notional or principal size of any swap (including large

    notional swaps) or any block trade; and (ii) a SEF or DCM to transmit

    to a real-time disseminator the actual notional or principal size for

    all swaps executed on or pursuant to its rules. Section 43.4(j)

    proposed a rounding convention for notional or principal size and

    provided that the rounding should be applied at the point of public

    dissemination.

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    \19\ Swap-specific events would include novations, swap unwinds,

    partial novations and partial swap unwinds.

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    3. Proposed Sec. 43.5--Block Trades and Large Notional Swaps for

    Particular Markets and Transactions

    CEA sections 2(a)(13)(E)(ii) and (iii) require the Commission to

    prescribe rules ``to specify the criteria for determining what

    constitutes a large notional swap transaction (block trade) for

    particular markets and contracts'' and ``to specify the appropriate

    time delay for reporting large notional swap transactions (block

    trades) to the public,'' with respect to swaps subject to the clearing

    mandate (including swaps that are excepted from the clearing mandate

    pursuant to CEA section 2(h)(7)) and those swaps that are not subject

    to the clearing mandate but are cleared. Similar provisions are not

    explicitly required for uncleared swaps, however, the Commission is

    authorized pursuant to its authority under CEA section 2(a)(13)(B) to

    prescribe similar rules for uncleared swaps described in CEA sections

    2(a)(13)(C)(iii) and (iv). Proposed Sec. 43.5 established: (1) The

    procedures for determining the appropriate minimum sizes for block

    trades and large notional swaps; and (2) the appropriate time delays

    for the reporting of block trades and large notional swaps. In

    describing the proposed block trade rules, the Commission noted that it

    would continue to analyze and study the effects of increased

    transparency on post-trade liquidity in the context of block trades and

    large notional swaps.\20\ The Commission anticipated that new data

    would continue to inform this discussion and could cause subsequent

    revision of the Proposing Release.

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    \20\ See 75 FR 76159 at note 67.

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    As noted, CEA section 2(a)(13)(A) requires that all parties to swap

    transactions, including parties to block trades and large notional

    swaps, report data relating to swap transactions ``as soon as

    technologically practicable after the time at which the swap

    transaction has been executed.'' The Dodd-Frank Act also requires that

    the Commission promulgate rules ``to specify the appropriate time delay

    for reporting large notional swaps transactions (block trades) to the

    public.'' \21\ In writing such rules, the Commission is charged to

    ``take into account whether public disclosure will materially reduce

    market

    [[Page 1185]]

    liquidity.'' \22\ The Commission recognized that the potential market

    impact of reporting a block trade or large notional swap is an

    important consideration in the determination of an appropriate time

    delay before public dissemination of block trade or large notional swap

    transaction and pricing data. Proposed Sec. 43.5(k) specified the

    appropriate time delays for public dissemination of block trades and

    large notional swaps and established that the time delay for public

    dissemination begins at execution of the swap.

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

    \21\ CEA section 2(a)(13)(E)(iii). As noted above, the

    Commission is only required to prescribe rules relating to CEA

    section 2(a)(13)(E) for swaps subject to the mandatory clearing

    requirement (including those excepted from such requirement pursuant

    to CEA section 2(h)(7)) and swaps that are not subject to the

    mandatory clearing requirement but are cleared, as described in CEA

    sections 2(a)(13)(C)(i) and (ii).

    \22\ CEA section 2(a)(13)(E)(iv). As noted above, the Commission

    is only required to prescribe rules relating to CEA section

    2(a)(13)(E) for swaps subject to the mandatory clearing requirement

    (including those excepted from such requirement pursuant to CEA

    section 2(h)(7)) and swaps that are not subject to the mandatory

    clearing requirement but are cleared, as described in CEA sections

    2(a)(13)(C)(i) and (ii).

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    4. Proposed Appendix A to Part 43

    The Commission anticipated that real-time swap transaction and

    pricing data may be publicly disseminated by multiple real-time

    disseminators in the same asset class. In order to minimize the effects

    of fragmentation and enhance consistency both within and among asset

    classes, the Commission proposed in appendix A to part 43 a number of

    data fields that should be publicly disseminated and provided guidance

    on the format and manner of reporting. The Commission believes that the

    public dissemination of standardized data should reduce the search

    costs to the public and market participants while increasing

    consolidation of real-time swap transaction and pricing data and

    promoting post-trade transparency and price discovery.

    C. Overview of Comments Received \23\

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    \23\ In addition to the comments specifically discussed herein,

    the Commission also received comments from various groups during the

    course of external meetings. Those commenters include, among others:

    Rabobank Nederland, Insurance Groups (American Counsel of Life

    Insurers, Genworth, Manulife, John Hancock Life, New York Life,

    Northwestern Mutual, Prudential, MetLife and Allstate Life);

    Fidelity Investments; and Vanguard.

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    The Commission received comments from 88 interested parties \24\

    representing a cross-section of the global financial services industry,

    including trade associations for both financial and non-financial end-

    users, potential SDs and MSPs; law firms representing diverse

    interests; exchanges; and numerous service and technology

    providers.\25\ While many commenters expressed general support for the

    proposed part 43 rules, they also offered recommendations for

    clarification or modification of specific proposed regulations. Other

    commenters objected to particular aspects of the Proposing Release.

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    \24\ The initial comment period with respect to proposed part 43

    closed on February 7, 2011. The comment periods for most proposed

    rulemakings implementing the Dodd-Frank Act--including the proposed

    part 43 rules--subsequently were reopened for the period of April 27

    through June 2, 2011.

    \25\ A complete list of the full names and abbreviations of

    commenters is included in section VII at the end of this release;

    comment letters are available through the Commission Web site at

    http://comments.cftc.gov/PublicComments/CommentList.aspx?id=919.

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

    In addition to a general solicitation for comment on all aspects of

    the Proposing Release, the Commission requested comment on a number of

    specific, focused questions related to particular provisions. For

    example, commenters were asked to address issues related to (i) the

    appropriate implementation schedule for the final rules; (ii) which

    swap counterparties should be covered by the reporting requirements of

    part 43 in order to enhance price discovery; (iii) the responsibilities

    of the swap counterparties to report swap transaction and pricing data

    (including the advisability of establishing maximum timeframes in which

    reporting parties must report data to an SDR); (iv) whether the final

    rules should address the reporting and public dissemination of swap

    transaction and pricing data for swaps transacted between two non-U.S.

    persons; (v) the circumstances under which SEFs and DCMs are deemed to

    have satisfied their public dissemination requirements; (vi)

    recordkeeping and retention requirements, including the anticipated

    costs associated with storing real-time swap transaction and pricing

    data for an extended period of time; (vii) protection of the anonymity

    of swap counterparties (including the utility of rounding notional

    amounts); (viii) the utility of the proposed data fields (including

    whether dissemination of additional data fields would enhance

    transparency and price discovery); and (ix) whether there would be an

    adverse price impact for traders and/or an impact on liquidity if all

    market participants knew the swap transaction and pricing details of

    all swaps in real-time.

    As noted, the SEC is separately authorized by section 763 of the

    Dodd-Frank Act to adopt real-time reporting rules for security-based

    swaps (``SBSs''). Because the Commission and the SEC regulate different

    products and markets and thus may have proposed differing regulatory

    requirements, the Commission particularly requested comments on the

    impact of any differences between the two regulatory approaches.

    The Commission also requested comment with respect to its cost-

    benefit considerations generally, and specifically asked whether there

    are alternative ways it can meet its mandate under section 727 of the

    Dodd-Frank Act in a less costly manner. Similarly, commenters were

    invited to submit data or other information quantifying or qualifying

    the costs and benefits of the Proposing Release.

    The comments received will be addressed as appropriate throughout

    the following discussion of the final rules.

    D. Proposed Sec. 43.5--Block Trades and Large Notional Swaps

    Several commenters urged that the Commission study additional data

    before setting appropriate minimum block sizes and time delays \26\ for

    public dissemination of block trades and large notional off-facility

    swaps.\27\ The Commission recognized the merit in those concerns, and

    subsequent to publication of the proposed part 43 rules, it continued

    to receive and analyze swap data for various asset classes in order to

    make informed decisions with respect to the appropriate criteria for

    determining block trade sizes and the initial appropriate minimum block

    trade sizes. The Commission agrees with the commenters that additional

    analysis is necessary prior to issuance of final rules for appropriate

    minimum block sizes, and accordingly has determined not to make final

    its proposed Sec. 43.5 rules specifying the criteria for determining

    block trade sizes. Instead, the Commission intends to issue a separate

    notice of proposed rulemaking that will specifically address the

    appropriate criteria for determining appropriate minimum block trade

    sizes in light of data and comments received.\28\ Comments on these

    issues received in connection with the instant rulemaking will be

    considered by the Commission in its re-proposal of the block trade

    rules.

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

    \26\ Commenters included: MFA; Barclays; AII; GS; UBS; GFXD;

    Freddie Mac; ISDA/SIFMA; Better Markets; ABC/CIEBA; SIFMA AMG;

    WMBAA; FHLBanks; Coalition for Derivatives End-Users; Cleary; and

    Vanguard.

    \27\ In light of clarifications in Sec. 43.2, the terms ``large

    notional swap'' and ``large notional off-facility swap'' will be

    used interchangeably throughout this Adopting Release. See infra

    note 29.

    \28\ The notice of proposed rulemaking regarding block trade

    sizes and criteria is referenced throughout this release as the

    ``block trade re-proposal'' or ``re-proposal of the block trade

    rules.''

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

    II. Part 43 of the Commission's Regulations--Final Rules

    As proposed in the Real-Time NPRM, the provisions of part 43

    governed the

    [[Page 1186]]

    method and timing of real-time public reporting; swap transaction and

    pricing data to be publicly disseminated in real-time; and time delays

    for public dissemination of swap transaction and pricing data. The

    purpose, scope and rules of construction of part 43 were established in

    proposed Sec. 43.1; proposed definitions of terms and processes

    relevant to real-time public reporting were specified in proposed Sec.

    43.2. Proposed Sec. 43.3 established the method and timing for real-

    time public reporting and dissemination of swap transaction and pricing

    data; this rule also delineated the responsibilities of swap

    counterparties and SDRs, and established procedures for recordkeeping,

    correction of errors and omissions, and hours of operation. Proposed

    Sec. 43.4 specified the format in which swap transaction and pricing

    data would be publicly disseminated and appendix A to proposed part 43

    described the fields for which an SDR must publicly disseminate swap

    transaction and pricing data. As proposed, Sec. 43.5 prescribed the

    criteria for determining what constitutes a large notional swap

    transaction (block trade) and specified the appropriate time delay for

    reporting block trades to the public.

    While the Commission has adopted the part 43 rules substantially as

    proposed, there are several salient changes.\29\ As noted above, the

    Commission is not adopting those elements of proposed Sec. 43.5

    relating to the establishment of block trade sizes. The Commission

    believes, in accordance with comments, that further study and analysis

    of block trade data is necessary prior to establishing minimum block

    trade size and for that reason has determined to make final only those

    elements of proposed Sec. 43.5 relating to timestamp requirements and

    time delays for the public dissemination of swap transaction and

    pricing data. In that regard, Sec. 43.5 provides that until the

    Commission establishes an appropriate minimum block size for a swap or

    group of swaps, the time delays specified therein will apply to all

    swaps that do not have an appropriate minimum block size. The anonymity

    provisions in Sec. 43.4 have been clarified, and the Commission has

    eliminated a provision in proposed Sec. 43.3 which would have

    permitted dissemination of swap transaction and pricing data by third-

    party service providers. Instead, the Commission will require that all

    public dissemination of such data occur through an SDR. Unless

    otherwise discussed in this section, the regulations are adopted as

    proposed.

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

    \29\ This adopting release is referred to herein as the

    ``Adopting Release.''

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

    A. Section 43.1--Purpose, Scope and Rules of Construction

    Proposed Sec. 43.1 applied to all swaps as defined in CEA section

    1a(47) and as may be further defined by Commission regulation. The

    provisions of part 43 also applied to the categories of swaps set forth

    in CEA section 2(a)(13)(C); those categories account for the universe

    of swaps subject to the Dodd-Frank Act's regulatory regime, whether

    cleared or uncleared, and regardless of whether executed on a SEF, DCM

    or off-facility. The proposed rules applied real-time reporting

    requirements to SEFs, DCMs, SDRs and the swap counterparties, including

    registered or exempt SDs, registered or exempt MSPs and U.S.-based end-

    users. The Commission requested comment generally on the scope of

    transactions covered by this part, and specifically with respect to

    which swap counterparties should be subject to the reporting

    requirements of this part.

    1. Scope--Generally

    Proposed Sec. 43.1(a) stated that the purpose of part 43 related

    to ``the collection and public dissemination of certain swap

    transaction and pricing data to enhance transparency and price

    discovery.'' \30\ As proposed, Sec. 43.1(b)(1) stated that the

    provisions of part 43 applied to all swaps as defined in CEA section

    1(a)(47) and any implementing regulations therefrom, including the

    categories of swaps set forth in section 2(a)(13)(C) of the Act.\31\

    Further, proposed Sec. 43.1(b)(2) provided that the provisions of part

    43 apply to all SEFs, DCMs, SDRs and swap counterparties (including

    registered or exempt SDs, registered or exempt MSPs and U.S.-based end-

    users). Proposed Sec. 43.1(c) specified the rules of construction for

    part 43, and explained that although the examples in part 43 and the

    related appendices are not exclusive, compliance with an example would

    constitute compliance with such portions of the rule to which the

    example relates.

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

    \30\ CEA section 2(a)(13)(B) provides that the purpose of

    section 727 of the Dodd-Frank Act is ``to authorize the Commission

    to make swap transaction and pricing data available to the public in

    such form and at such times as the Commission determines appropriate

    to enhance price discovery.''

    \31\ CEA section 2(a)(13)(C) provides that ``[t]he Commission is

    authorized and required to provide by rule for the public

    availability of swap transaction and pricing data'' for four

    categories of swaps: (1) Swaps subject to the mandatory clearing

    requirement described in CEA section 2(h)(1) (including those swaps

    that are excepted from the requirement pursuant to CEA section

    2(h)(7)); (2) swaps that are not subject to the mandatory clearing

    requirement described in CEA section 2(h)(1), but are cleared at a

    registered DCO; (3) swaps that are not cleared at a registered DCO

    and are reported to an SDR under CEA section 2(h)(6) (reporting for

    this category of swaps must be done in a manner that does not

    disclose the business transactions and market positions of any

    person); and (4) swaps that are determined to be required to be

    cleared under CEA section 2(h)(2) but are not cleared.

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

    Forty-six commenters addressed various aspects of the scope

    provisions.\32\ Commenters expressed concerns related to swaps between

    affiliates, portfolio compression exercises,\33\ uncleared and bespoke

    \34\ swaps, end-user to end-user swaps, foreign exchange swaps,

    international issues, distress scenarios and other scope-related

    issues.\35\

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

    \32\ See supra note 23.

    \33\ A separate proposed rulemaking under part 23 addresses

    rules relating to portfolio compression. 75 FR 81519 (Dec. 18,

    2010).

    \34\ As used throughout this Adopting Release, ``bespoke''

    indicates that a swap is off-facility and is not standardized.

    \35\ In addition, one commenter stated that the reporting and

    disclosure requirements could violate the First and Fifth Amendments

    to the United States Constitution by purportedly compelling ``non-

    commercial speech'' without satisfying a heightened standard and by

    ``taking'' protected private information without just compensation.

    See CL-Sadis and Goldberg. The Commission has carefully considered

    these comments and pertinent judicial precedent. It believes that

    the data reporting and disclosure requirements at issue would not

    violate the First Amendment because, among other reasons, the

    information at issue is commercial speech subject to a lower,

    reasonably-related standard. See, e.g., Zauderer v. Office of

    Disciplinary Counsel of Supreme Court of Ohio, 471 U.S. 626, 650-53

    (1985) (state bar did not violate First Amendment by requiring

    attorneys to fully disclose fee and cost arrangements in

    advertisements; the speech was commercial because it pertained to

    the economic interests of the parties, applicable standard was

    therefore whether the disclosure requirement was reasonably related

    to legitimate state interest, and the disclosure requirement at

    issue was rationally related to the state's interest in preventing

    deception of consumers). The Commission also believes that the

    requirements at issue would not violate the Fifth Amendment. Among

    other reasons, participants have no reasonable investment-backed

    expectation that information they submit will be kept confidential

    because they voluntarily submit it, knowing that it will be publicly

    disclosed to the extent provided by statute and regulation. In

    addition, the reporting and disclosure requirements are reasonably

    related to the government's legitimate interests in transparency and

    price discovery. See, e.g., Ruckelshaus v. Monsanto, 467 U.S. 986,

    1006-07 (1984) (determining that there was no regulatory taking

    where applicant for pesticide registration was required by federal

    pesticide law to submit certain trade secret product data to EPA

    that EPA could then publicly disclose; applicant knew at time of

    submission that statute authorized EPA to do so, applicant therefore

    could not have had a ``reasonable investment-backed expectation''

    that data would be kept confidential, and the government's action

    was reasonably related to legitimate government interest in an area

    of public concern and regulation).

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

    [[Page 1187]]

    2. Swaps Between Affiliates and Portfolio Compression Exercises

    Several commenters questioned whether swaps between affiliates

    should be subject to the real-time public reporting requirements of

    part 43. Some commenters stated that swaps between affiliates have no

    price discovery or transparency value and thus should not be publicly

    reported.\36\ One commenter noted that the real time dissemination of

    anonymous data regarding swaps between affiliates that price credit and

    market risk at or near zero might distort price discovery, rather than

    enhance it.\37\ Other commenters stated variously that inter-affiliate

    trades and portfolio management exercises should not be considered

    ``reportable transactions,'' \38\ and that reporting swaps between

    affiliates will add reporting requirements to end-users.\39\ A

    commenter noted the reporting of data on physical gas and power

    transactions between affiliates is excluded in other contexts.\40\

    Another argued that the public reporting of inter-affiliate

    transactions could seriously interfere with the internal risk

    management practices of a corporate group, thereby prompting market

    participants to act in a way that would prevent the corporate group

    from following through with its risk management strategy. This

    commenter suggested that such a result could raise the costs to

    corporate groups of managing risk internally, in addition to confusing

    market participants with irrelevant information.\41\

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

    \36\ See, e.g., CL-Cleary; CL-FSR; CL-Working Group of

    Commercial Energy Firms; CL-Coalition of Energy End-Users; CL-ISDA/

    SIFMA; CL-Japanese Banks; and CL-Coalition for Derivatives End-

    Users.

    \37\ The commenter stated that ``default risk among affiliated

    entities within a corporate group is negligible,'' and ``an inter-

    affiliate swap does not price hedging costs the same as a market-

    facing swap because each inter-affiliate swap is entered into on the

    general assumption that the market risk of all transactions within

    the corporate group will be hedged by the centralized hedging

    affiliate under a market-facing transaction.'' CL-Shell at 6.

    \38\ See CL-TriOptima; CL-WMBAA.

    \39\ See CL-Coalition for Derivatives End-Users.

    \40\ See CL-Working Group of Commercial Energy Firms.

    \41\ See CL-Cleary.

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

    The Commission agrees with the comments regarding the public

    dissemination of certain swaps between affiliates and portfolio

    compression exercises. The Commission concurs that publicly

    disseminating swap transaction and pricing data related to certain

    swaps between affiliates would not enhance price discovery, as such

    swap transaction and pricing data would already have been publicly

    disseminated in the form of the related market-facing swap. This

    information may create an inaccurate appearance of market depth.

    Notably, there is a very high volume of swaps between affiliates in

    certain asset classes (e.g., foreign exchange).\42\ To require public

    dissemination of all such transactions could be very costly for market

    participants. Where there are no price discovery benefits to publicly

    disseminating such transactions, the Commission has determined not to

    require the public dissemination of these transactions at this time.

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

    \42\ See CL-GFXD. ``Many millions of trades occur daily between

    different affiliates of the same institution which are not relevant

    to the institution's external market positioning.'' Id. at p. 13.

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

    Accordingly, the Commission is adopting a definition in Sec. 43.2

    for the term ``publicly reportable swap transaction'' that does not

    presently require the public dissemination of internal swaps.\43\

    Specifically, a publicly reportable swap transaction means, among other

    things, any executed swap that is an arm's length transaction between

    two parties that results in a corresponding change in the market risk

    position between the two parties. As adopted, the definition of a

    publicly reportable swap transaction also provides, by way of example,

    that internal transactions to move risk between wholly-owned

    subsidiaries of the same parent, without having credit exposure to the

    other party \44\ would not presently require public dissemination

    because such swaps are not arm's-length transactions.

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

    \43\ As discussed and referenced in this rule, internal swaps

    between one-hundred percent owned subsidiaries of the same parent

    entity may include back-to-back swap transactions between or among

    such wholly-owned subsidiaries to help manage the risks associated

    with a market-facing swap transaction. In general, a back-to-back

    swap transaction effectively transfers the risks associated with a

    market-facing swap transaction to an affiliate that was not an

    original party to such transaction.

    Back-to-back swap transactions may occur in a number of

    different ways. For example, an affiliate immediately may enter into

    a mirror swap transaction with its affiliate on the same terms as

    the marketing-facing swap transaction. By way of further example, a

    market-facing affiliate may enter into multiple transactions with

    affiliates that are not at arm's-length in order to transfer the

    risks associated with an arm's-length, market-facing transaction.

    \44\ Section 608 of the Dodd-Frank Act adds to paragraph 7 of

    the definition of ``covered transaction'' in Section 23A of the

    Federal Reserve Act (12 U.S.C. 371(c)): ``(G) a derivative

    transaction, as defined in paragraph (3) of section 5200(b) of the

    Revised Statutes of the United States (12 U.S.C. 84(b)), with an

    affiliate, to the extent that the transaction causes a member bank

    or a subsidiary to have credit exposure to the affiliate.'' Hence,

    all derivatives transactions will be subjected to Section 23A of the

    Federal Reserve Act to the extent that they cause the bank to have

    credit exposure to the affiliate. Section 23B of the Federal Reserve

    Act contains an arm's-length requirement stating that a member bank

    and its subsidiaries may engage in any covered transaction with an

    affiliate only ``(A) on terms and under circumstances, including

    credit standards, that are substantially the same, or at least as

    favorable to such bank or its subsidiary, as those prevailing at the

    time for comparable transactions with or involving other

    nonaffiliated companies, or (B) in the absence of comparable

    transactions, on terms and under circumstances, including credit

    standards, that in good faith would be offered to, or would apply

    to, nonaffiliated companies.'' The Commission considers any covered

    transaction between affiliates as described in Sections 23A and 23B

    of the Federal Reserve Act to be publicly reportable swap

    transactions.

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

    Similarly, the Commission agrees that portfolio compression

    exercises should not be publicly disseminated at this time.\45\ The

    purpose of such transactions is to mitigate risk between counterparties

    and any new swaps that were executed as a result of portfolio

    compression exercises would be a result of the compression itself and

    not an arm's-length transaction between the parties.\46\ As adopted,

    the definition of a publicly reportable swap transaction also cites

    portfolio compression exercises as an example that does not presently

    require public dissemination.

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

    \45\ In its proposed part 23 release relating to ``Confirmation,

    Portfolio Reconciliation, and Portfolio Compression Requirements for

    Swap Dealers and Major Swap Participants,'' portfolio compression is

    defined as ``a mechanism whereby substantially similar transactions

    among two or more counterparties are terminated and replaced with a

    smaller number of transactions of decreased notional value in an

    effort to reduce the risk, cost, and inefficiency of maintaining

    unnecessary transactions on the counterparties' books.'' 75 FR

    81532.

    \46\ See CL-TriOptima; CL-Shell.

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

    3. Uncleared or Bespoke Swaps

    The Commission received comments from various market participants

    relating to the scope of CEA section 2(a)(13) and proposed part 43, as

    it applies to uncleared and bespoke swaps. Some commenters stated that

    only standardized, cleared swaps should be real-time reported and

    publicly disseminated. Others urged that uncleared trades be treated

    differently than cleared trades and that the statute does not require

    that non-standardized swaps be real-time reported (e.g., customized

    trades should receive a greater time prior to public dissemination).

    A commenter argued that only uncleared swaps that perform a

    significant price discovery function should be publicly

    disseminated.\47\ Another commenter argued that bespoke trade data has

    little value and public dissemination of such information involves

    complex technical issues.\48\

    [[Page 1188]]

    Still another commenter explained that the public dissemination of swap

    transaction and pricing data should be phased in based on

    liquidity.\49\ In contrast, two commenters said that the real-time

    reporting requirements should apply to all swaps, both standard and

    bespoke.\50\

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

    \47\ The commenter recommended that the Commission utilize a

    process to identify swaps that perform a ``significant price

    discovery'' function. See CL-Dominion.

    \48\ See CL-TriOptima.

    \49\ See CL-FINRA.

    \50\ See CL-IECA; CL-Better Markets.

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

    Several commenters asserted that bespoke or customized swap

    transactions are not subject to real-time reporting, citing a perceived

    absence of authority under CEA section 2(a)(13)(C)(iii) to include

    these transactions. Others commented that bespoke transactions should

    not be subjected to real-time public reporting obligations because the

    transactions do not enhance price discovery and may compromise

    anonymity of the parties to the swap.

    Some commenters focused on perceived burdens to end-users inherent

    in the proposed rules; many stated that end-users should not be

    required to report swaps.\51\ Additionally, certain commenters stated

    that end-users do not have sufficient technology to report swaps; one

    commenter stated that end-user to end-user swaps should have next

    business day reporting.\52\ Others contended that end-users should be

    treated differently because the public dissemination of swaps

    information involving such parties does not enhance price

    discovery.\53\ Two commenters questioned the value of disclosing

    information relating to end-user to end-user power swaps compared to

    the harm that disclosing such information would have to these end-users

    and the public in general.\54\

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

    \51\ See CL-IPAA; CL-IECA; CL-COPE; CL-PCS Nitrogen Fertilizer;

    CL-Coalition of Energy End-Users; CL-NFPEEU; CL-API; and Meeting

    with EEI (Feb. 10, 2011).

    \52\ See CL-IPAA.

    \53\ See CL-COPE; CL-Coalition of Energy End-Users.

    \54\ See CL-Coalition of Energy End-Users; CL-NFPEEU.

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

    The Commission interprets CEA section 2(a)(13)(C) to grant the

    Commission the authority to require the real-time public reporting of

    all swaps in order enhance price discovery.\55\ Accordingly, the

    Commission does not believe that the transactions described above

    (e.g., bespoke, end-user to end-user, etc.) should be excluded from

    real-time reporting obligations. Such swap transactions, unlike

    internal swaps between affiliates and portfolio compression exercises,

    are executed at arm's length and result in a change in market risk

    between the swap counterparties. Thus, the Commission believes that the

    public dissemination of these transactions will provide price discovery

    benefits and transparency to the swap markets.

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

    \55\ The Commission stated in in the Proposing Release that it

    interprets CEA section 2(a)(13)(C) to apply to all swap

    transactions. The Commission agrees with the overall concern

    expressed by commenters regarding the statutory duty to ensure

    confidentiality. CEA sections 2(a)(13)(C)(iii) and 2(a)(13)(E)(i)

    emphasize the importance of not identifying swap counterparties. As

    discussed more fully below, CEA section 2(a)(13)(C)(iii) explicitly

    directs the Commission to require that real-time public reporting of

    transactions occur in a manner that does not disclose a party's

    business transactions and market position.

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

    However, the Commission agrees with commenters that the real-time

    public dissemination of swap transaction and pricing data should be

    phased in with longer initial time delays for public dissemination, as

    well as phased in compliance dates, for different asset classes and

    market participants within an asset class. Phasing in real-time

    reporting for certain transactions by allowing for longer initial time

    delays and phased compliance dates addresses concerns regarding bespoke

    transactions, including market liquidity and the ability for parties to

    report transactions. In particular, phasing in the public dissemination

    of bespoke transactions will allow the Commission to ensure that the

    public dissemination of such transactions will protect the identities

    of swap participants, not disclose the business transactions and market

    positions of any person involved in an uncleared swap and mitigate any

    adverse impact on market liquidity.

    4. Foreign Exchange (``FX'') Asset Class

    Several commenters sought clarification as to which FX swaps will

    be subject to the real-time public reporting requirements; some argued

    that FX forwards and swaps should not be subject to real-time public

    reporting rules. One commenter argued that the universe of FX market

    participants is massive given that FX transactions are an integral part

    of the global payment systems, presenting a practical challenge to

    ensuring that all relevant reporting participants are able to report.

    To the extent that FX swaps or forwards, or both, are excluded from

    the definition of ``swap'' pursuant to a determination by United States

    Department of the Treasury (``Treasury''), the requirements of CEA

    section 2(a)(13) would not apply to those transactions, and such

    transactions shall not be subject to the real-time public reporting

    requirements of part 43. Treasury issued a proposed determination on

    April 29, 2011, in which it stated that FX swaps and forwards that

    would be excluded from the definition of ``swap,'' and thereby exempt

    from certain requirements established in the Dodd-Frank Act, including

    registration and clearing. However, the CEA provides that, even if

    Treasury determines that FX swaps and forwards may be excluded from the

    definition of ``swap,'' these transactions are not excluded from

    regulatory reporting requirements to an SDR.\56\ Nonetheless, such

    transactions would not be subject to the real-time reporting

    requirements under part 43. Treasury has proposed to act pursuant to

    the authority in Section 721 of the Dodd-Frank Act that permits a

    determination that certain FX swaps and forwards should not be

    regulated as swaps and are not structured to evade the Dodd-Frank Act.

    The Commission has noted that, as proposed, Treasury's determination

    would exclude FX swaps and forwards, as defined in CEA section 1a, but

    would not apply to FX options or non-deliverable forwards

    (``NDFs'').\57\ FX instruments that are not covered by Treasury's final

    determination would still be subject to the real-time public reporting

    rules described in part 43.\58\

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

    \56\ See CEA section 1(a)(47)(E).

    \57\ See 76 FR 29818, 29835-29837 (May 23, 2011) (proposed

    rulemaking issued jointly by Commission and SEC to further define,

    among others, the term ``swap'').

    \58\ See 76 FR 25774 (May 5, 2011). Treasury's proposed

    determination may also be found at http://www.treasury.gov/initiatives/wsr/Documents/FX%20Swaps%20and%20Forwards%20NPD.pdf.

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

    Section 43.1 as adopted does not distinguish between transactions

    within the FX asset class; such a decision to exclude FX forwards and

    swaps will be determined by Treasury pursuant to CEA section 1(a)(47).

    5. Limitations and Special Accommodations

    Several scope-related comments focused on very specific issues.

    Some commenters argued that novations should not be publicly reportable

    swap transactions. Another commenter asserted that the Commission has

    no statutory basis for requiring that post-swap events (e.g.,

    novations, amendments, terminations, etc.) be subject to part 43. This

    commenter stated that real-time reporting should be limited to trade

    execution and that lifecycle events should not be reported.\59\

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

    \59\ See CL-NFPEEU.

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

    The Commission agrees that to the extent that novations or other

    lifecycle events do not change the pricing of an initial execution of

    the swap they would not be considered publicly reportable swap

    transactions and therefore would not be publicly disseminated.\60\ As

    two

    [[Page 1189]]

    commenters pointed out, the reporting of a novation that is just a

    change in ownership could lead to duplication in reporting and

    misrepresentative prices in the market.\61\ As discussed more fully

    below, in the case of novations where there is no change in the

    pricing, the novations would not be publicly reportable swap

    transactions pursuant to Sec. 43.2.

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

    \60\ See the definition of ``publicly reportable swap

    transaction'' in Sec. 43.2.

    \61\ See CL-Barclays; CL-Working Group of Commercial Energy

    Firms.

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

    The Commission recognizes that there are certain swap contract

    amendments or other transactions that could enhance price discovery.

    Those transactions that have a price impact should be subject to the

    real-time reporting rules of part 43. If price-changing lifecycle

    events were not required to be publicly disseminated, swap

    counterparties could enter into a swap at one price and then

    immediately enter into an amendment to change a material term of the

    swap. The Commission is clarifying the definition of ``publicly

    reportable swap transaction'' to ensure that only those lifecycle or

    continuation events that have a price-changing impact should be

    publicly disseminated. Requiring such price-forming continuation data

    to be publicly disseminated eliminates the incentive for swap

    counterparties to enter into a swap followed by an amendment in order

    to disguise the price of a swap.

    Commenters stated that illiquid markets should not be subject to

    real-time reporting.\62\ The Commission believes that, consistent with

    CEA section 2(a)(13), such swaps generally are subject to the public

    dissemination requirements of part 43. Certain accommodations, however,

    have been made for such swaps in part 43, including longer initial time

    delays for public dissemination in final Sec. 43.5.

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

    \62\ See CL-Members of Congress; CL-MS. Additionally, one

    commenter suggested less frequent reporting for illiquid parts of

    the market. CL-Chesapeake.

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

    One commenter stated that power markets should not be subject to

    real-time reporting.\63\ The Commission acknowledges this commenter's

    concern; swaps in the power market are priced in reference to specific

    locations and thus present issues regarding the protection of the

    identities of the counterparties. To the extent that these are off-

    facility swaps, the Commission intends to propose to describe the form

    and manner for their reporting in its block trade re-proposal. As

    discussed more fully below, until such standards are adopted, such off-

    facility swaps would not be subject to the real-time public reporting

    requirements of part 43.

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

    \63\ See CL-NFPEEU.

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

    A few commenters argued that physical forwards should be expressly

    excluded from the real-time reporting requirements. Others contended

    that various types of swaps--including total return swaps, stand-alone

    options and structured transactions--should not be subject to the real-

    time reporting requirements of part 43 or should be given special

    accommodations. To the extent that any of these types of swaps are

    excluded from the definition of ``swap,'' such transactions are not

    subject to the real-time reporting requirements. Accordingly, the

    Commission does not intend to provide any specific exemption from part

    43 at this time.

    The Commission received two comments regarding special

    accommodations for real-time public reporting in distress scenarios and

    DCO default scenarios.\64\ One commenter stated that special

    accommodations should be made for distress scenarios; the other stated

    that swaps in connection with a DCO's default management should not be

    reported. This commenter also provided language to address this

    situation in the final rule.

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

    \64\ See CL-Barclays; CL-LCH.Clearnet.

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

    The Commission agrees that, depending on the circumstances, default

    and distress scenarios may warrant different reporting requirements.

    The Commission believes that distress and DCO default scenarios may be

    situations in which the Commission may exercise its authority to

    temporarily suspend real-time public reporting obligations under part

    43. The Commission may address such emergency authority in a future

    Commission rulemaking. The Commission does not accept the

    recommendation that real-time reporting obligations be suspended

    automatically upon the occurrence of a distress scenario; in its view

    any suspension or delay of reporting should occur only upon a

    Commission determination. Further, the Commission believes that time

    delays described in Sec. 43.5 will address some of the concerns

    expressed in these comments.

    6. Liquidity

    Some commenters asserted that real-time public reporting could

    cause a reduction of liquidity, particularly in already illiquid

    markets.\65\ The Commission believes that the availability of

    previously-inaccessible swap pricing data in close to real-time will

    increase the competition among potential swap counterparties regarding

    the pricing of such swaps, and that such increased competition will be

    a central benefit of the real-time reporting rules. The enhanced

    transparency and reliability of transactional data provided by the

    real-time dissemination of swap transaction data can be expected to

    promote confidence in the fairness and integrity of swaps markets.

    Thus, the Commission anticipates that while a trade-off between

    liquidity and transparency may manifest itself in the beginning of the

    implementation period, the increased transparency ultimately should

    increase participation in the swaps markets.\66\

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

    \65\ See, e.g., CL-Chesapeake; CL-Dominion; CL-MS; CL-ATA and

    Meeting with Barclays (January 24, 2011).

    \66\ The Commission believes that it has achieved the

    appropriate balance between transparency and liquidity. However, the

    Commission recognizes that certain market participants may disagree

    with the Commission and choose not to enter into certain types of

    swaps. The Commission believes that increased price transparency

    will attract additional liquidity providers based on confidence that

    their competitive pricing will better attract business.

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

    Another key benefit of real-time reporting of previously

    unavailable swap transaction and pricing data is enhanced price

    discovery. Broader access to information will be of particular value to

    buy-side participants and end-users. As one commenter noted, the

    ability to observe information about recent transactions and to seek

    customized trades offers potential benefits to end-users.\67\ In this

    regard, the Commission disagrees with commenters who opined that

    transaction data about bespoke, bilateral swaps provides no price

    discovery information. On the contrary, such information helps to

    complete the picture of the swap market for all market participants,

    and would likely inform traders seeking to transact economically

    similar--although not identical--swaps.

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

    \67\ See CL-Reval.

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

    As SDs and MSPs adapt to the real-time public reporting of swap

    transaction data, the Commission anticipates that these market

    participants, who typically are large and technologically

    sophisticated, will compete on price to attract end-users and other

    typically smaller, less-sophisticated market participants as swap

    counterparties. The Commission believes that its phase in approach to

    dissemination delays provided in Sec. 43.5 of this rule will allow

    market participants time to adapt to the new procedures.

    7. International Issues

    The Commission received several comments addressing international

    [[Page 1190]]

    concerns as they relate to the scope of the Proposing Release. Four

    commenters stated that the Commission should explicitly require that

    only data relating to swap transactions involving at least one U.S.-

    person must be reported and publicly disseminated.\68\ Seven comments

    urged that the Commission consult with foreign regulators before

    establishing extraterritoriality scope; \69\ one comment stated that

    jurisdictional boundaries should be defined \70\ and seven comments

    stated that any SD or MSP in a swap should be the reporting party

    regardless of whether it is a U.S. person.\71\ Additionally, the Public

    Roundtable on Dodd-Frank Implementation produced comments regarding the

    need for the CFTC and SEC to harmonize their reporting requirements

    with international regulators.\72\

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

    \68\ See CL-ISDA/SIFMA; CL-GFXD; CL-Foreign Headquartered Banks;

    and CL-Working Group of Commercial Energy Firms.

    \69\ See CL-ISDA/SIFMA; CL-Commodity Markets Council; CL-Foreign

    Headquartered Banks; CL-WFE/IOMA; CL-Tradeweb; CL-SIFMA AMG; and CL-

    Soc Gen.

    \70\ See CL-ISDA/SIFMA.

    \71\ See CL-Vanguard; CL-MarkitSERV; CL-SIFMA AMG; CL-ICI; CL-

    ISDA/SIFMA; CL-BlackRock; and CL-DTCC.

    \72\ See CL-MarkitSERV; CL-AFGI; and CFTC/SEC Public Roundtable

    on International Issues Relating to Dodd-Frank (Aug. 1, 2011).

    Public Roundtable comments can be found at http://comments.cftc.gov/publiccomments/commentlist.aspx?id=1065.

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

    Two commenters questioned whether the Commission has the legal

    authority to implement proposed Sec. 43.1(b)(2) with respect to non-

    U.S. parties \73\ and suggested the Commission reach agreements with

    foreign regulators before requiring that all transactions with any U.S.

    person be subject to the requirements in part 43.\74\

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

    \73\ As proposed, Sec. 43.1(b) established the scope of part

    43. Proposed Sec. 43.1(b)(2) provides that the part 43 rules apply

    to all SEFs, DCMs, SDRs, as well as parties to a swap including

    registered SDs, registered MSPs and U.S.-based end-users.

    \74\ See CL-ISDA/SIFMA; CL-GFXD.

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

    The Commission recognizes the benefits of consultation with

    international regulators in developing the real-time public reporting

    rules set forth in part 43 of the Commission's regulations. To that

    end, Commission staff has had discussions with a number of

    international regulators, including the UK FSA, AEuropean Commission

    (``EC''),\75\ European Parliament Rapporteur for the Regulation on OTC

    Derivatives, Central Counterparties and Trade Repositories, European

    Securities and Markets Authority (``ESMA''), Canadian Provincial

    Regulators and Japan FSA.\76\ Commission staff continues to discuss

    with international regulators issues related to extraterritoriality.

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

    \75\ It should be noted that the 2004 version of Markets in

    Financial Instruments' Directive (``MiFID'') contained language for

    equities that ``Member States shall, at least, require regulated

    markets to make public the price, volume and time of the

    transactions executed in respect of shares admitted to trading.

    Member States shall require details of all such transactions to be

    made public, on a reasonable commercial basis and as close to real-

    time as possible.'' The European Commission published its MiFID and

    Markets in Financial Instruments Regulation (``MiFIR'') on October

    20, 2011. The European Commission's legislative proposals require

    that regulated markets, multilateral trading facilities (``MTFs'')

    and organized trading facilities (``OTFs'') shall make public the

    price, volume and time of transaction executed for all derivatives

    admitted to trading or which are traded on an MTF or an OTF. These

    organized trading venues shall make this transaction data public as

    close to real-time as is technically possible. Investment firms that

    make public trades outside of trading venues must make those trades

    available through Approved Publication Arrangements which are

    regulated by MiFID.

    \76\ In addition, the Commission met with European industry

    representatives, including Credit Suisse, Deutsche Bank, Citi, J.P.

    Morgan, Barclays, Goldman Sachs and UBS (Mar. 22, 2011).

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

    Several commenters stated that an SD or MSP should be the reporting

    party regardless of whether it is a U.S. person. The Commission

    generally agrees that if a registered SD or MSP is a party to a

    publicly reportable swap transaction, it should be the reporting party,

    to the extent that such transaction is subject to real-time reporting.

    The Commission understands the need for flexibility where one party to

    a swap is a U.S. counterparty and the other is a foreign counterparty.

    Accordingly, as discussed in greater detail below, the Commission is

    adopting language in Sec. 43.3(a)(3) that allows parties to a publicly

    reportable swap transaction involving an off-facility swap to mutually

    agree on the reporting party for such transaction; such agreement would

    be a term of the swap.

    8. Final Rule Text of Sec. 43.1

    After consideration of comments relating to the purpose, scope and

    rules of construction in proposed Sec. 43.1, the Commission is

    adopting Sec. 43.1 substantially as proposed, with some clarifying

    changes responsive to commenters' concerns relating to the

    extraterritorial scope of part 43. Additionally, as discussed below,

    the Commission is adopting other provisions, including a revised

    definition of ``publicly reportable swap transaction'' that responds to

    many commenters' concerns.

    The Commission is adopting Sec. 43.1(a) as proposed, with

    technical and clarifying changes including (i) changing the words ``set

    forth'' to ``implements;'' (ii) changing the word ``collection'' to

    ``reporting;'' and (iii) the addition of a reference to the Dodd-Frank

    Act. The Commission is adopting Sec. 43.1(b) with technical and

    clarifying changes relating to numbering and word changes as well as

    with a change to the last sentence. The last sentence of Sec. 43.1(b),

    as adopted, states that ``[t]his part shall apply to registered

    entities as defined in the Act, as well as to parties to a swap

    including SDs, MSPs and U.S.-based market participants in a manner as

    the Commission may determine.'' The change to the last sentence of

    Sec. 43.1(b) deletes the references to ``registered or exempt'' when

    referring to SDs and adds the clause ``in a manner as the Commission

    may determine'' as compared to proposed Sec. 43.1(b). Finally, Sec.

    43.1(c) is being adopted with two clarifying changes: ``constitute'' is

    changed to ``shall constitute;'' and ``such'' is changed to ``the

    particular.''

    B. Section 43.2--Definitions

    As proposed, Sec. 43.2 specified definitions for a number of terms

    and concepts related to real-time public reporting of swap transaction

    and pricing data. In response, the Commission received comments from 20

    interested parties, including industry associations representing myriad

    financial market participants, potential SDs, an asset manager,

    potential SDRs and a DCM. In addition to comments on the definitions

    proposed in Sec. 43.2, commenters addressed terms not defined in

    proposed Sec. 43.2, such as ``illiquid market.''

    1. Harmonization

    A number of commenters suggested that the Commission and the SEC

    harmonize the use of the defined terms in proposed Sec. 43.2 in order

    to foster operational efficiency, lessen the incidence of errors and

    place fewer burdens on reporting agencies.\77\ The Commission agrees

    that harmonization of certain terms is desirable and the two agencies

    have coordinated their responses to the Dodd-Frank Act as closely as

    possible. The Commission notes that the two agencies have jurisdiction

    over different types of swaps which necessitates some differences in

    terminology. The Commission believes therefore that any differences

    between the two commissions with respect to defined terms are justified

    and necessary to accomplish the purposes of the Act.

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

    \77\ See CL-GFXD; CL-ISDA/SIFMA; and CL-Vanguard.

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

    [[Page 1191]]

    2. Defined Terms

    Section 43.2 contains the definitions for terms and concepts

    throughout part 43 and its related appendices.\78\ The specific terms

    defined in Sec. 43.2 are discussed below.

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

    \78\ Proposed Sec. 43.2 used subparagraph lettering for the

    definitions; however, the Commission has removed the subparagraph

    lettering from final Sec. 43.2 to enable the addition of defined

    terms as rules relating to block trades and large notional off-

    facility swaps are promulgated, without necessitating a renumbering

    with Sec. 43.2.

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

    Act--Proposed Sec. 43.2(a)

    The Commission is adopting the definition as proposed with a

    clarifying citation to the United States Code.\79\

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

    \79\ No comments were received in connection with the proposed

    definition for ``Act.''

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

    Affirmation--Proposed Sec. 43.2(b)

    A commenter suggested that the use of terms like ``affirmation''

    should reflect long-standing market conventions that differ according

    to the type of underlying reference asset.\80\ Another commenter

    pointed to a perceived loophole in the Commission's proposed definition

    that would allow for the avoidance of block trade reporting by agreeing

    on swap terms at one point in time and affirming terms of trade details

    later.\81\ The Commission believes that the definition as proposed

    provided adequate clarity to permit flexibility for different market

    participants, asset classes and methods of execution. The Commission is

    not persuaded by the argument that the proposed definition contains a

    loophole that would allow for the avoidance of block trade reporting.

    The Commission believes that the business conduct and straight-through

    processing rules proposed in part 23 of its regulations,\82\ in

    addition to anti-evasion requirements (proposed to be included in part

    1 of its regulations), should provide adequate oversight rules.\83\

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

    \80\ See CL-ISDA/SIFMA. As discussed below, this comment was

    broadly applied to terms such as ``execution'' and ``confirmation.''

    \81\ See Communication with Darrell Duffie (Dec. 15, 2010).

    \82\ See supra note 18.

    \83\ Proposed part 1 of the Commission's regulations provides

    that all transactions that are willfully structured to evade the

    requirements of the Dodd-Frank Act will be treated as swaps. See 76

    FR 29818 at 29865-66 (May 23, 2011). The rule has not yet been

    adopted.

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

    Comments emphasizing the need for harmonization between the CFTC

    and the SEC focused in part on the definition of ``affirmation.'' The

    SEC's proposed Regulation SBSR does not include the concept of

    ``affirmation''; however, the Commission believes that this difference

    is not material.

    For the reasons discussed above, the Commission believes that the

    proposed definition of ``affirmation'' provides adequate clarity for

    different market participants, asset classes and methods of execution.

    Accordingly, the Commission is adopting the definition as proposed.

    Appropriate Minimum Block Size--Proposed Sec. 43.2(c)

    The Commission is adopting the definition of ``appropriate minimum

    block size'' with a few modifications. As discussed below, since the

    definition of ``swap instrument'' is not being adopted in these final

    rules, the reference to that definition is removed.\84\ The statement

    in the proposed definition regarding the calculation of appropriate

    minimum block sizes has been removed since those proposed rules are

    being reconsidered at this time.

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

    \84\ No comments were received in connection with the language

    of the proposed definition for ``appropriate minimum block size.''

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

    As Soon as Technologically Practicable--Proposed Sec. 43.2(d)

    Proposed Sec. 43.2(d) defined the term ``as soon as

    technologically practicable'' as ``as soon as possible, taking into

    consideration the prevalence of technology, implementation and use of

    technology by comparable market participants.'' The Commission

    anticipated that this term could have different interpretations for

    different swap counterparties (i.e., SDs, MSPs and end-users), for

    different types of swaps (e.g., energy swaps, credit default swaps,

    interest rate swaps, etc.) and for different methods of execution

    (i.e., SEFs, DCMs and off-facility swaps).

    The Commission received twelve comments from various interested

    parties, including trading platforms, industry groups/associations and

    a data vendor. One commenter \85\ stated that while the SEC's proposed

    definition of ``real time'' more easily replicates current market

    practice than ``as soon as technologically practicable,'' the CFTC and

    SEC should propose one consistent definition of real-time reporting for

    their respective rules.

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

    \85\ See CL-Chris Barnard.

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

    While the comments generally support the flexibility of the

    definition, some commenters requested further clarification. One

    commenter, for example, requested that the Commission distinguish

    between SDs that are banks and those that are non-banks.\86\ Another

    commenter requested clarification whether ``as soon as technologically

    practicable'' would mean the same thing for swaps executed on or

    pursuant to the rules of a SEF or DCM as for swaps under CEA section

    2(h)(7).\87\

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

    \86\ See CL-Working Group of Commercial Energy Firms.

    \87\ See CL-Coalition for Derivatives End-Users.

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

    Some commenters suggested that the Commission refrain from

    establishing maximum reporting time frames, except for large SDs and

    MSPs or, at a minimum, either adopt longer time frames for reporting

    for market participants that are not SDs or MSPs, or allow custom and

    market practice to eventually define the time period that is a

    responsible interpretation of ``technologically practicable.'' \88\

    Other commenters addressed the concept of backstops for real-time

    reporting for non-block trades.\89\ One stated that there must be a

    maximum time limit of no longer than five minutes,\90\ while another

    said that maximum reporting timeframes should be given only for SDs and

    MSPs (or at a minimum reporting timeframes should be longer for end-

    users).\91\ Another commenter contended that real-time reporting should

    occur after confirmation to reduce errors and omissions and since the

    confirmation process is what drives the booking of a trade into a

    firm's trade capture system.\92\

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

    \88\ Id.

    \89\ See CL-Better Markets; CL-Markit; and CL-Coalition for

    Derivatives End-Users.

    \90\ See CL-Better Markets.

    \91\ See CL-Coalition for Derivatives End-users.

    \92\ See CL-DTCC.

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

    The Commission acknowledges that SDs and MSPs are more likely to

    have the infrastructure and resources available to report their swap

    transaction and pricing data to an SDR faster than other categories of

    market participants (i.e., financial and non-financial end-users).

    However, the Commission believes it would be premature to establish

    maximum timeframes at this time without information on the manner and

    frequency in which these swaps are executed or a clear understanding of

    the technological capabilities of reporting parties. Declining to

    establish backstops is a less prescriptive approach that takes into

    account the different technological capabilities of different markets

    and market participants. The Commission can analyze timestamp data,

    which is not currently available, to determine whether reporting

    parties are reporting ``as soon as technologically practicable.''

    In response to comments requesting further clarification of the

    definition, the Commission believes that the proposed definition

    provided adequate flexibility for different market participants, asset

    classes and methods of execution. If the definition of ``as

    [[Page 1192]]

    soon as technologically practicable'' were more rigid (e.g., setting

    forth maximum reporting times) the costs to less sophisticated

    reporting parties could be greater, particularly in the initial phases

    of the rule.\93\

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

    \93\ The Commission notes that real-time swap transaction and

    pricing data must be reported ``as soon as technologically

    practicable'' after ``execution'' which is linked to the

    ``affirmation'' of the swap. ``Confirmation'' of the swap may occur

    at a point after the affirmation and execution, or at the same time

    (e.g., SEF or DCM execution of a swap).

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

    With respect to comments regarding backstops, the Commission

    believes that there could be potentially significant costs to certain

    market participants--particularly end-users--in complying with a

    backstop. For this reason as well, the Commission has determined to

    retain the flexibility of the definition by excluding backstops. While

    the SEC's proposed Regulation SBSR provided a 15-minute backstop, it is

    important to note that the markets overseen by the SEC have

    significantly fewer end-users participating in the credit and equities

    markets than the markets under the Commission's authority. The

    Commission believes this distinction justifies the difference in

    approach between the agencies.

    For the reasons discussed above, the Commission has retained a less

    prescriptive definition of ``as soon as technologically practicable''

    in order to provide adequate flexibility for different market

    participants, asset classes and methods of execution, particularly when

    weighed against the potential costs to market participants to comply

    with more rigid timeframes. Accordingly, the Commission is adopting the

    definition as proposed.

    Asset Class--Proposed Sec. 43.2(e)

    Proposed Sec. 43.2(e) provided that the asset classes include five

    major categories: Interest rate, currency, credit, equity and ``other

    commodity,'' as well as any other asset class that may be determined by

    the Commission. Commenters offered various views with respect to

    categorizing the asset classes. One commenter recommended that

    relatively few defined asset classes would create increased aggregation

    of services and reduce the risks of duplication or omission in public

    dissemination or erroneous consolidation by the public of available

    data, while also reducing the burden on market participants to connect

    and reconcile among multiple SDRs.\94\ ISDA and SIFMA jointly opined

    that providing sub-asset classes for ``other commodity'' would be

    advisable for reporting requirements.\95\

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

    \94\ See CL-DTCC.

    \95\ See CL-ISDA/SIFMA.

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

    One commenter expressed concern with respect to the definition,

    treatment and reporting of an FX forward under the Proposing

    Release.\96\ This commenter requested clarification that spot

    transactions with value dates less than or equal to T+2 \97\ are

    excluded from the definition and further requested clarification with

    respect to the reporting obligations on those FX products that may be

    excluded by Treasury. Commenters also requested further clarification

    in defining an ``FX swap'' and ``cross currency swap.'' These

    commenters distinguished between a cross currency swap (an interest

    rate product with multi-payment schedules, traded by interest rate

    desks with interest rate market participants) and an FX swap (``FX

    products traded by distinct FX desks with different market participants

    using different internal and external systems infrastructure'').\98\ In

    the commenters' opinion, cross-currency swaps should be reported in the

    interest rate asset class, while FX swaps should be reported in a

    separate FX asset class.

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

    \96\ See CL-GFXD.

    \97\ The terms ``T+1'' and ``T+2'' refer to the transaction date

    plus one day or two days, respectively.

    \98\ See CL-GFXD.

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

    One commenter suggested that, with respect to FX instruments,

    market conventions are needed to determine whether (i) both legs of the

    transaction are reported by a single counterparty; or (ii) whether the

    transaction is instead reported separately as two legs by two

    counterparties with two separate trade identifications. Additionally,

    the commenter suggested that an FX sub-classification system should be

    categorized by an industry association sufficiently familiar with the

    FX market.\99\

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

    \99\ Id.

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

    One commenter recommended that the definition of ``asset class'' be

    harmonized with the SEC's definition to facilitate ease of tracking by

    market participants.\100\ The Commission believes that references to

    the credit and equity asset classes should, to the extent possible, be

    defined consistently between the two agencies, but notes that the SEC

    will not be regulating products in asset classes other than credit and

    equity. Because the Commission is best situated to define the asset

    classes within its jurisdiction, it believes that any differences

    between the CFTC and the SEC with respect to the definition of ``asset

    class'' have their origins in different statutory and regulatory

    schemes and are justified and necessary.

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

    \100\ See CL-Vanguard.

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

    The Commission is persuaded by the suggestions regarding the

    subdivision of asset classes and agrees that fewer asset classes will

    decrease fragmentation of data and reduce the burden of market

    participants to reconcile among multiple SDRs. Additionally, since an

    SDR that accepts swap transaction and pricing data for a swap within an

    asset class must accept data for all swaps in that asset class, market

    participants will more likely be able to report data for both real-time

    and regulatory reporting purposes.\101\ The Commission also agrees that

    there is merit to providing a sub-class for the ``other commodity''

    asset class. The ``other commodity'' asset class may be broken down

    into sub-asset classes for purposes of public dissemination;\102\

    however, the ``other commodity'' asset class remains an asset class

    that includes energy, metals, precious metals, agricultural

    commodities, weather, property and other commodities.

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

    \101\ See Sec. 49.10(b). See also 76 FR 54538, 54579 (Sep. 1,

    2011). Part 49 establishes the registration and compliance

    requirements for SDRs. See also Sec. 43.3(c)(2).

    \102\ Accordingly, appendix A to part 43 provides a data field

    for public dissemination entitled ``sub-asset class for other

    commodity.''

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

    Finally, the Commission agrees that clarification and additional

    guidance is needed to address FX products.\103\ Specifically, the

    Commission has determined to include cross-currency swaps in the

    interest rate asset class and FX options, swaps and forwards will be

    included in an FX asset class. Therefore, the Commission has modified

    the definition to better reflect the fact that the industry typically

    characterizes ``currency'' swaps as ``interest rate swaps.'' \104\

    Accordingly, the Commission is replacing the term ``currency'' in the

    definition of asset class with ``foreign exchange'' in Sec. 43.2 to

    accurately reflect the asset classes employed by the swaps market.

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

    \103\ See CL-GFXD.

    \104\ This characterization is based on the attributes of

    currency swaps that resemble the structure and operation exhibited

    by interest rate swaps while in ``foreign exchange'' swaps, the

    underlying currencies are exchanged by the parties.

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

    As discussed above, to the extent that FX swaps or forwards, or

    both, are excluded from the definition of ``swap'' pursuant to a

    determination by Treasury, the requirements of CEA section 2(a)(13)

    would not apply to those transactions, and such transactions shall not

    be subject to the real-time reporting requirements of part 43. Under

    Treasury's proposed determination, while FX swaps and forwards would be

    excluded from the

    [[Page 1193]]

    real-time reporting requirements of part 43, FX options and NDFs would

    not be excluded and would be subject to part 43's real-time reporting

    requirements.\105\

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

    \105\ See 76 FR 25774 at 25776. ``[U]nlike most derivatives,

    foreign exchange swaps and forwards have fixed payment obligations,

    are physically settled, and are predominantly short-term

    instruments.''

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

    The Commission has determined to clarify the definition of ``asset

    class'' by changing the asset class from ``currency'' to ``foreign

    exchange.'' In addition, such change would place ``cross-currency

    swaps'' in the ``interest rate'' asset class. Finally, the Commission

    is making technical changes to the definition of ``asset class.'' For

    example, ``the broad category of goods, services or commodities'' is

    changed to ``a broad category of commodities, including, without

    limitation, any `excluded commodity' as defined in Section 1a(19) of

    the Act, with common characteristics underlying a swap.'' \106\

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

    \106\ The terms ``commodity'' and ``excluded commodity'' as used

    in the definition of ``asset class'' are defined in CEA sections

    1a(9) and 1a(19) respectively.

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

    Block Trade--Proposed Sec. 43.2(f)

    The Commission has determined to modify the proposed definition of

    ``block trade'' by making certain technical and conforming changes in

    light of other definitional changes and terminology usage throughout

    part 43.\107\ The Commission clarified that a block trade involves a

    swap that is ``listed on a SEF or DCM'' and therefore deleted the

    phrase ``made available for trading.'' Such change ensures that block

    trades may be executed with respect to any listed contract.

    Additionally, the Commission clarified certain aspects of the

    definition, including changing the word ``off'' to ``away from'' to

    indicate that a block trade is executed away from the trading system or

    platform. The other revisions to the ``block trade'' definition provide

    clarification and reflect consistency with other changes to the final

    rule. As previously discussed, this rulemaking does not address issues

    related to the determination of appropriate minimum block sizes.

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

    \107\ The Commission received no comments addressing its

    proposed definition of ``block trade.''

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

    Business Day

    The Commission has determined to add ``business day'' as a defined

    term to address the final time delay provisions in Sec. 43.5. The

    Commission defined the term ``business day'' in Sec. 43.2 as follows:

    ``Business day means the twenty-four hour day, on all days except

    Saturdays, Sundays and legal holidays in the location of the reporting

    party or registered entity reporting data for the swap.''

    The Commission believes that defining business day as twenty-four

    hours is necessary given the global nature of the swaps market. The

    determination of the business day will be based on the time zone of the

    location of the reporting party, SEF or DCM. For example, if the

    reporting party is an SD located in London who enters into a swap with

    a U.S.-based entity, London time would be used to determine the

    business day.

    Business Hours

    The Commission did not receive comments suggesting a definition of

    ``business hour;'' however, it believes that the addition of such

    defined term is necessary to provide clarity with respect to the real-

    time reporting provisions in final Sec. 43.5. The term ``business

    hours'' is defined in Sec. 43.2 as follows: ``Business hours means the

    consecutive hours of one or more consecutive business days.''

    Since ``business day'' is defined as the twenty-four hour day,

    ``business hours'' are consecutive hours during and across ``business

    days.'' For example if a publicly reportable swap transaction has a

    time delay of 24 business hours and it is executed at 6 a.m. EST on

    Friday, then such swap would be publicly disseminated at 6 a.m. EST on

    Monday, assuming that weekend days are not business days in the locale

    of the reporting party.

    Confirmation--Proposed Sec. 43.2(g)

    One commenter stated that the definition of confirmation was

    appropriately broad.\108\ With respect to the proposed requirement that

    a confirmation would legally supersede any previous agreement

    (electronic or otherwise), this commenter requested clarification or

    confirmation that this provision does not mean that a confirmation

    supersedes terms in the package of documentation that make up the

    ``agreement,'' unless the parties themselves so agree.\109\ The

    commenter stated that this clarification is necessary because some

    fiduciaries of plans ensure that the terms of a swap are the best terms

    available from the perspective and interests of plan participants by

    having the lead fiduciary centralize the negotiation of the terms of

    the Schedule and Paragraph 13 of the ISDA Agreement.\110\

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

    \108\ See CL-ABC/CIEBA. See supra note 80.

    \109\ Id.

    \110\ The Schedule provides an opportunity for parties to a swap

    to negotiate terms of or add terms to the pre-printed ISDA Master

    Agreement. Paragraph 13 provides an opportunity for parties to a

    swap to negotiate the terms of or add terms to the Credit Support

    Annex (New York Agreement) for the OTC swap transaction.

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

    A commenter suggested that use of terms such as ``confirmation''

    should reflect long-standing market conventions that differ according

    to the type of underlying reference asset.\111\ Another commented

    similarly that the definition used for ``confirmation'' should reflect

    the underlying conventions that are prevalent in the FX market, which

    may be different to those used in other asset classes.\112\

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

    \111\ See CL-ISDA/SIFMA. This suggestion is part of a broader

    comment recommending that defined terms should follow market

    conventions.

    \112\ See CL-GFXD.

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

    The Commission agrees that clarification is necessary with respect

    to the proposed requirement that a confirmation would legally supersede

    any previous agreement (electronically or otherwise).\113\ The

    Commission believes that adding the phrase ``relating to the swap''

    following ``previous agreement'' provides sufficient clarity. Absent a

    requirement that the confirmation legally supersedes the previous

    agreement relating to the swap, transparency could be lost as key terms

    could be included in the schedule or credit support annex and conflict

    with terms later added to the confirmation. It is industry practice

    that the confirmation is the controlling document, and such

    confirmation will usually incorporate the schedule, master and any

    collateral arrangement(s) by reference.

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

    \113\ See CL-ABC/CIEBA.

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

    With respect to the comment that ``confirmation'' should reflect

    long-standing market conventions that differ according to the type of

    underlying reference class, the Commission believes that the definition

    as proposed, with the modification as described above, provides

    adequate clarity to allow flexibility for different market

    participants, asset classes and methods of execution. Therefore, the

    Commission is adopting the definition of confirmation as proposed with

    some minor clarifications, including adding ``relating to the swap'' to

    the end of the definition to make clear that the agreement that would

    be legally superseded would have to relate to the same swap.

    Confirmation by Affirmation--Proposed Sec. 43.2(h)

    This term is adopted as proposed, except for the deletion of the

    last

    [[Page 1194]]

    sentence of the proposed definition.\114\ Upon further consideration,

    while it agrees with that statement, the Commission believes that this

    statement is not necessary and therefore should not be included in the

    definition.

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

    \114\ Proposed Sec. 43.2(h) contained the sentence: ``With the

    affirmation by one party to the complete swap terms submitted by the

    other party, the swap is legally confirmed and a legally binding

    confirmation is consummated (i.e., confirmation by affirmation).''

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

    Embedded Option--Proposed Sec. 43.2(i)

    This defined term is adopted as proposed with a minor

    clarification. The proposed definition stated that an embedded option

    was a right, but not an obligation, provided to one party of a swap by

    the other party ``to the same swap that provides the party in

    possession of the option * * *.'' The Commission is clarifying this

    language to provide that the ``party holding the option'' that has the

    ability to change any of the economic terms of the swap ``as those

    terms previously were established at confirmation (or were in effect on

    the start date).''

    Executed--Proposed Sec. 43.2(j)

    The Commission is adopting this term as proposed.

    Execution--Proposed 43.2(k)

    Proposed Sec. 43.2(k) defined ``execution'' as the agreement

    between parties to the terms of a swap that legally binds the parties

    to such terms under applicable law. An agreement may be in electronic

    form (e.g., on a SEF or DCM or via instant message); oral (e.g.,

    telephonically); in writing (e.g., a bespoke, structured transaction

    where documents are exchanged); or in some other format not

    contemplated at this time. Execution is simultaneous with or

    immediately follows the affirmation of the swap. The SEC does not

    define ``execution'' in its Proposed Regulation SBSR, but rather

    defines ``time of execution'' as the ``point at which the

    counterparties to an SBS become irrevocably bound under applicable

    law.'' \115\ One commenter asserted that the use of terms such as

    ``execution'' should reflect long-standing market conventions that

    differ according to the type of underlying reference asset.\116\ The

    commenter further stated that harmonization of these terms in the

    Commission's and SEC's rules for a particular product type will foster

    operational efficiency, lessen the incidence of errors, and place fewer

    burdens on reporting agencies. Another commenter stated that the

    definition used for ``execution'' should reflect the underlying

    conventions that are prevalent in the FX market, which may be different

    from those used in other asset classes.\117\

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

    \115\ See 75 FR 75211, n. 30 (Dec. 2, 2010).

    \116\ See CL-ISDA/SIFMA. See supra note 80.

    \117\ See CL-GFXD.

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

    In response to the comments that ``execution'' should reflect long-

    standing market conventions that differ according to the type of

    underlying reference asset and underlying conventions in the FX market,

    the Commission believes that the definition as proposed provides

    adequate clarity to allow flexibility for different market

    participants, asset classes and methods of execution. Additionally, the

    definition is substantially similar to that in proposed Commission

    regulation Sec. 23.500(d).\118\

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

    \118\ ``Execution'' is defined in proposed Sec. 23.500(d) to

    mean, with respect to a swap transaction, ``an agreement by the

    counterparties (whether orally, in writing, electronically, or

    otherwise) to the terms of the swap transaction that legally binds

    the counterparties to such terms under applicable law.'' See 75 FR

    81519 at 81530.

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

    However, in order to provide additional clarity with respect to the

    definition of ``execution,'' the Commission is modifying the last

    sentence of the proposed definition to read, ``Execution occurs

    simultaneous with or immediately following the affirmation of the

    swap.'' The Commission believes that swaps associated with structured

    transactions will, for the most part, be bespoke, or customized,

    transactions. These structured transactions will be identified as

    bespoke when publicly disseminated. Additionally, the Commission

    believes it is necessary to make clear that execution (i.e., when a

    legally binding contract is formed) for certain structured transactions

    may not occur until the documents are signed and/or the deal is funded.

    Large Notional Swap--Proposed Sec. 43.2(l)

    Although no comments were received in connection with the proposed

    definition, the Commission has determined to make certain technical and

    conforming changes consistent with other definitional changes and

    terminology throughout part 43: The term ``large notional swap'' is

    renamed ``large notional off-facility swap'' for added clarity. All

    references to ``large notional swap'' should be read interchangeably

    with the term ``large notional off-facility swap'' for the purposes of

    these part 43 rules. In addition, the Commission has made minor

    technical and conforming changes to the definition. Specifically, the

    definition is simplified to clarify that the term large notional off-

    facility swaps applies to all off-facility swaps with a notional or

    principal amount at or above the appropriate minimum block size that

    nevertheless are not block trades.

    Minimum Block Trade Size--Proposed Sec. 43.2(m)

    The Commission is not adopting a definition for ``minimum block

    trade size'' at this time; the definition will be addressed in

    connection with the block trade re-proposal to be published for comment

    in the Federal Register.

    Newly-Listed Swap--Proposed Sec. 43.2(n)

    The Commission is not adopting a definition for ``newly-listed

    swap'' in this final rulemaking; the definition will be addressed in

    connection with the block trade re-proposal to be published for comment

    in the Federal Register.

    Novation--Proposed Sec. 43.2(o)

    The Commission is adopting the defined term ``novation'' as

    proposed with a minor, non-substantive clarification.

    Off-Facility Swap--Proposed Sec. 43.2(p)

    One commenter contended that the definition of ``off-facility

    swaps'' unnecessarily complicate an already complex process and is not

    required by the Act.\119\ The Commission disagrees: Terms and

    sufficiently detailed definitions assist readers to understand the

    rule, to adequately define complex products and to assist in describing

    the requirements for registered entities and market participants.

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

    \119\ See CL-NFPEEU.

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

    While there are no substantive changes to this definition, the

    Commission made minor technical and conforming changes by adding

    ``publicly'' before ``reportable swap transaction'' to conform with the

    change to the defined term.

    Other Commodity--Proposed Sec. 43.2(q)

    Although the Commission did not receive comments addressing the

    definition of ``other commodity,'' it has determined to modify the

    definition to more appropriately reflect other revisions to proposed

    Sec. 43.2. The proposed definition stated, ``Other commodity means any

    commodity that cannot be grouped in the credit, currency, equity or

    interest rate asset class categories.'' Section 43.2 defines ``other

    commodity'' as follows: ``Other commodity means any commodity that is

    not categorized in the other asset classes as may be determined by the

    Commission.''

    [[Page 1195]]

    The phrase ``as may be determined by the Commission'' modifies the

    phrase ``other asset classes'' to adequately reflect the language in

    the definition of ``asset class.''

    Public Dissemination and Publicly Disseminate--Proposed Sec. 43.2(r)

    The proposed definition of ``publicly disseminate'' states that

    data should be disseminated on a non-discriminatory basis. Commenters

    requested further clarification relating to the definition of

    ``publicly disseminate.'' One believed that the definition was too

    passive in describing how the data is delivered. Two commenters asked

    for clarification whether the data that is publicly disseminated is

    pre- or post-allocation.

    The Commission clarifies that the swap transaction and pricing data

    that must be publicly disseminated is pre-allocation data. Accordingly,

    the notional or principal amount that would be publicly disseminated

    would be the pre-allocated amount.

    The Commission disagrees that the definition of ``publicly

    disseminate'' is too passive in describing how the data are delivered.

    The Commission believes that ``publicly disseminate'' should mean

    making the data readily available in a non-discriminatory manner to

    those who wish to access it, rather than pushing out the data to market

    participants, data vendors, news media, etc.

    In the Commission's view the proposed definition of ``publicly

    disseminate,'' is sufficiently clear. This definition is intended to

    convey that the data are available to all interested parties. The

    Commission believes that posting the swap transaction and pricing data

    on an Internet Web site and providing the Commission with a link to a

    conspicuous Internet Web site on which anyone can freely access the

    information is sufficient to satisfy the definition of publicly

    disseminate. The Commission expects to post these links on its Web site

    to provide market participants and the public with a central location

    to access such data.\120\

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

    \120\ The Commission's Web site can be accessed at www.cftc.gov.

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

    The Commission agrees with commenters that the term ``widely

    published'' should be clarified, and has defined ``widely published''

    in Sec. 43.2 to mean, ``to publish and make available through

    electronic means and in a manner that is freely available and readily

    accessible to the public.''

    Real-Time Disseminator--Proposed Sec. 43.2(s)

    All real-time data must be sent to SDRs, and SDRs must ensure that

    such data is publicly disseminated. For this reason, the Commission has

    concluded that a separate definition of ``real-time disseminator''

    could be confusing and is unnecessary. Accordingly, the Commission has

    determined not to adopt this defined term in Sec. 43.2.

    Real-Time Public Reporting--Proposed Sec. 43.2(t)

    The Commission is adopting this term as proposed.\121\

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

    \121\ No comments were received in response to the proposed

    definition of ``real-time public reporting.''

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

    Remaining Party--Proposed Sec. 43.2(u)

    This Commission is adopting this term as proposed.\122\

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

    \122\ No comments were received in response to the proposed

    definition of ``remaining party.''

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

    Reportable Swap Transaction--Proposed Sec. 43.2(v)

    Proposed Sec. 43.2(v) defined this term as ``any executed swap,

    novation, swap unwind, partial novation, partial swap unwind or such

    post-execution event that affects the price of a swap.'' The proposed

    definition included both the execution of a swap and certain price-

    affecting events that occur over the life of a swap. The Commission

    believes novations and swap unwinds are events that may affect the

    price of the swap and should be publicly disseminated in real-time, but

    only to the extent that they affect the pricing of the swap. In

    addition to novations and swap unwinds, other price-affecting events

    over the life of a swap may be considered ``reportable swap

    transactions.'' One commenter contended that the criteria for

    ``reportable swap transaction'' should exclude internal transactions

    between related or affiliated parties, such as back-to-back

    transactions between trading centers for the purpose of transferring

    the management of risk, where the pricing of the individual transaction

    could be influenced by group internal issues.\123\ Another commenter

    stated that the reporting of lifecycle events should be limited to

    price-forming events. This commenter further suggested the inclusion of

    an unconditional requirement to report any information which could

    affect prices or pricing attributes during the life of a swap.\124\

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

    \123\ See CL-TriOptima.

    \124\ See CL-Chris Barnard.

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

    The Commission recognizes commenters' concerns regarding the

    criteria for ``reportable swap transaction'' and also agrees that the

    reporting of lifecycle events should be limited to price-forming

    events. Accordingly, it is modifying the definition of ``reportable

    swap transaction'' in proposed Sec. 43.2(v) to address these concerns.

    The defined term has been changed to ``publicly reportable swap

    transaction'' to make clear that the scope of the definition covers

    only those swaps and lifecycle events that are to be publicly

    disseminated pursuant to part 43, and not necessarily all of the swaps

    and lifecycle events that must be reported to SDRs for regulatory

    purposes. The Commission is limiting the scope of publicly reportable

    swap transactions to those executed swaps that are arm's-length and

    that result in a change in the market risk position between two

    parties. The Commission also is providing clarifying examples in the

    definition regarding executed swaps that need not be publicly

    disseminated because they are not arm's-length transactions between two

    parties, notwithstanding that they do result in a corresponding change

    in the market risk position between the two parties. The definition

    provides that such swaps include: (1) Internal swaps between one-

    hundred percent owned subsidiaries of the same parent entity; and (2)

    portfolio compression exercises.\125\

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

    \125\ The Commission notes that the examples provided in the

    definition of ``publicly reportable swap transaction'' are not

    exhaustive.

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

    The Commission's definition of publicly reportable swap transaction

    does not include swaps that are not executed at arm's-length. These

    transactions do not serve the price discovery objective of CEA section

    2(a)(13)(B). Moreover, the public dissemination of such trades and

    exercises may reveal the identity of a counterparty in violation of CEA

    sections 2(a)(13)(E)(i) and (C)(iii). Further, the public dissemination

    of such information may mislead the market.\126\ The definition also

    modifies the list of lifecycle events (``price-forming continuation

    events''). This modification was made to provide clarity as to the

    types of lifecycle events that are publicly reportable swap

    transactions and to provide conformity between Commission

    regulations.\127\

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

    \126\ See the discussion of Sec. 43.1 for further discussion

    relating to swaps between affiliates and portfolio compression

    exercises.

    \127\ This language is consistent with the definition of ``swap

    transaction'' in proposed Sec. 23.500(m). See 75 FR 81519 (December

    28, 2010).

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

    [[Page 1196]]

    Reporting Party--Proposed Sec. 43.2(w)

    The Commission is adopting this definition as proposed with minor

    conforming changes including adding the word ``publicly'' before

    ``reportable swap transaction'' and adding ``43'' after ``part.''

    Social Size--Proposed Sec. 43.2(x)

    The Commission is not adopting the defined term ``social size'' at

    this time. The Commission will address the concept of ``social size''

    in a forthcoming re-proposal of the block trade rules to be published

    for comment in the Federal Register. Comments regarding ``social size''

    received in connection with the Proposing Release will be considered by

    the Commission in its re-proposal of the block trade rules.

    Swap Instrument--Proposed Sec. 43.2(y)

    In the Proposing Release, the Commission stated that swap

    instrument groupings or categories should be relatively broad for the

    purposes of calculating minimum block sizes.\128\ The Commission

    solicited comments addressing how it should refine the definition and

    received eleven comments from various interested parties, including

    industry associations representing myriad financial market

    participants, SDs, an asset manager, potential SDRs and a financial

    end-user. Several commenters requested further clarification of this

    definition. Others challenged the Commission's ability to develop

    adequate swap instrument categories and a definition without adequate

    data.

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

    \128\ See Real-Time NPRM supra note 6, at 76145.

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

    Some commenters urged the Commission to consider various criteria

    when creating groupings or categories of swaps instruments. One

    commenter provided a list of major currencies to consider while another

    cited a list of the key drivers of liquidity. Another commenter

    submitted information on how liquidity should be considered when

    determining the swap instrument groupings. Other commenters argued that

    the groupings or categories for ``swap instrument'' should be more

    specific. One commenter suggested that the Commission define the

    relevant swap markets and contracts with sufficient granularity to

    appropriately reflect different types of swap transactions. The

    Commission does not believe it is necessary to adopt a more granular

    definition of swap contracts in light of the revisions to the asset

    class definition, the re-proposal relating to block trades sizes and

    the implementation phase in.

    The Commission agrees that its ability to develop adequate swap

    instrument groupings or categories would benefit from adequate market

    data as well as further research. Therefore the Commission has

    determined not to define ``swap instrument'' at this time. The

    Commission will address the concept of ``swap instrument'' in a re-

    proposal of the block trade rules to be published for comment in the

    Federal Register.\129\

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

    \129\ Comments regarding ``swap instrument'' received in

    connection with the Proposing Release also will be considered by the

    Commission in its re-proposal of the block trade rules.

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

    Swap Market--Proposed Sec. 43.2(z)

    As discussed above, the Commission disagrees that definitions such

    as ``swap markets,'' ``off-facility swaps,'' ``real-time price

    disseminators'' and ``third party service providers'' unnecessarily

    complicate an already complex process.\130\ The Commission believes

    that such terminology, including sufficiently-detailed definitions, is

    necessary to assist readers' understanding of the rule and to

    adequately define and describe complex products and the requirements of

    registered entities and market participants. Nor does the Commission

    agree that the creation of such terms is inconsistent with the statute.

    The Commission believes the terms are consistent with the statutory

    purposes and/or requirements of CEA section 2(a)(13). However, in the

    interest of clarity the Commission is replacing the term ``swap

    market'' with ``registered swap execution facility or designated

    contract market'' in the final rule.

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

    \130\ See CL-NFPEEU.

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

    Swap Unwind--Proposed Sec. 43.2(aa)

    In light of changes to the term ``publicly reportable swap

    transaction,'' the Commission is not adopting the defined term ``swap

    unwind.''

    Third-Party Service Provider--Proposed Sec. 43.2(bb)

    In light of changes to final Sec. 43.3, the Commission is not

    adopting the defined term ``third-party service provider.''

    Transferee--Proposed Sec. 43.2(cc)

    The Commission is adopting this defined term as proposed.

    Transferor--Proposed Sec. 43.2(dd)

    The Commission is adopting this defined term as proposed.

    Unique Product Identifier--Proposed Sec. 43.2(ee)

    The Commission is adopting this defined term as proposed with the

    clarification that the definition refers to a ``product in an asset

    class or sub-asset class'' and not the asset class itself, as well as

    an additional reference to appendix A to part 43.

    U.S. Person--Proposed Sec. 43.2(ff)

    The Commission is not adopting the defined term ``U.S. person''

    since the term is not used in the final rules.

    3. Additional Issues Relating to Defined Terms

    Several commenters suggested adding defined terms that were not

    included in proposed Sec. 43.2:

    Illiquid Markets

    Commenters suggested that the Commission define ``illiquid

    markets'' subject to this provision by reference to particular

    commodities, such as jet fuel, or by a formula relating to the average

    number of transactions per day. One comment suggested that market

    segments be defined by distance on the forward curve.\131\ The

    commenter believes that many swap contracts in physical commodities

    that are longer than nine months forward should be eligible for a delay

    in public dissemination. Another commenter suggested that the

    determination of what constitutes an illiquid market should be based on

    the number of reported transactions, and that any market in which the

    average number of transactions (measured annually) is less than five

    transactions per day be deemed to be ``illiquid.'' \132\

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

    \131\ See CL-ATA.

    \132\ See CL-MS.

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

    The Commission has considered these comments, but does not believe

    that a definition of ``illiquid markets'' is necessary to this

    rulemaking. Comments regarding liquidity are discussed in this Adopting

    Release and will be further considered by the Commission in its re-

    proposal of the block trade rules.

    Widely Published

    One commenter suggested that the term ``widely published,'' as used

    within the definition of ``public dissemination and publicly

    disseminate'' is subject to interpretation and should be separately

    defined.\133\ Accordingly, the Commission has defined ``widely

    published'' in Sec. 43.2 as follows: ``Widely published means to

    publish and make available through electronic means in a manner that is

    freely available and readily accessible to the public.''

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

    \133\ See CL-CME.

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

    [[Page 1197]]

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

    As proposed, Sec. 43.3 specified both the manner in which swap

    counterparties must report swap transaction and pricing data to the

    appropriate registered entity, and the manner in which registered

    entities must publicly disseminate such data. This section also

    established requirements for: (1) Acceptable forms of media through

    which swap transaction and pricing data may be made available to the

    public; (2) appropriate methods to cancel or correct erroneous or

    omitted data that has been publicly disseminated; (3) the hours of

    operation that SEFs, DCMs and SDRs must maintain for the public

    dissemination of swap transaction and pricing data; and (4)

    recordkeeping of data.

    1. Responsibilities of Parties to a Swap (Sec. 43.3(a))

    CEA section 2(a)(13)(F) provides the Commission with authority to

    determine reporting requirements for swap counterparties:

    [p]arties to a swap (including agents of the parties to a swap)

    shall be responsible for reporting swap transaction information to

    the appropriate registered entity in a timely manner as may be

    prescribed by the Commission.

    As proposed, Sec. 43.3(a) provided that the reporting party to

    each swap transaction would be responsible for reporting to a real-time

    disseminator ``as soon as technologically practicable.'' The

    designation of the responsible party depended on the execution of the

    swap transaction. For swap transactions executed on a SEF or DCM,

    proposed Sec. 43.3(a)(2)(i) provided that the SEF or DCM must report

    to a real-time disseminator ``as soon as technologically practicable.''

    For off-facility swaps, proposed Sec. 43.3(a)(3) established the

    following hierarchy of counterparties to determine who has the

    responsibility to report to an SDR:

    If only one party is an SD or MSP, the SD or MSP shall be

    the reporting party.

    If one party is an SD and the other party is an MSP, the

    SD shall be the reporting party.

    If both parties are SDs, the SDs shall designate which

    party shall be the reporting party.

    If both parties are MSPs, the MSPs shall designate which

    party shall be the reporting party.

    If neither party is an SD or MSP, the parties shall

    designate which party (or its agent) shall be the reporting party.

    Proposed Sec. 43.3(a)(3) provided that the reporting party must

    report swap transaction and pricing data to a real-time disseminator

    ``as soon as technologically practicable.'' The above-referenced

    hierarchy is consistent with the reporting requirements for uncleared

    swaps to an SDR under CEA section 4r(a).\134\

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

    \134\ The Commission notes that CEA section 4r(a)(3) provides:

    (A) ``With respect to a swap in which only 1 counterparty is a swap

    dealer or major swap participant, the swap dealer or major swap

    participant shall report the swap as required under [CEA sections

    4r(a)(1) and (2)];'' (B) ``With respect to a swap in which 1

    counterparty is a swap dealer and the other is a major swap

    participant, the swap dealer shall report the swap as required under

    [CEA sections 4r(a)(1) and (2)];'' and (C) ``With respect to any

    other swap not described in subparagraph (A) or (B), the

    counterparties to the swap shall select a counterparty to report the

    swap as required under [CEA sections 4r(a)(1) and (2)].''

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

    Proposed Sec. 43.3(a)(2)(i) also specified that for swaps executed

    on a SEF's or DCM's trading system or platform, ``a reporting party

    shall satisfy its reporting requirement under this section by executing

    such reportable swap transaction on [such SEF or DCM].'' Proposed Sec.

    43.3(b) provided that a SEF or DCM satisfies its reporting requirement

    by (i) sending the real-time swap transaction and pricing data to an

    SDR that accepts and publicly disseminates such data; or (ii) sending

    such data to a third party service provider. Proposed Sec. 43.3(a)(3)

    provided that bilateral swaps must be sent to an SDR that accepts and

    publicly disseminates swap transaction and pricing data.

    The Commission received 21 comments addressing the responsibilities

    of swap counterparties with respect to real-time public reporting. The

    commenters included industry associations representing myriad financial

    market participants, a potential SD, and several service providers to

    the OTC derivatives industry.\135\

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

    \135\ Commenters include: WFE/IOMA; GFXD; Tradeweb; Working

    Group of Commercial Energy Firms; FHLBanks; SIFMA AMG; DTCC; Markit;

    MarkitSERV; BlackRock; Barclays; ISDA/SIFMA; Coalition of

    Derivatives End-Users; ICE; Foreign Headquartered Banks; WMBAA;

    NFPEEU; ICI; FSR; Coalition of Energy End-Users; and Better Markets.

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

    Several commenters expressed concern regarding the proposed

    framework for determining responsibility to report swap transaction and

    pricing data pursuant to part 43. Specifically, commenters questioned

    how responsibility is allocated when two parties are within the same

    category (i.e., both parties are MSPs or end-users). Proposed Sec.

    43.3(a)(3) provided that when both parties to an off-facility swap are

    within the same category, the parties must designate which of them will

    be the reporting party. Some commenters agreed with this approach.

    Others, however, believe that the Commission should amend proposed part

    43 to follow current market conventions. For instance, a few commenters

    noted that in the interdealer market, the seller of protection is

    responsible for confirming the swap transaction with a confirmation

    service.\136\ Another commenter noted that while adopting current

    market conventions would eliminate confusion in asset classes like

    credit and equity, it would not eliminate confusion in other asset

    classes such as foreign exchange.\137\ Commenters also questioned

    whether DCOs should be able to act as reporting parties when an off-

    facility swap is cleared.\138\ Several other commenters argued that the

    reporting party should be able to contract with any third-party service

    providers to fulfill its reporting obligation, including SEFs and

    existing confirmation/matching service providers.\139\ Many of these

    commenters emphasized the perceived adverse and disproportionate impact

    that reporting obligations would place on end-users.\140\ Indeed, one

    commenter stated that an end-user would have to expend significant time

    and resources to develop infrastructure and automation to comply with

    the reporting requirements in the Proposing Release.\141\

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

    \136\ The commenters addressing this issue include: Barclays;

    BlackRock; ISDA/SIFMA; GFXD; Coalition of Energy End-Users; ICE; and

    MarkitSERV.

    \137\ See CL-GFXD.

    \138\ The commenters include: Barclays; BlackRock; WFE/IOMA;

    ISDA/SIFMA; WMBAA; SIFMA AMG; ICI; NFPEEU; DTCC; Markit; and

    MarkitSERV.

    \139\ See CL-MarkitSERV.

    \140\ See CL-ICI; CL-SIFMA AMG.

    \141\ See CL-ICI.

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

    Two commenters argued that, to ensure accuracy and reduce

    fragmentation, only regulated SDRs should be able to satisfy the real-

    time reporting requirement. Several commenters also stated that the

    Commission's Proposing Release was not consistent with the SEC's

    proposed Regulation SBSR regarding the explicit ability of end-users to

    use third parties to comply with their reporting obligations.

    Certain comments focused on the Commission's reporting framework in

    proposed Sec. 43.3(a)(3). Three commenters contended that the

    Proposing Release was somewhat inflexible and would create

    disproportionate burdens on end-users that would not have the capacity

    to report swap transaction and pricing data

    [[Page 1198]]

    in real-time.\142\ To relieve this perceived burden, these commenters

    asked the Commission to allow parties to off-facility swaps to

    independently designate the reporting party or, in the alternative, to

    place most of the responsibility on dealers and MSPs. These commenters

    believe that the swap counterparties should be able to decide the

    reporting party, regardless of whether the parties are within the same

    category.

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

    \142\ The specific commenters include: FSR; ICI; and SIFMA AMG.

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

    As noted, the Proposing Release provided that the reporting party

    must report swap transaction and pricing data ``as soon as

    technologically practicable.'' \143\ The Commission solicited comments

    as to whether it should establish maximum reporting timeframes for the

    various categories of reporting parties to swap transactions (e.g.,

    ``as soon as technologically practicable but no later than X

    minutes''). In response, some commenters recommended that the

    Commission not establish maximum reporting timeframes, primarily

    because of the end-users' limited technological reporting capacity and

    the resulting significant financial burdens on end-users.\144\ These

    commenters argued alternatively that if the Commission prescribes

    specific timeframes, it should aim for an appropriate balance between

    speed and accuracy and adopt longer time frames for end-users.

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

    \143\ Additionally, CEA section 2(a)(13)(A) states that the

    definition of real-time public reporting means ``to report data

    relating to a swap transaction, including price and volume, as soon

    as technologically practicable after the time at which the swap

    transaction has been executed.''

    \144\ See CL-Coalition for Derivatives End-Users; CL-ISDA/SIFMA.

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

    Many commenters supported proposed Sec. 43.3(a)(2)(i), which

    provided that the swap transaction and pricing data reporting

    requirement is itself satisfied by the act of execution on the SEF or

    DCM.\145\ Commenters reasoned that SEFs and DCMs should have the

    capability to report transactions ``as soon as technologically

    practicable'' and to preserve anonymity. Two commenters recommended

    that the decision where to report remain with the parties of the swap

    and not be satisfied by executing on a SEF or DCM.\146\ As noted in the

    discussion of Sec. 43.1(b) above, commenters also raised

    extraterritoriality concerns with regard to reporting parties of swaps.

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

    \145\ See CL-ICE; CL-Tradeweb; CL-Coalition of Energy End-Users;

    CL-DTCC; and CL-MarkitSERV.

    \146\ See CL-DTCC; CL-MarkitSERV.

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

    After consideration of these comments the Commission is adopting

    Sec. 43.3(a) with certain revisions. The Commission received no

    comments directly addressing proposed Sec. 43.3(a)(1). It is adopting

    these provisions with technical and clarifying changes to reflect

    changes to defined terms in Sec. 43.2 as well as a clarification that

    the reporting should occur ``after such publicly reportable swap

    transaction is executed.'' Additionally, the Commission is adding a

    sentence at the end of this provision to make clear that, for purposes

    of part 43, any references to a ``registered swap data repository''

    would include provisionally registered SDRs.\147\

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

    \147\ Pursuant to part 49, the Commission may grant provisional

    registration to an SDR if the applicant is in substantial compliance

    with the registration standards set forth in Sec. 49.3(a)(4) and is

    able to demonstrate operational capability, real-time processing,

    multiple redundancy and robust security controls.

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

    With respect to proposed Sec. 43.3(a)(2)(i), the Commission agrees

    that SEFs and DCMs should serve as reporting parties for swaps that are

    executed on the execution platform. The Commission acknowledges the

    recommendation that the decision where to report the swap transaction

    and pricing data instead remain with the parties to the swap. However,

    the Commission believes that there are several benefits to requiring

    SEFs and DCMs to report these transactions directly to SDRs, including

    utilization of the technology of the execution platform, increased

    speed of reporting (and therefore increased transparency) and the

    ability for straight-through processing.

    Proposed Sec. 43.3(a)(2)(ii) prescribed the method and timing for

    real time public reporting of block trades executed pursuant to the

    rules of a SEF or DCM. Although the Commission has determined not to

    adopt the proposed Sec. 43.5 rules relating to block trades, it

    believes that proposed Sec. 43.3(a)(2)(i) and (ii) can be combined in

    this final rule to simplify the requirement. For the reasons discussed

    above, the Commission is adopting the provisions of Sec. 43.3(a)(2)

    largely as proposed, with several clarifying, technical and conforming

    changes necessitated by other part 43 definitional and terminology

    changes.

    The provision now references swaps ``executed'' on or pursuant to

    the rules of a SEF or DCM to ensure that block trades executed

    ``pursuant to the rules of'' a SEF or DCM would be included in the

    provision. Accordingly, if parties executed a block trade away from a

    SEF or DCM and then brought the swap transaction and pricing data

    pertaining to that block trade to the SEF or DCM pursuant to its rules,

    the parties to the swap would satisfy their reporting requirements

    under part 43. The SEF or DCM would then report the swap transaction

    data for public dissemination.

    With respect to proposed Sec. 43.3(a)(3), the Commission has

    considered comments that DCOs should be authorized to act as reporting

    parties when an off-facility swap is cleared. The Commission has also

    noted commenters' contention that the reporting party should be able to

    contract with any third party, including SEFs and existing

    confirmation/matching service providers, to satisfy its reporting

    obligation. The Commission agrees that the reporting party to an off-

    facility swap which is cleared should be able to contract with third

    parties (including DCOs or confirmation/matching service providers) to

    meet its reporting obligations under part 43.\148\ The Commission

    believes that competition among third-party providers may foster the

    development of innovative and cost effective technological solutions

    that would create efficiencies for market participants that do not have

    the resources to develop such solutions. The use of third parties in

    reporting swap transaction and pricing data could reduce costs to

    market participants. For example, third parties may be able to develop

    low-cost and readily accessible web-based solutions to enable financial

    and non-financial end-users to comply with their reporting obligations

    when entering into transactions with other end-users.\149\

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

    \148\ In this circumstance, the Commission notes that the

    obligation to report remains with the reporting party.

    \149\ It is important to note that DCOs may provide reporting

    services; however, real-time reporting and public dissemination must

    occur ``as soon as technologically practicable'' after execution

    unless subject to an appropriate time delay as described in Sec.

    43.5.

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

    The Commission acknowledges that its Proposing Release and the

    SEC's proposed Regulation SBSR differ with respect to end-users'

    reporting obligations.\150\ The Commission

    [[Page 1199]]

    explicitly permits end-users, SEFs and DCMs to utilize third parties to

    comply with reporting obligations described in Sec. 43.3 in a manner

    similar to that described in the SEC's proposed Regulation SBSR.

    However, unlike proposed Regulation SBSR, the Proposing Release

    provided that a reporting party's reporting obligation is satisfied by

    executing a publicly reportable swap transaction on or pursuant to the

    rules of a SEF or DCM. SEFs and DCMs then have the obligation to report

    swaps that are executed on or pursuant to their trading system or

    platform to an SDR pursuant to Sec. 43.3(b)(1), discussed below. A

    reporting party, SEF or DCM would retain the obligation to ensure that

    the appropriate information is provided in the appropriate timeframe to

    an SDR for public dissemination.\151\

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

    \150\ Proposed Regulation SBSR provided, ``[P]roposed Rule

    901(a) would not prevent a reporting party to a SBS from entering

    into an agreement with a third party to report the transaction on

    behalf of the reporting party. For example, for a SBS executed on a

    security-based swap execution facility (``SB SEF'') or a national

    securities exchange, the SB SEF or national securities exchange

    could transmit a transaction report for the SBS to a registered SDR.

    By specifying the reporting party with the duty to report SBS

    information under proposed Regulation SBSR, the Commission does not

    intend to inhibit the development of commercial ventures to provide

    trade processing services to SBS counterparties. Nevertheless, a SBS

    counterparty that is a reporting party would retain the obligation

    to ensure that information is provided to a registered SDR in the

    manner and form required by proposed Regulation SBSR, even if the

    reporting party has entered into an agreement with a third party to

    report on its behalf.'' 75 FR 75211-75212.

    \151\ Thus, a reporting party, SEF or DCM would be liable for a

    violation of Sec. 43.3 if, for example, a third party acting on

    behalf of a reporting party did not report the appropriate swap

    transaction and pricing data to an SDR for public dissemination.

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

    The Commission has also considered comments addressing the

    allocation of reporting obligations when counterparties fall within the

    same market participant category. The Commission agrees that market

    conventions may determine which party will be obligated to report to an

    SDR when both parties to an off-facility swap are within the same

    category. However, the Commission favors a flexible approach and

    believes the swap counterparties should decide whether a market

    convention is used for determining the reporting party. In asset

    classes where market conventions currently exist, the Commission

    believes that parties to an off-facility swap should still have the

    same ability to agree on which party will serve as the reporting party.

    In response to these comments, the Commission has added the

    language ``[u]nless otherwise agreed to by the parties prior to the

    execution of the publicly reportable swap transaction, the following

    persons shall be reporting parties for off-facility swaps * * *''

    before the listing of reporting parties for off-facility swaps. The

    Commission concurs with commenters that there may be circumstances in

    which it makes greater economic or practical sense for a party other

    than the one described in the hierarchy in Sec. 43.3(a)(3) to be the

    reporting party. This additional language will give the parties

    flexibility to agree on the reporting party in situations described in

    Sec. 43.3(a)(3)(i) and (ii) as long as such agreement occurs prior to

    the execution of the publicly reportable swap transaction.\152\ And the

    Commission believes that in the situations described in Sec. Sec.

    43.3(a)(3)(iii), (iv) and (v), the designation of the reporting party

    for an off-facility swap provided for in the rule should be agreed to

    prior to execution of such swap in order to ensure compliance with the

    requirements of part 43. The requirement serves to ensure that

    reporting after execution is not hampered by the parties' inability to

    agree.

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

    \152\ To the extent that the parties have not agreed to the

    reporting party prior to the execution of the swap, the reporting

    party would be the SD or the MSP as applicable.

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

    The Commission disagrees that the reporting framework in proposed

    Sec. 43.3(a)(3) was inflexible and would create disproportionate

    burdens on end-users which do not have the capability to report swap

    transaction and pricing data in real-time.\153\ In the Commission's

    view, the approach taken in the Proposing Release created a balanced

    framework by placing a greater burden on SDs and MSPs, but not

    mandating which party must report if two parties are of the same

    category. Further, the Commission is adding to this provision the

    flexibility to determine the reporting party for a particular

    transaction if both parties agree prior to execution of the swap. As

    discussed above, the Commission believes such an approach is preferable

    to a prescriptive rule governing reporting.

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

    \153\ See CL-FSR; CL-ICI; and CL-SIFMA AMG.

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

    The reporting framework in Sec. 43.3(a)(3) strikes an appropriate

    balance from a cost-benefit perspective. Avoiding a more prescriptive

    regime for assigning the reporting responsibility in transactions

    between parties of the same category should allow the parties to

    determine which party can report the transaction at a lower cost.\154\

    In the Commission's view, it is appropriate to assign a greater cost

    burden to SDs and MSPs than to the buy-side (including end-users), as

    SDs and MSPs are likely to be larger, more sophisticated and more

    active in swap markets and thus more able to realize economies of scale

    in carrying out reporting responsibilities. In addition, allowing

    reporting parties to contract with third parties should allay concerns

    regarding the potential disproportionate cost burden placed on end-

    users. Moreover, the Commission's definition of ``as soon as

    technologically practicable'' provides additional flexibility as its

    application includes consideration of the ``prevalence, implementation

    and use of technology by comparable market participants.'' \155\ The

    hierarchy of reporting parties described in Sec. 43.3(a)(3) for off-

    facility swaps would not apply to counterparties to block trades.

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

    \154\ The Commission recognizes that a publicly reportable swap

    transaction may be a multi-asset or hybrid instrument (e.g., a

    commodity-linked interest rate swap), meaning that each leg of such

    swap falls in a different asset class. The Commission believes that

    with respect to reporting such multi-asset or hybrid swaps pursuant

    to part 43, absent an agreement by the swap counterparties stating

    otherwise, the reporting party, SEF or DCM shall choose the SDR to

    which the real-time swap transaction and pricing data is reported

    for public dissemination. The Commission expects that if an SDR is

    available for only one leg of a hybrid swap, the reporting party,

    SEF or DCM will send the real-time swap transaction and pricing data

    to such SDR for public dissemination.

    \155\ See supra Sec. 43.2 and related discussion in section

    II.B.2.

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

    Commenters have asserted that, to avoid ambiguity, the Commission

    should explicitly state in part 43 that only data relating to swap

    transactions where at least one party is a U.S.-based person are

    required to be reported and publicly disseminated in real-time.\156\

    The Commission believes that both U.S.-based and non-U.S.-based

    counterparties that transact on or pursuant to the rules of a SEF or

    DCM should be subject to all of the real-time reporting requirements.

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

    \156\ See CL-ISDA/SIFMA; CL-GFXD; CL-Foreign Headquartered

    Banks; and CL-TriOptima.

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

    Proposed Sec. 43.3(a)(4) provided a process for reporting off-

    facility swaps when no SDR was available. As discussed below, under the

    Commission's phase in and compliance date schedule, an SDR must be

    registered or provisionally registered for a particular asset class in

    order to comply with the part 43 requirements.\157\ The Commission

    believes that coordinating the real-time reporting obligations with the

    regulatory reporting obligations will enable market participants to

    reduce reporting costs. Therefore, the Commission is not adopting Sec.

    43.3(a)(4) at this time.

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

    \157\ The Commission notes that until such time as an SDR is

    registered or provisionally registered for an asset class, reporting

    parties, SEFs and DCMs are permitted to publicly disseminate real-

    time swap transaction and pricing data.

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

    2. Public Dissemination of Swap Transaction and Pricing Data (Sec.

    43.3(b))

    CEA section 2(a)(13)(D) authorizes the Commission to require

    registered entities to publicly disseminate the swap transaction and

    pricing data required to be reported under CEA section 2(a)(13).

    Accordingly, proposed Sec. 43.3(b) specified the method and timeliness

    of public dissemination of

    [[Page 1200]]

    swap transaction and pricing data for swaps that are executed on a SEF

    or DCM.

    Proposed Sec. 43.3(b)(1)(i) provided that a SEF or DCM must send

    or otherwise electronically transmit swap transaction and pricing data

    ``as soon as technologically practicable'' to: (1) An SDR that accepts

    swaps for the particular asset class of ``reportable swap

    transactions;'' or (2) a third-party service provider operating on

    behalf of the SEF or DCM. Such data would then be publicly disseminated

    in the same manner described in proposed Sec. 43.3(a)(3) for swaps

    that are executed off-facility (i.e., the SDR publicly disseminates

    such data ``as soon as technologically practicable''). The Proposing

    Release specified that if a SEF or DCM chose to use a third-party

    service provider for public dissemination, the obligation to ensure

    that such data was publicly disseminated would remain with the SEF or

    DCM, since the third-party service provider would be an unregulated

    entity.\158\ Accordingly, proposed Sec. 43.3(b)(1)(i) required a SEF

    or DCM to remain vigilant in monitoring the timeliness and accuracy of

    the public dissemination if it chooses to use a third-party service

    provider.

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

    \158\ While proposed Sec. 43.3(c) generally required SDRs to

    register and comply with the requirements set forth in proposed part

    49, neither the Commission's proposal nor the Commission itself has

    the authority to require third-party service providers to comply

    with the same requirements. Instead, proposed Sec. 43.3(d)

    attempted an indirect approach at requiring third-party service

    providers to comply with proposed part 49's requirements. In

    particular, proposed Sec. 43.3(d) provided that a [SEF or DCM] must

    ensure that the third-party service provider maintains standards for

    public reporting of swap transaction and pricing data that are, at a

    minimum, equal to those standards for registered SDRs as described

    in proposed Sec. 43.3(c) and proposed part 49 of the Commission's

    regulations.

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

    Proposed Sec. 43.3(b)(2)(i) prohibited SEFs, DCMs or any reporting

    party to a swap from disclosing transaction and pricing data for a

    particular swap before an SDR or third-party service provider has

    disseminated data for that swap to the public. This prohibition--

    sometimes referred to as the ``embargo rule''--is intended to ensure

    that swap transaction and pricing data is disseminated uniformly and is

    not published in a manner that creates an unfair advantage for any

    segment of market participants. At the same time, however, proposed

    Sec. 43.3(b)(2)(ii) permitted a SEF or DCM to make swap transaction

    and pricing data available to participants on its market prior to

    public dissemination of such data. Similarly, proposed Sec.

    43.3(b)(2)(iii) permitted an SD to share swap transaction and pricing

    data with its customers prior to public dissemination of such data.

    These sections were intended to give SEFs, DCMs and SDs the flexibility

    to share swap transaction and pricing data with their market

    participants or customers, respectively, concurrent with the

    transmission of such data to an SDR or third-party service provider for

    public dissemination.

    Various interested parties commented on the method of dissemination

    of swap transaction and pricing data to the public.\159\ These

    commenters raised a number of issues including: (1) The use of SDRs for

    public dissemination; (2) the use of third-party service providers for

    public dissemination; (3) the requirement that SDRs accept all swaps in

    a particular asset class; (4) the embargo rule; and (5) the

    consolidation of data.

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

    \159\ The commenters include: GFXD; Working Group of Commercial

    Energy Firms; Coalition of Energy End-Users; WFE/IOMA; ICI; NFPEEU;

    ISDA/SIFMA; Better Markets, Inc.; Coalition for Derivative End-

    Users; Reval; Tradeweb; DTCC; CME; Argus; Markit; MarkitSERV;

    BlackRock; FINRA; and NGX.

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

    Two commenters asserted that SDRs should not be used to real-time

    report swap transaction and pricing data.\160\ One urged that SDRs not

    be used because they are the last party to receive the swap data; \161\

    the other suggested that SDRs may have an unfair competitive advantage

    over third-party real-time disseminators.\162\ Conversely, four

    commenters argued that only SDRs should be used for dissemination of

    real-time data.\163\ One commenter requested that the Commission

    clarify the responsibilities of an SDR under part 43.\164\

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

    \160\ See CL-Reval; CL-Argus.

    \161\ See CL-Reval.

    \162\ See Meeting with Argus (December 15, 2010).

    \163\ See CL-Markit; CL-NFPEEU; CL-MarkitSERV; and CL-DTCC.

    \164\ See CL-MarkitSERV.

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

    Commenters expressed varying opinions with respect to the use of

    third-party service providers in public dissemination. One commenter

    supported the Commission's proposal to give SEFs and DCMs the option to

    use third-party service providers to satisfy their public dissemination

    obligation.\165\ Five commenters opposed the use of potentially

    unregistered third-party service providers to satisfy the public

    dissemination obligation.\166\ Several commenters expressly supported

    the use of DCOs to disseminate real-time data.\167\ Specifically, one

    commenter stated that DCOs should publicly disseminate data for real-

    time purposes, because they currently have the infrastructure to

    support such operations.\168\ One commenter questioned the Commission's

    statutory authority to introduce the third-party service provider

    concept. Indeed, this commenter argued that terms not in section 727 of

    the Dodd-Frank Act, such as third-party service provider, are

    unnecessary complications to an already complex statutory mandate and

    are not required by the Dodd-Frank Act.\169\

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

    \165\ See CL-ISDA/SIFMA.

    \166\ See CL-Coalition of Energy End-Users; CL-MarkitSERV; CL-

    Tradeweb; CL-NFPEEU; and CL-DTCC.

    \167\ See CL-Working Group of Commercial Energy Firms; CL-Reval;

    CL-BlackRock; CL-CME; and CL-NFPEEU.

    \168\ See CL-CME.

    \169\ See CL-NFPEEU.

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

    Commenters also offered solutions to the circumstance in which no

    SDR is available to disseminate swap transaction data. One commenter

    asserted that in those circumstances, if both counterparties are end-

    users, the reporting party should not be obligated to report at

    all.\170\ Another recommended that if no SDR is available to accept

    swap transaction and pricing data for a specific asset class, the swap

    transaction and pricing data should be reported to the Commission by

    the end of the day.\171\

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

    \170\ See CL-Coalition of Energy End-Users.

    \171\ See CL-GFXD.

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

    Commenters also questioned the ``embargo rule.'' One commenter

    stated that permitting SEFs, DCMs and reporting parties to disclose

    data prior to public dissemination would afford them an unfair

    competitive advantage over the general public.\172\ Another argued that

    any information embargo should be eliminated entirely.\173\ Another

    commenter, however, argued that if data were publicly disseminated

    later, it would cause confusion because ``[the] data, if disseminated

    after the fact * * * will not be representative of current market data

    when it is made public.'' \174\ One commenter argued that the role of

    ``work-up'' in the interdealer markets is important and data should not

    be reported to an SDR until the work-up process is completed.\175\

    Similarly, this commenter argued that with regard to the ``work-up''

    process, trading platforms should be able to share the last trade

    information to market participants prior to reporting such data to an

    SDR.

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

    \172\ See CL-ICI.

    \173\ See CL-Better Markets.

    \174\ See CL-Coalition of Energy End-Users.

    \175\ See CL-WMBAA.

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

    Several commenters urged the Commission to require the

    consolidation of swap transaction and

    [[Page 1201]]

    pricing data.\176\ One commenter recommended that the Commission and

    the SEC jointly establish a single consolidator for the public

    dissemination of swap and security-based swap transaction and pricing

    data.\177\ As the Commission noted in the Proposing Release, neither

    the CEA nor the Dodd-Frank Act grants the Commission explicit statutory

    authority to establish a real-time reporting consolidator.\178\ The

    SEC's proposed Regulation SBSR similarly would require public

    dissemination of real-time swap data by SDRs and does not establish a

    consolidator.\179\

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

    \176\ See CL-Coalition for Derivatives End-Users; CL-Better

    Markets; CL-Markit; CL-MarkitSERV; and CL-FINRA.

    \177\ See CL-FINRA.

    \178\ See 75 FR 76149.

    \179\ See 75 FR 75208.

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

    With respect to proposed Sec. 43.3(b)(1)(i) and comments

    addressing the use of SDRs for public dissemination, the Commission

    agrees with the majority of the commenters that third party service

    providers should not be used for public dissemination. Accordingly, the

    Commission is modifying the proposed rule to require that SEFs and DCMs

    satisfy the requirements of this subparagraph by transmitting swap

    transaction and pricing data to an SDR for public dissemination ``as

    soon as technologically practicable'' after such swap has been executed

    on the SEF or DCM.\180\ The Commission expects that ``transmittal'' of

    such data would mean, at a minimum, some form of electronic conveyance.

    This change removes the requirement in proposed Sec. 43.3(b)(1)(i)

    that SEFs and DCMs must publicly disseminate by sending data either to

    an SDR or to a third-party service provider. SEFs and DCMs may enter

    into a contractual relationship with a third party service provider to

    transmit the swap transaction and pricing data to an SDR; however, the

    SEF or DCM will remain responsible for such reporting requirement

    pursuant to part 43.

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

    \180\ The Commission notes that, pursuant to Sec.

    48.8(a)(9)(i), registered foreign boards of trade must ensure that

    swap transaction data be sent to an SDR that is either registered

    with the Commission or has an information sharing arrangement with

    the Commission.

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

    In its Proposing Release, the Commission imposed public

    dissemination obligations on SDRs that accept and publicly disseminate

    swap transaction and pricing data in real-time. Further, CEA section

    2(a)(13)(D) provides the Commission with the authority to require

    registered entities to publicly disseminate swap data. The Commission

    is further clarifying Sec. 43.3(b) by adding Sec. 43.3(b)(2) to

    provide that SDRs must then ensure that such data is publicly

    disseminated as soon as technologically practicable'' pursuant to part

    43 for SEF and DCM executed swaps as well as off-facility swaps, unless

    a time delay described in Sec. 43.5 is applicable. The Commission

    believes that this approach addresses various commenters' suggestions

    and concerns and is consistent with the SEC's approach in proposed

    Regulation SBSR. The Commission further believes that eliminating the

    option to use a third-party service provider will reduce (i)

    fragmentation in the market; (ii) search costs for market participants;

    and (iii) inconsistencies in data formats reported to various

    disseminators. Additionally, SDRs will be registered entities subject

    to the Commission's jurisdiction, whereas third-party service providers

    are unregistered entities over which the Commission has no authority.

    The Commission notes that the rule does not prohibit an SDR from

    contracting with a third party which may perform the public

    dissemination function. Should an SDR choose to enter into such a

    contractual relationship, it will remain responsible to ensure public

    dissemination under CFTC regulations.

    With respect to proposed Sec. 43.3(b)(1)(ii), the Commission has

    considered the comments and, as discussed, believes that reporting

    parties (including SEFs and DCMs) should be permitted to transmit their

    swap transaction and pricing data only to SDRs for public

    dissemination. Consistent with this determination, the Commission is

    eliminating in the final rule the option for SEFs, DCMs and reporting

    parties to send or otherwise electronically transmit their swap

    transaction and pricing data to a third-party service provider.

    However, the Commission believes that an SDR may ensure public

    dissemination by contracting with a third-party service provider to

    assist in the public dissemination of swap transaction and pricing data

    in real-time. Finally, in requiring that the reporting parties transmit

    the real-time swap transaction and pricing data only to SDRs, the

    Commission notes that nothing in part 43 would prohibit DCOs, SEFs or

    DCMs from registering as SDRs.

    The Commission has considered the comments addressing the embargo

    rule and has determined to modify proposed Sec. 43.3(b)(3) to provide

    further clarity.\181\ Three clarifying criteria are established in the

    final rule: (1) Disclosure is made only to market participants on such

    SEF or DCM (changed from ``participants on its market''); \182\ (2)

    market participants are provided advance notice of such disclosure; and

    (3) any disclosure must be non-discriminatory.\183\ A SEF or DCM that

    wishes to disclose swap data prior to the public dissemination by an

    SDR must provide advance notice to its market participants of any

    disclosure of such swap transaction and pricing data.\184\ The

    Commission also notes that this policy is consistent with the practice

    of public dissemination in the futures markets. Further, pursuant to

    Sec. 43.3(b)(3)(i)(A), SEFs and DCMs must not disclose such data prior

    to sending such data to an SDR for public dissemination.

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

    \181\ The Commission does not intend that Sec. 43.3(b)(3) apply

    to risk management activities, post-trade processing or regulatory

    reporting where it would be necessary to transmit the full swap

    details to comply with such activities.

    \182\ For the purposes of Sec. 43.3(b)(3)(i), the Commission

    believes that market participants on a SEF or DCM include those

    persons with trading privileges on such platform, as well as others

    without trading privileges that subscribe to the SEF or DCM for

    information services.

    \183\ The Commission seeks to avoid a situation that would

    permit discrimination among those market participants of a SEF or

    DCM.

    \184\ For example, a SEF or DCM may provide advance notice by

    including a provision in its rulebook describing the disclosure of

    swap transaction and pricing data to market participants.

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

    Section 43.3(b)(3)(ii) replaces proposed Sec. 43.3(b)(2)(iii) and

    establishes data reporting requirements for SDs and MSPs reporting to

    their customer bases that are substantially similar to part 43's data

    reporting requirements for SEFs and DCMs providing such information to

    their market participants. Section 43.3(b)(3)(ii)(B) establishes that

    an SD's or MSP's ``customer base'' includes parties that maintain

    accounts with or have been swap counterparties with such SD or MSP.

    This provision also expands the scope of parties that can share such

    swap data to include MSPs, as the Proposing Release permitted only SDs

    to share such data. Section 43.3(b)(3)(ii)(C) requires an SD or MSP to

    provide a swap counterparty to a publicly reportable swap transaction

    with advance notice of any disclosure by the SD or MSP of such swap

    transaction and pricing data.\185\ Further, SDs and MSPs must ensure

    that the data shared with their customer bases is not shared prior to

    sending such data to an SDR for public dissemination and that any

    disclosure is non-discriminatory.

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

    \185\ For example, advance notice is sufficiently given when an

    SD or MSP, prior to the execution of such publicly reportable swap

    transaction, informs a swap counterparty that it will disclose the

    relevant swap transaction and pricing data.

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

    There are several advantages to this approach. Allowing

    participants to see last trade information for the particular markets

    on which they are trading, in many cases prior to the data being

    disseminated to the public, will

    [[Page 1202]]

    enhance price discovery. Information is not delayed to market

    participants on a particular SEF or DCM. This approach does not allow

    the sharing of information by a trading facility or platform

    immediately upon execution, as one commenter suggested. However, the

    Commission believes that the requirement to send swap transaction and

    pricing data to an SDR simultaneously with or prior to sharing such

    information with persons with trading privileges will reduce potential

    inequities while incentivizing faster reporting by SEFs, DCMs, SDs and

    MSPs that wish to share such data. If real-time reporting is delayed as

    part of a phase in, or if no SDR is registered or provisionally

    registered in an asset class, the individual markets could share the

    information to allow for last trade information and post-trade price

    discovery on a particular SEF or DCM, until such time as compliance is

    required.

    The Commission notes that its part 49 rules governing SDRs do not

    permit SDRs to use real-time data between the time they receive the

    data from SEFs, DCMs and reporting parties and the time they publicly

    disseminate the data.\186\

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

    \186\ See 76 FR 54550; See also 76 FR 54582. Section 43.3(d),

    discussed below, does not prohibit an SDR from transmitting real-

    time swap transaction and pricing data to market participants at the

    same time that such data is publicly disseminated pursuant to part

    43. However, as prescribed in Sec. 49.17(g) of the Commission's

    regulations, the distribution of such data prior to the public

    dissemination pursuant to part 43 would constitute a ``commercial

    use'' of such data.

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

    3. Requirements for Registered Swap Data Repositories in Providing the

    Public Dissemination of Swap Transaction and Pricing Data (Sec.

    43.3(c))

    As proposed, Sec. 43.3(c) required that: (1) SDRs register and

    comply with the requirements set forth in proposed part 49; (2) SDRs

    that accept and publicly disseminate real-time data for swaps in

    selected asset classes shall accept and publicly disseminate real-time

    data for all swaps within such asset classes; and (3) any SDR that

    accepts and publicly disseminates real-time data perform an annual

    independent compliance review.

    The Commission is adopting Sec. 43.3(c)(1) substantially as

    proposed with certain technical and conforming changes.\187\ For

    example, the phrase ``unless the data is subject to a time delay in

    accordance with Sec. 43.5'' was changed to state, ``except as

    otherwise provided in this part.'' Additionally, the language ``in

    accordance with this part'' was added as a clarification.

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

    \187\ The Commission received no comments on proposed Sec.

    43.3(c)(1).

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

    Proposed Sec. 43.3(c)(2) provided that if an SDR chose to publicly

    disseminate swap transaction and pricing data in real-time for a

    specific asset class, the SDR must accept all swaps within such asset

    class. The Commission received three comments \188\ supporting this

    proposal; these commenters contended that such a provision would help

    avoid fragmentation of the SDR landscape. The Commission agrees that

    this provision will reduce fragmentation and is adopting Sec.

    43.3(c)(2) as proposed with some minor technical and conforming

    changes. For example, the phrase ``and public dissemination'' was added

    to the title of (c)(2), and the phrase ``unless otherwise prescribed by

    the Commission'' was added to the end of the text. The Commission also

    notes that the definition of ``asset class'' was revised in Sec.

    43.2.\189\

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

    \188\ See CL-GFXD; CL-DTCC; and CL-MarkitSERV.

    \189\ See Sec. 49.10(b) of the Commission's regulations

    regarding SDRs which is identical to Sec. 43.3(c)(2).

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

    The Commission is adopting Sec. 43.3(c)(3) as proposed with one

    conforming change: ``43'' was added to the end of the text.\190\

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

    \190\ The Commission received no comments addressing proposed

    Sec. 43.3(c)(3).

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

    4. Requirements for Third-Party Service Providers--Proposed Sec.

    43.3(d)

    Proposed Sec. 43.3(d) established requirements for SEFs and DCMs

    that publicly disseminate through a third-party service provider. As

    discussed above, the Commission is requiring that public dissemination

    of swap transaction and pricing data for the purposes of part 43 occur

    through an SDR. This new requirement obviates proposed Sec. 43.3(d),

    and the Commission is not adopting the provision.

    5. Availability of Swap Transaction and Pricing Data to the Public

    (Sec. 43.3(d))

    Proposed Sec. 43.3(e) required SDRs that report swap transaction

    and pricing data to the public in real-time to make the data available

    and accessible in an electronic format that is capable of being

    downloaded, saved and/or analyzed. Requiring that SDRs make swap

    transaction and pricing data available to market participants and the

    public ensures equal access such data.\191\

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

    \191\ In addition to the comments discussing the definitions of

    ``as soon as technologically practicable'' and ``public

    dissemination or publicly disseminate,'' one commenter stated that

    the Commission should consider the additional requirement that an

    SDR make available any real-time reporting data to all market

    participants, including SEFs, DCMs and DCOs on a non-discriminatory

    basis. See CL-Tradeweb at 5 (``Without such requirements, the

    Commission is effectively taking away from market participants,

    including swaps markets and DCOs, a potentially significant and

    valuable component of their market data services.'').

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

    The Commission believes that additional clarity is needed with

    regard to proposed Sec. 43.3(e)--which has been renumbered as Sec.

    43.3(d) in the final rules--and therefore is adopting Sec. 43.3(d)(1)-

    (3). Section 43.3(d)(1) is similar in substance to proposed Sec.

    43.3(e); however, the Commission has clarified that the data must be in

    ``a consistent, usable and machine-readable electronic'' format that

    ``allows the data to be downloaded, saved and analyzed.'' These

    modifications address several comments relating to the definitions of

    ``public dissemination or publicly disseminate'' by providing clarity

    with respect to the format in which publicly disseminated data must be

    made available.

    Section 43.3(d)(2) reflects the Commission's belief that data must

    be made freely available to market participants and the public, on a

    non-discriminatory basis. Finally, Sec. 43.3(d)(3) requires that SDRs

    provide the Commission with a hyperlink to a Web site where the public

    can access the publicly-disseminated swap transaction and pricing data.

    The Commission anticipates that it will make these links available to

    the public on its own Web site. In this manner, the Commission will

    provide a centralized location where market participants and the public

    can find all available swap transaction and pricing data, thus

    enhancing price discovery.

    6. Errors or Omissions (Sec. 43.3(e))

    As proposed, Sec. 43.3(f) outlined the process for correcting or

    cancelling any errors or omissions in swap transaction and pricing data

    that are publicly disseminated in real-time. Proposed Sec. 43.3(f)(1)

    established the process by which such errors or omissions must be

    corrected or cancelled, depending on whether the data error or omission

    was discovered by the reporting party to the swap or the non-reporting

    party. The Proposing Release also sought to prevent fraudulent

    dissemination for the purpose of distorting market pricing.

    Specifically, pursuant to proposed Sec. 43.3(f)(2) reporting parties,

    SEFs, DCMs and SDRs that accept and publicly disseminate swap

    transaction and pricing data in real-time were prohibited from

    submitting or agreeing to submit a cancellation or correction for the

    purpose of re-reporting swap transaction and pricing data in order to

    gain or extend a delay in publication or

    [[Page 1203]]

    to otherwise evade the reporting requirements of proposed part 43.

    Proposed Sec. 43.3(f)(3) specified the appropriate method of

    canceling incorrectly published swap transaction and pricing data,

    providing that a real-time disseminator must cancel incorrect data that

    has been disseminated to the public by publishing a cancellation in the

    format and manner described in appendix A to proposed part 43. As

    proposed, the rule would have required a real-time disseminator to

    correct any erroneous or omitted data disseminated by (i) first

    publicly disseminating a cancellation of the incorrect data; and (ii)

    then publicly disseminating the correct data pursuant to the format

    described in appendix A to proposed part 43. In addition to the

    substantive changes discussed below, the Commission has determined to

    make minor technical and conforming changes to Sec. 43.3. In that

    regard, proposed Sec. 43.3(f) is redesignated as Sec. 43.3(e) in the

    final rule and will be referred to accordingly below.

    The Commission received five comments addressing the proposed

    treatment of errors and omissions in real-time reporting of swap

    transaction and pricing data. The commenters--industry groups and a

    non-financial end-user--generally supported the Proposing Release that

    errors and omissions should be reported ``as soon as technologically

    practicable.'' However, one commenter suggested that in the event of a

    dispute between counterparties regarding the reported data, the

    reporting party would control the public record regarding the swap and

    thus would always prevail. The commenter further urged that the non-

    reporting party should be permitted to report the disputed data to the

    SEF, DCM or ``real-time disseminator,'' who would then be obliged by

    rule to review the disputed data.\192\ Two commenters contended that

    the proposed requirement that the cause of the error or omission be

    included in any correction was unnecessary. These commenters suggested

    that reporting parties should not be responsible for data that is

    inaccurately transcribed or corrupted after it has been submitted to an

    SDR or for correcting data errors of which they are unaware.\193\

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

    \192\ See CL-MFA.

    \193\ See CL-GFXD; CL-ISDA/SIFMA.

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

    One commenter recommended that cancellations not due to an error in

    the primary economic terms should not be required to be reported in

    real time, but should instead be reported in accordance with

    requirements specified in the general reporting rule.\194\

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

    \194\ See CL-ISDA/SIFMA; CL-Working Group of Commercial Energy

    Firms.

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

    Two commenters noted that longer reporting times would reduce

    errors. In this regard, they asserted that the proposed reporting times

    are more ``aggressive'' than those that the industry has committed to

    in the past, and may lead to an increase in reporting errors.\195\ One

    commenter suggested a reporting time of T+1,\196\ while another

    suggested that the Commission balance the sometimes competing needs of

    reporting speed and data accuracy in proposing timeframes for

    regulatory reporting.\197\ Another recommended that the Commission

    explicitly state in the final rule that it will not prosecute, penalize

    or otherwise impose ``remedies'' on parties for inadvertent errors in

    reporting under any new standardized information collection system

    required by the final rules.\198\

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

    \195\ See CL-ISDA/SIFMA.

    \196\ See CL-MFA.

    \197\ See CL-GFXD; CL-ISDA/SIFMA.

    \198\ See CL-AGA.

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

    In response to comments suggesting that the non-reporting party

    should be permitted to submit errors or corrections in the case of a

    dispute between the non-reporting party and the reporting party, the

    Commission believes that dispute resolution mechanisms should be

    exercised before the data is sent back to an SDR for public

    dissemination. In its view, the execution platform or the parties to

    the swap are in the best position to determine whether an error has

    been made in public dissemination and to agree upon the corrected swap

    transaction and pricing data. The Commission is deleting in final Sec.

    43.3(e)(1)(i) references to the ``reporting party'' and is requiring

    instead that one party to a swap must notify the other party if it

    becomes aware of an error or omission. As described in Sec.

    43.3(e)(1)(ii), the reporting party remains responsible for submitting

    corrections and cancellations.

    The Commission is adopting Sec. 43.3(e)(1)(ii) with clarifications

    to certain terminology changed in the rule (e.g., references to real-

    time disseminator are eliminated). This provision requires that the

    reporting party submit corrections to the same SEF, DCM or SDR to which

    that data was originally submitted for the purposes of reporting. The

    reporting party may report corrections to a SEF or DCM if it becomes

    aware that the SEF or DCM submitted incorrect data to an SDR for public

    dissemination for a swap executed on the platform or if the reporting

    party submitted the data to a SEF or DCM with respect to a block trade.

    The Commission notes that pursuant to CEA section 21(c)(2), an SDR has

    a duty to ``confirm with both counterparties to a swap the accuracy of

    the data that was submitted.''

    The Commission is adopting Sec. 43.3(e)(1)(iii)-(iv) and Sec.

    43.3(e)(2)-(4) with technical and clarifying changes. For example, in

    Sec. 43.3(e)(3), a clarification has been added that cancellations

    must be publicly disseminated by an SDR ``as soon as technologically

    practicable'' to mirror the requirements for corrections in Sec.

    43.3(e)(4).

    Several comments suggested that the Commission omit from the final

    rule the requirement that the reason for any amendment to swap

    transaction and pricing data be reported during the correction process.

    The Commission notes that there is no requirement in Sec. 43.3(e) that

    such information be included in any type of correction or cancellation

    report. The Commission requires that any correction of incorrect data

    that has been publicly disseminated must be reported in the same format

    as all other data reported under part 43, ``as soon as technologically

    practicable'' and as set forth in appendix A to part 43.

    The Commission agrees that the reporting parties should not be

    responsible for data that is inaccurately transcribed or corrupted

    after it has been submitted to an SDR. However, the Commission expects

    that reporting parties will take due care to ensure that the data

    submitted to an SDR is accurate and complete. Under Sec. 43.3(a)(2), a

    reporting party has satisfied its reporting requirement ``by executing

    a publicly reportable swap transaction on or pursuant to the rules of a

    registered swap execution facility or designated contract market.'' For

    off-facility swaps, Sec. 43.3(a)(3) provides that a reporting party

    has satisfied its reporting requirement when the swap has been

    ``reported to a registered swap data repository for the appropriate

    asset class.'' Once the data have been reported in accordance with the

    relevant provision, the reporting party has satisfied its reporting

    requirement under this section and will not be responsible for

    correction of subsequent inaccuracies in said data; no additional

    modification is necessary.

    The Commission considered the comment that cancellations not due to

    an error in the primary economic terms need not be reported in real

    time. The Commission does not agree with the suggestion that the

    correction of errors

    [[Page 1204]]

    in data reported under part 43 should be reported pursuant to a

    periodic reporting schedule. The correction of errors or omissions in

    real time is necessary to fulfill the price discovery mandate of

    Section 727 of the Dodd-Frank Act. In addition, depending on the

    circumstance, a cancellation may or may not be followed by a

    correction. For example, a cancellation may occur where a clearinghouse

    does not accept a particular swap for clearing: Such a swap may be

    busted and would not require a correction. In another situation, one or

    more terms to a swap may be incorrectly reported by the reporting

    party, and the error would be realized upon confirmation of the swap.

    Under the final rules, such a circumstance would require a cancellation

    of the original--incorrectly reported--data, followed by a correction

    with accurate swap transaction and pricing data. When reporting a

    cancellation or correction, the SDR must report the data in the same

    form and manner in which it was originally reported and include a date

    stamp reflecting the time of the original transaction, so that market

    participants and the public are aware of which swap has been canceled

    or corrected.

    The Commission agrees that a longer reporting time would reduce

    reporting errors. Section 43.5 (``Time delays for public dissemination

    of swap transaction and pricing data'') provides initial timeframes for

    reporting swap transaction and pricing data during an initial interim

    period. These timeframes will provide additional time for reporting.

    The Commission believes that longer reporting times during the phase in

    period should allay concerns about errors resulting from speed of

    reporting and should also provide market participants and registered

    entities with the necessary time to develop appropriate systems to

    reduce errors in the reporting process.

    One commenter requested an explicit undertaking from the Commission

    that it will not prosecute, penalize or otherwise impose ``remedies''

    on parties for inadvertent errors in reporting under any new

    standardized information collection system required by the final rules.

    Such relief is not appropriately part of a rulemaking. Parties seeking

    such relief may do so pursuant to the no-action procedures of Sec.

    140.99.\199\

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

    \199\ The Commission has the ability to review all error and

    omission reports and is authorized under the CEA and Commission

    regulations to investigate and prosecute false reports.

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

    7. Hours of Operation of Registered Swap Data Repositories (Sec.

    43.3(f))

    Proposed Sec. 43.3(g)(1) specified that an SDR that accepts and

    publicly disseminates real-time data must be able to do so twenty-four

    hours a day. However, proposed Sec. 43.3(g)(2) permitted an SDR to

    declare special closing hours to perform maintenance on an ad hoc

    basis. Such closing would require advance notice by the SDR to market

    participants and the public. Proposed Sec. 43.3(g)(3) further provided

    that special closing hours should not be scheduled during periods when

    the U.S. markets and major foreign swap markets are most active.

    Proposed Sec. 43.3(h) provided that during special closing hours, an

    SDR that is a real-time disseminator must have the capability to

    receive and hold in queue information regarding ``reportable swap

    transactions.''

    The Commission received three comments regarding an SDR's hours of

    operation. One commenter suggested that the real-time disseminator

    should operate continuously in light of the global nature of

    derivatives markets and participation by non-U.S. persons.\200\ Another

    stated that SDRs should operate 24 hours a day, six days a week to

    permit continuous access to data by regulators (including during

    periods where individual exchanges or other trading platforms are

    closed). Requiring such operating hours recognizes the global nature of

    trading in derivatives markets and the round-the-clock participation in

    these markets by U.S. persons.\201\ The third commenter suggested that

    scheduled downtime should be permitted so that the ``real-time

    disseminator'' could perform routine maintenance and to mark the

    beginning and end of the trading day. This commenter also stated that

    the downtime periods should extend for no less than 30 minutes and

    should be scheduled for time periods that are least disruptive (i.e.,

    when market activity is at low levels).\202\

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

    \200\ See CL-Working Group of Commercial Energy Firms.

    \201\ See CL-DTCC.

    \202\ See CL-CME.

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

    The Commission agrees that the global nature of the swaps market

    requires that an SDR be able to publicly disseminate swap transaction

    and pricing data at all times and believes that SDRs that publicly

    disseminate swap transaction and pricing data should be fully

    operational 24 hours a day, 7 days a week.\203\ Accordingly, in

    addition to minor technical changes--including the redesignation of

    proposed Sec. 43.3(g)(1) as Sec. 43.3(f) in the final rule--the

    Commission has amended the proposed rule to add: ``Unless otherwise

    provided in this subsection,'' a registered swap data repository

    ``shall have systems in place to continuously receive and publicly

    disseminate swap transaction and pricing data in real time pursuant to

    this part.''

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

    \203\ The Commission notes that the CEA does not require SDRs to

    have any scheduled down time.

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

    The Commission also agrees that scheduled downtime should be

    permitted to allow the SDR to perform routine maintenance and that

    these periods should be scheduled during time periods that are least

    disruptive (i.e., when market activity for the asset class of the SDR

    is low). Accordingly, the Commission is adopting in Sec. 43.3(f)(2) a

    provision that the SDR should, to the extent reasonably possible, avoid

    scheduling closing hours when, in its estimation, the U.S. market and

    major foreign markets are most active. However, the Commission does not

    believe it is necessary to close an SDR daily to mark the beginning and

    end of the trading day. The Commission also disagrees that SDRs should

    operate 24/6 and believes that such continuous operating hours are

    appropriate given the global nature of trading derivatives.\204\

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

    \204\ By requiring SDRs to operate continuously for the purposes

    of the real-time public reporting requirements of part 43, market

    participants will be less likely to execute during SDR downtimes in

    order to delay public dissemination of swap transaction and pricing

    data.

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

    In addition to minor technical changes, the Commission is deleting

    the reference to closing ``on an ad hoc basis'' with regard to

    ``special closing hours.'' Instead, Sec. 43.3(f)(1) refers only to

    ``closing hours.'' These changes allow SDRs to properly maintain their

    systems while also providing advance notice of scheduled downtime to

    market participants and the public.

    During these downtimes, SDRs must hold the data for public

    dissemination in queue and release the information with the appropriate

    execution timestamp upon re-opening. Any downtime by an SDR should be

    publicly announced, with adequate notice to the market, and should

    occur at a time when there is anticipated low market activity, which

    may vary based on asset class. Further, the Commission strongly

    encourages SDRs to adopt redundant systems to allow public reporting

    during closing hours.

    The Commission intends to ensure that SDRs will provide market

    participants and the public with sufficient notice of closing hours. To

    that end, the Commission is adopting new Sec. 43.3(f)(3) to provide

    that: ``A

    [[Page 1205]]

    registered SDR shall comply with the requirements under part 40 of the

    Commission's regulations in setting closing hours and shall provide

    advance notice of its closing hours to market participants and the

    public.''

    The Commission previously has deemed policies such as trading hours

    to be ``rules'' as that term is defined in Sec. 40.1(i) of the

    Commission's regulations.\205\ Accordingly, an SDR is required under

    part 40 to self-certify its rules, including the establishment and

    modification of trading hours.\206\ The self-certification process

    under Sec. 40.6 includes posting notice on the SDR's Web site.\207\

    However, compliance with the part 40 provisions alone may not suffice

    to meet the notice requirement under Sec. 43.3(f)(3), which requires

    an SDR to provide reasonable advance notice to participants and the

    public of its closing hours.\208\

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

    \205\ Section 40.1(i) includes in the definition of ``rule''

    both ``stated policy'' and ``terms and conditions.'' Further, Sec.

    40.1(j)(1)(iv) defines ``terms and conditions'' to include trading

    hours. 76 FR 44776 at 44791 (July 27, 2011).

    \206\ Section 40.4(b)(3) provides that changes in trading hours

    may be implemented without prior approval of the Commission, as long

    as such changes have been submitted for self-certification as

    required under the procedures of Sec. 40.6(a). See 76 FR 44776,

    44793 (July 27, 2011).

    \207\ The Commission's part 40 regulations include a process by

    which registered entities may certify rules or rule amendments that

    establish standards for responding to an emergency.

    \208\ For example, an SDR could provide notices to its

    participants or publicize its closing hours in a conspicuous place

    on its Web site.

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

    8. Acceptance of Data During Closing Hours (Sec. 43.3(g))

    Proposed Sec. 43.3(h) required that an SDR have the capability to

    receive and hold in queue information regarding ``reportable swap

    transactions'' during special closing hours. Consistent with comments

    addressing hours of operation, the Commission is adopting Sec. 43.3(g)

    and adding Sec. Sec. 43.3(g)(1) and (2) to an SDR's responsibilities

    to accept data during closing hours.\209\

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

    \209\ As previously noted, the Commission is not required to

    provide schedule closing times for SDRs.

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

    The Commission is adopting Sec. 43.3(g)(1) to clarify that an SDR

    must publicly disseminate the data that it has held in queue during

    closing hours promptly upon reopening after closing hours. The

    Commission anticipates that there may be circumstances in which an SDR

    is unable to receive and/or hold swap transaction and pricing data in

    queue during downtime. To ensure that market participants and the

    public receive timely notice of any failure to hold data in queue, the

    Commission is adding Sec. 43.3(g)(2) which requires the SDR, upon

    reopening, to issue notice that it has resumed normal operations in

    such cases where data was not held in queue. The Commission believes

    that such notice should be provided for all market participants. Such

    notice must state that the SDR resumed normal operations but was

    unable, while closed or for some other reason, to receive and hold in

    queue such transaction information. Further, Sec. 43.3(g)(2) requires

    that upon receiving such notice, any SEFs, DCMs or reporting parties

    whose data was so ``lost'' shall re-report the data to the SDR

    immediately.\210\

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

    \210\ In addition to these changes, the Commission has made

    minor technical and conforming changes to this section. For example,

    proposed Sec. 43.3(g) (``Hours of Operation'') is renumbered as

    Sec. 43.3(f) in the final rules; proposed Sec. 43.3(h)

    (``Acceptance of data during special hours) is redesignated as Sec.

    43.3(g).

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

    9. Timestamp Requirements (Sec. 43.3(h))

    Proposed Sec. 43.3(i) required that all data related to a

    ``reportable swap transaction'' be maintained for a period of not less

    than five years following the time at which the transaction data is

    publicly disseminated pursuant to part 43. Specifically, proposed Sec.

    43.3(i)(1) required that SEFs and DCMs retain all swap transaction

    information received from reporting parties for the purposes of public

    dissemination, including block trade and large notional swap data. As

    proposed, Sec. 43.3(i)(2) directed that SDs and MSPs retain swap

    transaction and pricing information in accordance with proposed part 43

    and proposed part 23.

    The Commission received seven comments from various interested

    parties, including industry associations and a potential SDR, with

    respect to proposed Sec. 43.3(i).\211\ Two commenters asserted that

    recordkeeping standards should be coordinated internally between

    Commission rulemakings as well as externally with the SEC and

    international regulators.\212\ Some commenters focused on perceived

    burdens to end-users, asserting that that the costs and burdens of

    recordkeeping for end-users would be very high for less-

    technologically-sophisticated end-users, and that further clarification

    is necessary with respect to the precise data that should be retained

    by end-users.\213\ One commenter recommended that this clarification

    should be written in clear, easy-to-understand terms, and that the

    final rules should provide for a ``CFTC-lite'' regulatory scheme for

    commercial end-users.\214\

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

    \211\ See, e.g., CL-FSR.

    \212\ See CL-WFE; CL-Working Group of Commercial Energy Firms.

    \213\ See CL-Working Group of Commercial Energy Firms; CL-

    NFPEEU.

    \214\ See CL-NFPEEU.

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

    A commenter stated that Sec. 1.31 of the Commission's regulations

    is outdated and should not be applied to the proposed recordkeeping

    rules under this part.\215\ This commenter further recommended that

    data retention should be triggered by the execution of the swap

    transaction, as proposed in the part 45 rules, and not upon public

    dissemination.\216\

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

    \215\ See CL-Working Group of Commercial Energy Firms.

    \216\ See id.; See also 75 FR 76574.

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

    The Commission does not believe that Sec. 1.31 of the Commission's

    regulations is outdated and inappropriate to the proposed recordkeeping

    rules. On the contrary, Sec. 1.31 provides that books and records be

    kept for a period of five years from the date such records are created.

    In addition, this section provides that records must be readily

    accessible during the first two years of the five year period. Adopting

    proposed Sec. 43.3(i) would duplicate the existing recordkeeping

    requirements of Sec. 1.31. \217\ Further, in response to other

    commenters, the Commission does not believe that a ``CFTC-lite''

    regulatory scheme for commercial end-users is contemplated by the Dodd-

    Frank Act.

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

    \217\ In addition, registered entities are also subject to the

    swap recordkeeping provisions of proposed Sec. 45.2. Proposed Sec.

    45.2 sets forth the swap transaction records that shall be kept by

    all parties subject to the Commission's jurisdiction and the manner

    and form in which such records should be kept, including relevant

    timeframes for retention and access.

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

    The Commission also disagrees that data retention should be

    triggered by termination of the publicly reportable swap transaction.

    Real-time data will have been publicly disseminated upon affirmation

    and there would be no requirement to maintain the data in the interim

    period. However, the Commission does see merit in the comment that

    real-time data should be retained for an appropriate period from the

    date of the price-forming event to allow re-publication of historic

    price data and support the error correction process.\218\ Proposed

    Sec. 45.2(c) explicitly states that all records required to be kept

    for a swap shall be kept ``from the date of the creation of the swap

    through the life of the swap and for a period of at least five years

    from the final termination of the swap, in a form and manner acceptable

    to the Commission.'' Therefore, as required by Sec. 1.31 and proposed

    part 45, real-time swap transaction and pricing data will be

    [[Page 1206]]

    retained for a period of five years after the termination of the swap.

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

    \218\ See CL-DTCC.

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

    After considering comments and the recordkeeping requirements in

    both the Commission's existing regulations and proposed part 45 rules,

    the Commission has determined to limit the recordkeeping requirements

    in part 43 to timestamps. The Commission agrees that the recordkeeping

    and data retention requirements should be coordinated between CFTC

    rulemakings, particularly the data recordkeeping and reporting rules.

    The Commission believes that the recordkeeping provision in proposed

    Sec. 43.3(i) is duplicative of recordkeeping requirements found in

    other proposed Commission regulations (e.g., proposed part 45 and

    proposed part 23 recordkeeping requirements) and is therefore not

    adopting proposed Sec. 43.3(i). The Commission believes that

    eliminating this provision addresses commenters' concerns relating to

    the cost burden of maintaining data beyond the data retained in the

    ordinary course of business and eliminates duplicative recordkeeping

    requirements.

    The Commission believes that there is a need for SEFs, DCMs, SDRs,

    SDs and MSPs to record and maintain certain timestamps regarding the

    transmission and dissemination of real-time swap transaction and

    pricing data.

    The Commission's proposed block trading rules included a

    requirement in Sec. 43.5(f) that SEFs and DCMs timestamp swap

    transaction and pricing data with the date and the time to the nearest

    second. Additionally, and as discussed with respect to appendix A to

    part 43 below, the Commission proposed that an ``execution timestamp''

    be publicly disseminated for all ``reportable swap transactions.'' As

    discussed above, the Commission has determined not to adopt the

    proposed rules establishing appropriate minimum size for block trades

    at this time; proposed Sec. 43.5(f) has been redesignated as Sec.

    43.3(h) (``Timestamp Requirements''). As proposed, Sec. 43.5(f)(1) and

    appendix A to part 43 required SEFs and DCMs to timestamp swap

    transaction and pricing data with the date and time to the nearest

    second.

    The Commission received two comments objecting to the timestamp

    reporting requirement as unreasonable and inconsistent with current

    market practice. One commenter also suggested that the value derived by

    moving the industry to Coordinate Universal Time (``UTC'') appears

    minimal when compared to the costs involved.\219\ The Commission

    recognizes that reporting the timestamp to the second is not current

    industry practice in some asset classes and may incur some

    technological and cost challenges. However, a timestamp to the second

    is necessary both for audit trail and enforcement purposes and to

    provide market participants and the public with sufficient information

    to re-create a trading day. The Commission will also use the timestamps

    described in Sec. 43.3(h) to determine whether swaps are being

    reported ``as soon as technologically practicable'' and to compare the

    speed at which similar market participants report swap transaction and

    pricing data to an SDR for public dissemination. Additionally, the

    Commission will be able to determine how quickly SDRs are publicly

    disseminating the information that they receive for public

    dissemination.

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

    \219\ See CL-ISDA/SIFMA.

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

    The execution timestamp, described in appendix A to part 43, is

    critical for SDRs in determining when to publicly disseminate swap

    transaction and pricing data that is subject to a time delay pursuant

    to Sec. 43.5. Different market participants and different types of

    execution may be assigned different time delays, so the execution

    timestamp that is publicly disseminated will be an important aid in

    following the order of execution of transactions within a particular

    market.

    Notwithstanding potential costs to the industry, the Commission

    believes that movement to UTC will facilitate the ability for market

    participants and the public to harmonize swap transactions across the

    global market. The Commission notes that use of UTC in the part 43

    rules refers only to the execution timestamp that is publicly

    disseminated. Consistency across the global swaps market will better

    enhance price discovery, and the Commission believes that requiring UTC

    will allow market participants and reporting parties to recreate the

    order of trades, provide consistency across all publicly disseminated

    swap transaction and pricing data and reduce the need for market

    participants to convert different transaction times to understand the

    order of trades in a particular market.

    For the reasons discussed above, the Commission is adopting the

    timestamp requirements as proposed in Sec. 43.5(f), with certain

    modifications, as Sec. 43.3(h). First, the Commission has clarified

    that the timestamps in Sec. 43.3(h) are in addition to the execution

    times in appendix A to part 43. Further, the Commission is not limiting

    these timestamp requirements to block trades and large notional off-

    facility swaps, as in the Proposing Release, but rather is requiring

    such timestamps for all publicly reportable swap transactions. The

    Commission has also made conforming changes to proposed Sec.

    43.5(f)(1)-(3) which are reflected in Sec. 43.3(h)(1), (2) and

    (4).\220\ In Sec. 43.3(h)(1)(i), the Commission has changed the term

    ``reporting party'' to ``swap counterparty'' since block trades must be

    reported pursuant to the rules of a SEF or DCM.\221\

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

    \220\ The conforming changes to these sections include changing

    the phrases ``a swap market and a registered swap data repository''

    to ``a registered swap execution facility or designated contract

    market''; ``real-time disseminator'' to ``registered swap data

    repository''; and ``swap market or reporting party'' to ``registered

    swap execution facility, designated contract market or reporting

    party'' to more accurately reflect the terms as defined in Sec.

    43.2.

    \221\ The circumstance described in Sec. 43.3(h)(1)(i) may

    occur when a block trade is executed away from a SEF or DCM, but

    pursuant to the rules of a SEF or DCM. The SEF or DCM would need to

    record a timestamp of when it received such data from a swap

    counterparty pursuant to its rules.

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

    The Commission has added Sec. 43.3(h)(3) and (4) to require that

    SDs and MSPs record and maintain for a period of at least five years a

    timestamp reflecting when data is sent to an SDR for public

    dissemination.\222\

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

    \222\ The Commission anticipates that the timestamp requirements

    in Sec. 43.3(h)(3) would likely apply only in the case of off-

    facility swaps and price-forming continuation data in which the SD

    or MSP is the reporting party.

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

    The commenters' concerns with respect to the costs and burdens of

    recordkeeping on end-users also have merit. Accordingly, the Commission

    has determined that, other than the timestamp requirements of Sec.

    43.3(h), no additional recordkeeping burdens will be placed upon end-

    users under part 43.

    The Commission agrees that the recordkeeping requirements should be

    harmonized with the SEC. Many registered entities, SDs and MSPs will be

    dually registered with the Commission and the SEC, and they will comply

    with the agency regime that has more robust recordkeeping standards.

    Finally, the Commission acknowledges that coordination with

    international regulators will also be necessary in their rulemaking

    processes and commits that it will continue to do so.

    10. Fees Charged by SDRs (Sec. 43.3(i))

    The Commission interprets CEA sections 2(a)(13) and 21 to require

    that SDRs ensure open and equal access to their data collection

    services for the purpose of real-time reporting. Consistent with this

    interpretation, the Commission proposed in Sec. 43.3(j) that fees

    charged by a real-time disseminator to reporting parties, SEFs or DCMs

    should be equitable and non-discriminatory, and that volume

    [[Page 1207]]

    discounts for data collection shall not be offered, unless available to

    all reporting parties.

    The Commission received ten comments related to fees charged by an

    SDR for their public dissemination services. A market data vendor

    suggested that the Commission permit SDRs to employ the sell-side-pays

    model, or alternatively, a structure that requires only the reporting

    party to pay SDR fees.\223\ Another commenter criticized proposed Sec.

    43.3(j) for permitting volume discounts; \224\ while others urged that

    the Commission monitor what is ``fair and reasonable.'' \225\ A

    commenter recommended that the Commission clarify that nothing in its

    rules is intended to impose or imply any limit on the ability of market

    participants--including parties to the transaction, SEFs and DCOs--to

    use and/or commercialize data they create or receive in connection with

    the execution or reporting of swap data, so long as it is consistent

    with their confidentiality obligations.\226\ Two commenters stated that

    the final rules should clarify that ownership of data is retained by

    the counterparties to the swap and does not transfer to a SEF, DCM or

    SDR.\227\ Another requested clarification that market participants may

    use and/or commercialize real-time swap transaction and pricing

    data.\228\ Finally, several commenters stated that SDRs should not

    charge reporting parties since they will receive fees from the sale of

    such data to the public.\229\

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

    \223\ See CL-MarkitSERV.

    \224\ See CL-Better Markets.

    \225\ See CL-BlackRock; CL-MarkitSERV.

    \226\ See CL-Tradeweb.

    \227\ See CL-Markit; CL-DTCC.

    \228\ See CL-Tradeweb.

    \229\ See CL-Working Group of Commercial Energy Firms.

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

    A commenter stated that it currently provides data to the public

    free of charge and expects to continue to do so when satisfying its

    part 43 obligations.\230\ Another commenter urged that SDRs be allowed

    to charge commercially reasonable fees to disseminate data, because

    otherwise there would be no incentive to improve systems to the

    detriment of transparency.\231\ A commenter urged that the Commission

    monitor the fee setting of entities under its jurisdiction to ensure

    that fees are fair and reasonable and do not favor any class of

    participant at the expense of others.\232\ Some commenters suggested

    that the fees collected by SDRs relating to public dissemination of

    swap transaction and pricing data should be redistributed to reporting

    parties; \233\ other commenters stated that such fees should be

    remitted to the Commission to offset the costs of implementing the

    Dodd-Frank Act. \234\

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

    \230\ See CL-DTCC.

    \231\ See CL-ICE.

    \232\ See CL-BlackRock.

    \233\ See CL-Tradeweb.

    \234\ See CL-Working Group of Commercial Energy Firms.

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

    The Commission emphasizes that section 727 of the Dodd-Frank Act

    explicitly requires public dissemination of such data. The Commission

    believes that implicit in this mandate is the requirement that the data

    be made available to the public at no cost. On the other hand, however,

    the Commission believes it is reasonable to permit an SDR that publicly

    disseminates swap transaction and pricing data to charge fair and

    reasonable fees to providers of swap transaction and pricing data to

    offset the costs associated with public dissemination of those data.

    Further, nothing in these rules would prohibit SDRs responsible for the

    public dissemination of real-time swap data from making commercial use

    of such data subsequent to public dissemination of those data.\235\

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

    \235\ Section 49.17(g) of the Commission's regulations governs

    the commercial use by SDRs of both core regulatory data and real-

    time publicly reported data; Sec. 49.17(g)(3) explicitly prohibits

    the commercialization by SDRs of publicly disseminated swap

    transaction and pricing data prior to the public dissemination of

    such data pursuant to part 43.

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

    With regard to specific fee arrangements, the Commission believes

    such matters are business decisions best left to the parties. Further,

    the Commission believes that issues of data ownership are outside the

    scope of this rulemaking.

    For these reasons, the Commission is adopting proposed Sec.

    43.3(j) with minor technical amendments \236\ and additional language

    to clarify that volume-based discounts offered to any reporting party

    must be made available to all reporting parties.

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

    \236\ The Commission notes that the rule has been redesignated

    as Sec. 43.3(i).

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

    D. Section 43.4--Swap Transaction and Pricing Data To Be Publicly-

    Disseminated in Real-Time

    1. In General (Sec. 43.4(a))

    Proposed Sec. 43.4(a) provided that swap transaction information

    must be reported to a real-time disseminator so that the real-time

    disseminator could publish swap transaction and pricing data in

    accordance with part 43. As explained more fully in the discussion of

    Sec. 43.3(b), the Commission has concluded that third party service

    providers should not be used for public dissemination and that instead

    real-time swap transaction and pricing data should be reported to SDRs

    for public dissemination. Accordingly, Sec. 43.4(a) is amended to

    eliminate the reference to ``real-time disseminator'' and replace it

    with ``registered swap data repository'' and to remove the phrase ``and

    format requirements.''

    2. Public Dissemination of Data Fields (Sec. 43.4(b))

    The Commission is adopting this section as proposed, with minor

    conforming changes.\237\

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

    \237\ One commenter recognized that Sec. 43.4(b) does not

    require the public dissemination of any counterparty-identifying

    information. See CL-MFA.

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

    3. Additional Swap Information (Sec. 43.4(c))

    The Commission is adopting this section as proposed, with minor

    technical and conforming changes. For example, ``match'' is changed to

    ``compare'' and the phrase ``that accepts and publicly disseminates

    swap transaction and pricing data in real-time on a transactional or

    aggregate basis'' is removed from the end of the text.

    4. Amendments to Data Fields (Proposed Sec. 43.4(d))

    Two commenters questioned the Commission's authority to summarily

    modify the data fields described in appendix A to proposed part 43

    without the opportunity for notice and comment.\238\ One commenter

    indicated that any changes to data fields should not include the

    publication of identifying information.\239\

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

    \238\ See CL-MFA; CL-ABC/CIEBA.

    \239\ See CL-MFA.

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

    The Commission agrees that any changes to the data fields should

    reflect careful consideration and should not result in the publication

    of identifying information. Accordingly, the Commission is not adopting

    proposed Sec. 43.4(d) (``Amendments to data fields'').\240\

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

    \240\ Proposed Sec. 43.4(d) stated that the ``Commission may

    determine from time to time to amend the data fields described in

    appendix A to this part.''

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

    5. Anonymity of the Parties to a Publicly Reportable Swap Transaction

    (Sec. 43.4(d))

    CEA section 2(a)(13)(E)(i) requires the Commission to protect the

    identities of counterparties to mandatorily cleared swaps, swaps

    excepted from the mandatory clearing requirement and voluntarily

    cleared swaps.\241\ Similarly,

    [[Page 1208]]

    CEA section 2(a)(13)(C)(iii) requires that the Commission's rules

    maintain the confidentiality of business transactions and market

    positions of the counterparties to an uncleared swap.\242\

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

    \241\ As noted, Congress required that such rules ``ensure that

    the public reporting of swap transaction and pricing data does not

    disclose the names or identities of the parties to the

    transactions.'' See Statement of Sen. Blanche Lincoln supra note 15.

    \242\ Such provision does not cover swaps that are determined to

    be required to be cleared but are not cleared.

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

    Proposed Sec. 43.4(e)(1) prohibited the public dissemination of

    real-time swap transaction and pricing data that would identify or

    facilitate the identification of a party to a swap and further

    specified that an SDR may not publicly report such data in a manner

    that discloses or otherwise facilitates the identification of a party

    to a swap. Proposed Sec. 43.4(e)(2) directed that a SEF, DCM or

    reporting party must provide an SDR with a specific description of the

    underlying asset and tenor of a swap. Proposed Sec. 43.4(e)(2) further

    provided that ``this description must be general enough to provide

    anonymity but specific enough to provide for a meaningful understanding

    of the economic characteristics of the swap.'' Proposed Sec. 43.4(i)

    established a rounding convention for all swaps, including a ``notional

    cap'' providing that if the notional size of a swap is greater than

    $250 million, only ``$250+'' would be publicly disseminated.\243\

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

    \243\ Given the importance of protecting the identities of the

    parties to a swap and the business transactions and market positions

    of market participants, and pursuant to its authority under CEA

    section 2(a)(13)(B), the Commission in adopting part 43 has

    considered the protection of the anonymity for all swaps, both

    cleared and uncleared.

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

    The Commission recognized that the public dissemination of the

    underlying asset and tenor of a swap executed off-facility with a

    specific underlying asset may be more susceptible to an inference as to

    the identity, business transactions or market positions of the parties

    to the swap, particularly in the ``other commodity'' asset class.\244\

    In contrast, the Commission acknowledged that swaps executed on or

    pursuant to the rules of a SEF or DCM would likely not be subject to

    the same disclosure risk.\245\ To avoid the former result and comply

    with the statutory mandate, the Commission determined that a more

    general description than the specific underlying asset and tenor should

    be publicly disseminated.\246\ The Commission provided an example in

    the Proposing Release of how such a standard could be applied, but did

    not propose specific guidelines because it recognized that SEFs or DCMs

    may differ and that new types of swaps may emerge.\247\ Proposed Sec.

    43.4(e)(2) made clear that its requirement was separate from the

    requirement that a reporting party report swap data to an SDR pursuant

    to CEA section 2(a)(13)(G).\248\

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

    \244\ Real-Time NPRM supra note 6, at 76150--76151.

    \245\ Real-Time NPRM supra note 6, at 76151.

    \246\ Id.

    \247\ See Real-Time NPRM supra note 6.

    \248\ Real-Time NPRM supra note 6, at 76174.

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

    As proposed in Sec. 43.4(e)(2), the standard that swap data be

    ``general enough to provide anonymity but specific enough to provide

    for a meaningful understanding of the economic characteristics of the

    swap'' applied to all swaps. However, in the preamble to the Proposing

    Release, the Commission recognized that SEFs or DCMs differ and sought

    to clarify that the standard would be applied differently depending on

    asset class and place of execution. Even if the specific underlying

    asset and tenor of a swap executed on or pursuant to the rules of a SEF

    or DCM were publicly disseminated, it would be difficult for market

    participants to ascertain the identity, business transactions or market

    positions of the counterparties. Swaps executed on or pursuant to the

    rules of a SEF or DCM would generally lack the kind of customization

    that would permit reverse engineering; therefore, identities, business

    transactions and market positions and of counterparties could not be

    inferred from the underlying asset and tenor.

    The Commission received 25 comments addressing anonymity in the

    public dissemination of swap transaction and pricing data. The

    commenters included industry associations representing financial market

    participants; potential SDs; end-users (both financial and non-

    financial); potential SDRs; an asset manager; and a data vendor to the

    OTC derivatives industry. Some commenters expressed a general concern

    that the provisions in the Proposing Release would not sufficiently

    protect the anonymity of the market participants. Within this group,

    some commenters believed that anonymity would not be sufficiently

    protected by the proposed provisions because of the structure of the

    swap (i.e., bilateral swap where at least one counterparty is an end-

    user; bespoke transaction; \249\ uncleared bespoke transaction).\250\

    Others argued that anonymity would be compromised because of the

    underlying asset (i.e., energy products); \251\ still others focused on

    the liquidity in the market.\252\ In addition to general concerns, one

    commenter asserted that the information that would be publicly

    disseminated under the proposed rule would fail to enhance price

    discovery, and thus its disclosure would not further the statutory

    purpose embodied in CEA section 2(a)(13)(B).\253\

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

    \249\ See CL-Coalition of Energy End-Users.

    \250\ See CL-FHLBanks.

    \251\ See CL-Dominion; CL-ATA; and CL-EMUS.

    \252\ See CL-MS; CL-EMUS; CL-Argus.

    \253\ See CL-Dominion.

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

    One commenter stated that the anonymity provisions of proposed

    Sec. 43.4(e)(2) should be applied to all asset classes and to all

    swaps, regardless of whether the swap is executed on or pursuant to the

    rules of a SEF or DCM or off-facility.\254\ Another requested that the

    Commission clarify in the final rule ``that the information required to

    be publicly disseminated cannot identify the participants to a swap or

    provide information specific to the participants.'' \255\

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

    \254\ See CL-Coalition of Derivatives End-Users. The commenter

    stated that often, after a bond is issued to raise debt in the

    capital markets, the issuer will enter into an interest rate swap to

    hedge the interest rate risk.

    \255\ CL-ISDA/SIFMA at 15.

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

    One commenter asserted that whether a swap is liquid enough to

    clear at a DCO is not determinative of whether the swap exists in a

    liquid market.\256\ The commenter stated that cleared swaps may exist

    in illiquid markets and the real-time reporting of such swap

    transaction and pricing data may both negatively impact the price, and

    disclose the identity, business transactions or market positions of one

    or more counterparties.\257\ The same commenter suggested that the

    Commission define an ``illiquid market'' and require that swaps traded

    in such markets receive special treatment for purposes of public

    dissemination.\258\ Similarly, commenters suggested that the Commission

    begin phasing in real-time public reporting with more liquid contracts

    and phase in less liquid contracts as it gains more information on

    markets with less liquidity.\259\

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

    \256\ See CL-MS.

    \257\ The commenter stated that a market in which products that

    are illiquid are cleared exists for high-yield single name CDS. The

    Commission notes, however that such single name CDS are not under

    the Commission's jurisdiction. CL-MS at 3, fn. 4.

    \258\ See CL-MS.

    \259\ See CL-MS; CL-Barclays.

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

    A common belief expressed by many commenters is that special

    accommodations should be made for off-facility swaps based upon an

    underlying physical commodity because of the increased risk that the

    identities of the parties and their business transactions or market

    positions may be revealed.\260\ Some commenters focused on the illiquid

    markets that exist for

    [[Page 1209]]

    some swaps that fall within the ``other commodity'' asset class with

    specific pricing points or delivery points, grade level or tenor,

    specifically for swaps with an underlying asset in the energy space

    (e.g., natural gas, electricity, jet fuel, etc.).\261\ The commenters

    explained these markets are very illiquid with few transactions and/or

    few market participants. They argued that trades executed in illiquid

    markets are more susceptible to reverse engineering, thereby increasing

    the likelihood that the counterparties' identities, business

    transactions or market positions could be discovered.\262\

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

    \260\ See CL-ISDA/SIFMA.

    \261\ See CL-ATA; and CL-Barclays.

    \262\ See CL-Dominion.

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

    One commenter suggested that the Commission ``allow for an

    exclusion [from the requirements of part 43] for any transaction

    between either two end-users or an end-user and a regulated entity with

    respect to any class of swaps that does not serve a significant price

    discovery function.'' \263\ The commenter stated that in such

    situations, particularly when the entity is hedging an energy asset,

    the public dissemination of the swap transaction and pricing data would

    serve no price discovery function and may reveal the identity of the

    end-user, depending on whether the underlying asset is in an illiquid

    market with few market participants.\264\ Another commenter stated that

    the Commission should ensure anonymity by not requiring the public

    dissemination of swap transaction and pricing data for any bespoke off-

    facility swaps.\265\ Similarly, a commenter suggested the Commission

    should not require the public dissemination of any swap which falls

    under CEA section 2(a)(13)(C)(iii) and any end-user swaps under CEA

    section 2(a)(13)(C)(i) that are clearable but not cleared, until the

    Commission determines that these swaps are ``significant price

    discovery'' swaps as set forth in Section 737 of the Dodd-Frank

    Act.\266\ This commenter believed that given the Commission's anonymity

    provisions, the public dissemination of the underlying asset would not

    be specific enough to enhance price discovery.

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

    \263\ Id. at 7.

    \264\ See id.

    \265\ See CL-Working Group of Commercial Energy Firms. As stated

    above in section II.A.1. (``Scope'') discussion, the Commission has

    determined that Section 2(a)(13)(C) requires all swaps to be

    publicly reported.

    \266\ See CL-Dominion.

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

    Some commenters suggested that, to ensure anonymity, the Commission

    should limit the amount of data or the data fields that are publicly

    disseminated.\267\ In this regard, one commenter observed that ``[i]f

    the list of data fields is extensive [and carries with it substantial

    implementation costs], yet not complete enough that pricing of

    instruments can be reproduced easily, then end-users would bear the

    implementation costs without the commensurate benefit of enhanced price

    discovery.'' \268\ The commenter emphasized the importance of

    dissemination of the data fields that allow market participants to

    deduce the material incentives that SDs or MSPs have in connection with

    a particular swap.\269\ Another commenter noted that credit support

    arrangements are often privately negotiated; to ensure the

    confidentiality of the business transactions of the counterparties to

    an uncleared, bespoke swap with a credit support arrangement, a

    ``credit'' data field should not be publicly disseminated.\270\

    Commenters suggested that for swaps with a specific delivery or pricing

    point, a broad geographic region should be publicly disseminated rather

    than a specific location.\271\

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

    \267\ See CL-Coalition of Energy End-Users; CL-Working Group of

    Commercial Energy Firms.

    \268\ CL-Coalition of Derivatives End-Users at 8.

    \269\ See id.

    \270\ See CL-Working Group of Commercial Energy Firms. In the

    Proposing Release, the Commission asked about whether

    creditworthiness of counterparty should be publicly disseminated.

    Real-Time NPRM supra note 6, at 76158. See also infra discussion in

    section II.F. (``Appendix A to Part 43 (``Data Fields for Public

    Dissemination'')'').

    \271\ Id.; See also CL-Argus.

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

    One commenter stated that the ``Tenor'' data field should allow

    parties to report using a tenor ladder, rather than the month and year,

    to protect the anonymity of the parties.\272\ However, another

    commenter suggested that tenor should be reported according to the

    current market convention for a particular swap instrument.\273\

    Another commenter suggested a contrary approach: Because the tenor of a

    swap is a primary economic term, the specific tenor of the swap should

    be reported.\274\

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

    \272\ ``[T]he trade data should be mapped to a tenor ladder for

    public dissemination with longer dated products mapping to one-year

    or two-year, for example, rather than specific month and year.'' CL-

    GFXD at 11.

    \273\ See CL-Working Group of Commercial Energy Firms. The

    commenter provided an example that because energy products tend to

    trade in seasonal strips except for short tenors, it may be

    beneficial to report seasonal strips rather than month for such

    transactions.

    \274\ See CL-ISDA/SIFMA. The commenter stated: ``The Commission

    requests comment on whether date information for swaps should be

    rounded to the nearest tenor/month. Many swaps meet specific

    requirements for end-users. To limit or manipulate data elements

    that are part of the Primary Economic Terms in order to allow trades

    with differing terms to be aggregated will reduce post trade

    transparency. We recommend that this proposal not be implemented.''

    Id. at 15.

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

    Many commenters questioned how the Commission intended to enforce

    the provisions of proposed Sec. 43,2(e)(2).\275\ Several commenters

    believed the proposed standard lacked clarity in terms of its

    application and requested additional guidance.\276\ These commenters

    noted that the Proposing Release placed the burden to provide the

    requisite description of the swap on the reporting party and requested

    that the Commission adopt explicit guidelines as to what data should

    (and should not) be reported to an SDR for purposes of public

    dissemination. Several other commenters believed that the

    confidentiality provisions of proposed Sec. 43.2(e)--which includes

    the rounding convention and notional cap--would not adequately protect

    the counterparties, particularly when at least one party to the swap

    was an end-user or when there was an illiquid market for the swap.\277\

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

    \275\ See CL-ABC/CIEBA; CL-MFA; and CL-ISDA/SIFMA.

    \276\ Id.

    \277\ See, e.g., CL-Dominion; CL-Encana; CL-FHLBanks; CL-

    Coalition for Derivatives End-Users; CL-Argus; and Meeting with

    NFPEEU (January 19, 2011).

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

    Consistent with its statutory mandate, the Commission is requiring

    real-time reporting that will enhance price discovery while ensuring

    the anonymity of the swap counterparties and the confidentiality of

    business transactions and market positions. The Commission agrees that

    the Proposing Release did not provide sufficient certainty as to what

    data was required to be reported by the reporting party to the swap.

    Accordingly, in adopting Sec. 43.4(d), the Commission is not requiring

    the reporting party, SEF or DCM, to apply the ``general enough but

    specific enough'' standard in proposed Sec. 43.4(e)(2). Rather, Sec.

    43.4(d)(2) requires that the actual underlying asset be reported and

    publicly disseminated for all swaps in the interest rate, credit,

    foreign exchange and equity asset classes (``financial swaps'') and for

    those swaps described in Sec. 43.4(d)(4) with respect to the ``other

    commodity'' asset class.

    As discussed above, one commenter urged that the final rule make

    clear that publicly disseminated data cannot identify the participants

    to the swap or information specific to the participants. The Commission

    believes that proposed Sec. 43.4(e)(1) adequately addresses this

    concern. Accordingly, Sec. 43.4(d)(1) incorporates the rule text of

    proposed

    [[Page 1210]]

    Sec. 43.4(e)(1) with non-substantive clarifying changes.\278\

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

    \278\ Due to the deletion of proposed Sec. 43.4(d), the

    anonymity provisions in proposed Sec. 43.4(e) are being moved to

    final Sec. 43.4(d). Final Sec. 43.4(d)(1) states that ``[s]wap

    transaction and pricing data that is publicly disseminated in real-

    time may not disclose the identities of the parties to the swap or

    otherwise facilitate the identification of a party to a swap. A

    registered swap data repository that accepts and publicly

    disseminates swap transaction and pricing data in real-time may not

    publicly disseminate such data in a manner that discloses or

    otherwise facilitates the identification of a party to a swap.''

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

    As adopted, Sec. 43.4(d)(2) requires that reporting parties, SEFs

    and DCMs report the actual description of the underlying assets and

    tenor to the SDR.\279\ The SDR must then publicly disseminate the swap

    transaction and pricing data related to the swap pursuant to appendix A

    to part 43. The SDR is responsible for applying the appropriate time

    delay, rounding convention, and notional cap prior to the public

    dissemination of the swap transaction and pricing data. Section 43.4(d)

    eliminates the need for the reporting party to report a generalized

    description of the underlying asset to the SDR. Further, the Commission

    anticipates that reporting parties will utilize the data connections

    that will be required to report regulatory data to an SDR, as described

    in proposed part 45, and that requiring additional fields may create

    confusion. However, although reporting parties may use the same data

    stream for reporting regulatory data and real-time data, Sec.

    43.4(d)(2) clarifies the intent of the Proposing Release: The reporting

    requirements for SEFs, DCMs and reporting parties for real-time

    reporting purposes are separate from the requirement to report to an

    SDR for regulatory reporting purposes.\280\

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

    \279\ Sections 43.4(d)(2)-(4) replace proposed Sec. 43.4(e)(2).

    \280\ Certain clarifying language was added to the provision

    found in proposed Sec. 43.4(e)(2).

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

    In response to commenters who contended that swaps involving end-

    users should be treated differently to protect anonymity, the

    Commission acknowledges that end-users may enter bespoke or customized

    swaps more often than non-end-users. The Commission nonetheless

    believes it is unnecessary to differentiate by swap counterparties in

    promulgating a rule to protect anonymity.\281\ Rather, as explained

    below, it is more appropriate to focus on the asset class, the

    liquidity of certain types of swaps and the execution venue (i.e., SEF,

    DCM, off-facility) in determining whether a specific description of the

    underlying asset should be publicly disseminated.\282\ In response to

    commenters who claimed that the public dissemination of swap

    transaction and pricing data for certain swaps entered into by end-

    users serves no price discovery function, the Commission disagrees;

    there is price discovery value in publicly disseminating all arm's-

    length transactions. Publicly disseminating such data will provide

    market participants and the public with a clearer understanding of the

    depth of a particular market, the frequency of trading in the market

    and the pricing of transactions with the same or similar underlying

    assets.

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

    \281\ Further, the statute requires that all swaps, including

    bespoke swaps, be publicly disseminated so long as the identity,

    business transactions and market positions of the parties to the

    swap are not disclosed. See CEA sections 2(a)(13)(C) and

    2(a)(13)(E)(i).

    \282\ In determining the appropriate time delay, the Commission

    also focuses on asset class and place of execution.

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

    With respect to financial swaps, the Commission has considered

    comments and discussions with market participants, and does not believe

    that disclosure of information relating to the underlying asset,

    reference price or index will compromise anonymity. Financial swaps do

    not have underlying assets with specific delivery or pricing points

    (such as swaps with underlying physical commodities). Further, the

    liquidity to hedge such financial swaps, either in the swaps markets or

    in alternative markets (i.e., futures, cash markets, etc.), reduces

    concerns that the public dissemination of such swap transaction and

    pricing data pursuant to part 43 will reveal specific information about

    market participants.

    One commenter asserted that the public dissemination of an interest

    rate swap in connection with a bond issuance could identify the end-

    user to the swap.\283\ This commenter contended that because bond

    issuances are a matter of public record, real-time reporting would

    enable market participants to identify the end-user to the swap by

    matching the terms of the swap with the bond issuance that is being

    hedged. In the circumstance described by the commenter, the hedge of

    interest rate risk after a bond issuance is a routine transaction that

    market participants expect. The Commission believes that there is

    sufficient liquidity in the interest rate, credit, equity and foreign

    exchange asset classes to protect the anonymity of market participants

    in such asset classes. Further, in the Commission's view, the rounding

    convention and notional caps provided in Sec. Sec. 43.4(g) and (h)

    will help to protect the counterparties' identities, business

    transactions and market positions for all swaps, regardless of asset

    class. Therefore, the Commission believes that the public dissemination

    of the full information relating to financial swaps, such as swaps

    executed in connection with a bond issuance, will enhance price

    discovery and will not compromise the anonymity of market participants.

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

    \283\ See CL-Coalition for Derivatives End-Users.

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

    Accordingly, Sec. 43.4(d)(3), as adopted, requires that the actual

    underlying asset and tenor be publicly disseminated for all swaps in

    the interest rate, credit, foreign exchange and equity asset classes,

    regardless of whether a swap is executed on or pursuant to the rules of

    a SEF or DCM or is an off-facility swap. The rounding convention and

    notional caps provide sufficient protection to ensure the anonymity of

    the identities, business transactions and market positions of market

    participants with respect to financial swaps.

    Some commenters asserted that to protect the identities of the

    counterparties, the actual tenor of the swap should not be publicly

    disseminated (i.e., use of a tenor ladder or use of current market

    convention). The Commission has considered the implications of publicly

    disseminating the various data fields on disclosing the anonymity,

    business transactions and market positions of swap counterparties. As

    further explained in the discussion of appendix A to part 43, the

    Commission is clarifying the data fields in order to protect the

    identities, business transactions and market positions of market

    participants while enhancing price discovery to market participants and

    the public. The Commission agrees with the commenter who stated that

    the tenor of a financial swap is a primary economic term of the swap.

    Because the tenor is material to the pricing of a swap, the Commission

    is requiring that the actual tenor for all swaps be publicly

    disseminated.\284\

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

    \284\ See infra discussion in section II.F. (``Appendix A to

    Part 43 (``Data Fields for Public Dissemination'')'').

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

    The Commission agrees that there are bespoke, off-facility

    transactions in which the underlying asset is a physical commodity;

    these transactions carry a significantly increased likelihood that the

    public dissemination of the underlying asset may disclose the identity,

    business transactions or market positions of a counterparty. Several

    commenters focused on the lack of liquidity in certain ``other

    commodity'' markets, expressing the view that the public dissemination

    of the underlying asset or delivery point would reveal information

    about market participants.

    [[Page 1211]]

    Commenters' concerns about illiquid swaps in the ``other commodity''

    asset class may be valid; however, the Commission believes that for

    certain bilateral ``other commodity'' swaps, adequate liquidity exists

    such that the counterparty's identity, business transactions and market

    positions will not be disclosed by the public dissemination of such

    swap transaction and pricing data.\285\

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

    \285\ Additionally, one commenter urged that the fact that a

    swap may be cleared is not determinative of whether a swap is

    trading in an ``illiquid'' market. See CL-MS. The Commission

    believes that the interim time delays described in Sec. 43.5(c)

    adequately address this commenter's concerns, and the Commission

    intends to further address this comment in the block trade re-

    proposal.

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

    As discussed above, commenters recommended phasing in public

    reporting and dissemination based on liquidity, and the Commission

    agrees that, given the anonymity concerns, such an approach is

    appropriate. The Commission is phasing in the public dissemination

    requirements for ``other commodity'' swaps, as discussed directly

    below.

    As adopted, Sec. Sec. 43.4(d)(4)(ii)(A) and (B) provide that for

    any publicly reportable swap transaction in the ``other commodity''

    asset class that references any of the 28 ``Enumerated Physical

    Commodity Contracts'' including ``other commodity'' swaps that are

    economically-related to such contracts,\286\ the actual underlying

    physical commodity or referenced price or index must be publicly

    disseminated by the SDR, regardless of execution method. Additionally,

    the Commission believes that the public dissemination of any swap that

    references Brent Crude Oil (ICE) (and any swaps that are economically-

    related thereto) must reference the actual underlying asset, regardless

    of execution method.

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

    \286\ Similar contracts are described in the Position Limits

    final rulemaking. See 76 FR 71626 (final rule available at http://www.cftc.gov/ucm/groups/public/@lrfederalregister/documents/file/2011-28809a.pdf, last visited Nov. 30, 2011).

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

    The 28 Enumerated Physical Commodity Contracts have been identified

    by the Commission as (i) having high levels of open interest and

    significant cash flow; and (ii) serving as a reference price for a

    significant number of cash market transactions.\287\ These 28

    Enumerated Physical Commodity Contracts are identical to those that

    will have federally-administered limits imposed on them by the

    Commission's part 151 rules (Position Limits) generally covering

    contracts based on the agricultural, metals and energy commodities.

    Additionally, using the same criteria enumerated above, the Commission

    is requiring that any swap that references Brent Crude Oil (ICE), or

    economically-related to Brent Crude Oil (ICE), be reported and publicly

    disseminated by an SDR.\288\ The Commission has determined that these

    contracts and economically related contracts have sufficient liquidity

    to ensure that the public dissemination of swap transaction and pricing

    data for swaps based on these reference assets poses little risk of

    disclosing identities of parties, business transactions or market

    positions.

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

    \287\ The 28 Enumerated Physical Commodity Contracts are: ICE

    Futures U.S. Cocoa, ICE Futures U.S. Coffee C, Chicago Board of

    Trade Corn, ICE Futures U.S. Cotton No. 2, ICE Futures U.S. FCOJ-A,

    Chicago Mercantile Exchange Live Cattle, Chicago Board of Trade

    Oats, Chicago Board of Trade Rough Rice, Chicago Board of Trade

    Soybeans, Chicago Board of Trade Soybean Meal, Chicago Board of

    Trade Soybean Oil, ICE Futures U.S. Sugar No. 11, ICE Futures U.S.

    Sugar No. 16, Chicago Board of Trade Wheat, Minneapolis Grain

    Exchange Hard Red Spring Wheat, Kansas City Board of Trade Hard

    Winter Wheat, Chicago Mercantile Exchange Class III Milk, Chicago

    Mercantile Exchange Feeder Cattle, Chicago Mercantile Exchange Lean

    Hogs, Commodity Exchange, Inc. Copper, New York Mercantile Exchange

    Palladium, New York Mercantile Exchange Platinum, Commodity

    Exchange, Inc. Gold, Commodity Exchange, Inc. Silver, New York

    Mercantile Exchange Light Sweet Crude Oil, New York Mercantile

    Exchange New York Harbor Gasoline Blendstock, New York Mercantile

    Exchange Henry Hub Natural Gas, New York Mercantile Exchange New

    York Harbor Heating Oil.

    \288\ The 28 Enumerated Physical Commodity Contracts are traded

    on U.S. DCMs, while Brent Crude Oil (ICE) futures contracts are

    primarily traded in Europe. Nonetheless, Commission has determined

    that swaps that utilize a reference price based on Brent Crude Oil

    (ICE) futures have sufficient trading activity such that public

    dissemination of the actual underlying asset would not disclose the

    identities of counterparties or the business transactions and market

    positions of any person.

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

    Appendix B to part 43 (``Enumerated Physical Commodity Contracts

    and Other Contracts'') lists the 28 Enumerated Physical Commodity

    Contracts and Other Contracts (i.e., Brent Crude Oil (ICE)) for which

    the actual underlying asset must be publicly disseminated. For the

    purposes of part 43, swaps are economically related, as described in

    Sec. 43.4(d)(4)(ii)(B), if such contract utilizes as its sole floating

    reference price the prices generated directly or indirectly \289\ from

    the price of a single contract described in appendix B to part 43.

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

    \289\ An ``indirect'' price link to an Enumerated Physical

    Commodity Contract or an Other Contract described in appendix B to

    part 43 includes situations where the swap reference price is linked

    to prices of a cash-settled contract described in appendix B to part

    43 that itself is cash-settled based on a physical-delivery

    settlement price to such contract.

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

    For all off-facility swaps that reference an underlying asset(s) in

    the ``other commodity'' asset class which are not listed on appendix B

    to part 43, the Commission intends to propose special accommodations

    for the public dissemination of transaction and pricing data in a

    future Commission release to be published for comment in the Federal

    Register. Until such time as the Commission adopts these special

    accommodations, those off-facility swaps not listed in appendix B to

    part 43 will not be required to comply with the real-time reporting and

    public dissemination requirements under this part. However, such swaps

    will be subject to the regulatory reporting requirements, described in

    proposed part 45, when adopted.\290\ The Commission believes that the

    phasing in of these illiquid, off-facility swaps in the ``other

    commodity'' asset class addresses commenters' concerns that public

    dissemination of such information would disclose the identities of the

    parties, market positions or business transactions.\291\

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

    \290\ See 75 FR 76574.

    \291\ As one commenter noted: ``A strict set of real-time

    reporting rules could apply to all ``benchmark'' instruments that

    have significant price-discovery functions, while non-benchmark

    instruments could fall under a different set of real-time reporting

    requirements. In so doing, the Commission would achieve the majority

    of the price-discovery benefits without the danger of damaging the

    market structure for the non-benchmark transactions that do not have

    a meaningful price discovery function.'' CL-Coalition for

    Derivatives End-Users at 4.

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

    The Commission is not persuaded by commenters' concerns that public

    disclosure of ``other commodity'' swaps executed on or pursuant to the

    rules of a SEF or DCM could disclose the identities of the parties.

    Parties will execute swaps on or pursuant to the rules of a SEF or DCM

    because either (i) the swap is subject to the trade execution mandate

    of CEA section 2(h)(8) and therefore must be traded on a SEF or DCM; or

    (ii) the swap is not subject to the trade execution mandate but the

    parties voluntarily execute the swap on or pursuant to the rules of a

    SEF or DCM.\292\ When counterparties voluntarily execute on or pursuant

    to the rules of a SEF or DCM, the parties' choice to execute such swap

    evidences their belief that the market is sufficiently liquid and has a

    sufficient number of participants that the identity of the parties

    cannot be reverse engineered; thus counterparties' business

    transactions or market positions would not be discernible.\293\

    [[Page 1212]]

    The Commission believes that by voluntarily executing a swap on a SEF

    or DCM, the swap counterparties are already consenting to price

    transparency, regardless of the manner in which such transaction is

    executed. If the parties believed that their identities, market

    positions and business transactions could be exposed, they may choose

    to enter into an off-facility swap. Accordingly, the Commission is

    adopting Sec. 43.4(d)(4)(ii)(C) which requires that the actual

    underlying physical commodity or referenced price or index must be

    publicly disseminated by an SDR for any swap that is executed on or

    pursuant to the rules of a SEF or DCM.\294\

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

    \292\ The Commission notes that a swap which is voluntarily

    executed on or pursuant the rules of a SEF or DCM may or may not be

    cleared at a DCO.

    \293\ To the extent that counterparties avail themselves to the

    rules of a SEF or DCM, they will typically choose to do for the

    purpose of taking advantage of the liquidity of the SEF or DCM.

    \294\ Section 43.4(d)(4)(ii)(C) includes the public

    dissemination of the actual underlying physical commodity or

    referenced price or index for all swaps executed on a SEF or DCM,

    not just those that are made available for trading, and any block

    trades executed pursuant to the rules of a SEF or DCM.

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

    The Commission's Proposing Release did not address the manner in

    which a basis swap should be publicly disseminated and the Commission

    received no comments addressing the issue. Basis swaps are swaps that

    are cash-settled based on the difference in pricing of the same (or

    substantially the same) commodity at different delivery points. Since

    the parties to a basis swap price the difference between the same (or

    substantially the same) commodity in two different locations and not

    the underlying commodity itself, the Commission has not yet determined

    how such swaps that reference commodities with specific delivery points

    should be publicly disseminated. Accordingly, for this initial phase in

    period, the Commission is not requiring the public dissemination of

    basis swaps when such swap is not executed on or pursuant to the rules

    of a SEF or DCM and when at least one leg is not based on one of the 28

    Enumerated Physical Commodity Contracts or Other Contracts listed in

    appendix B to part 43.

    The Commission agrees that the Proposing Release did not provide

    adequate certainty as to the reporting requirements applicable to the

    reporting party to the swap. Accordingly, as described above, Sec.

    43.4 does not require the reporting party to a swap or a SEF or DCM to

    apply a standard which would ensure that transaction data would remain

    anonymous. Section 43.4(d)(2) provides that for all swaps, the

    reporting party must report the actual underlying asset and tenor to an

    SDR. The SDR is responsible for applying the appropriate time delay,

    rounding convention and notional cap prior to the public dissemination

    of the swap transaction and pricing data. Furthermore, if the

    underlying asset of the swap reported is an ``other commodity'' which

    does not reference one of the Enumerated Physical Commodity Contracts

    or Other Contracts described in appendix B to part 43, and is not

    economically related to one of the 28 Enumerated Physical Commodity

    Contracts or Other Contracts, the SDR which receives such data shall

    not publicly disseminate such swap's transaction and pricing data at

    this time.

    6. Unique Product Identifier (Sec. 43.4(e))

    Proposed Sec. 43.4(f) provided that if a unique product identifier

    is developed that sufficiently describes one or more data fields as set

    forth in appendix A to part 43, then the unique product identifier may

    be used in lieu of the data fields that it describes. An SDR could

    determine whether to publicly disseminate the UPI and may ask reporting

    parties, SEFs and DCMs to provide the UPI as part of the swap

    transaction and pricing data that must be reported to the SDR for

    public dissemination.

    Several commenters questioned this provision. One commenter stated

    that multiple unique identifiers could be assigned by different

    regulators to the same financial entity for the products traded by such

    entity, unnecessarily creating compliance burdens, operational

    difficulties, and opportunities for confusion.\295\ Another contended

    that any rule regarding product identifiers should require that they be

    made available on a ``commercially reasonable basis.'' \296\ Yet

    another stated that unique product identifiers should be in place

    before real-time public reporting begins.\297\ The commenter argued

    that it would be expensive to begin real-time public reporting without

    unique product identifiers and then have to change systems to account

    for new unique product identifiers.

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

    \295\ See CL-ICI.

    \296\ See CL-MarkitSERV.

    \297\ See Meeting with Credit Suisse (April 15, 2011).

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

    The Commission acknowledges that multiple unique identifiers could

    be assigned by different regulators to the same financial entity but

    notes as well that the industry, the Commission and prudential

    regulators are currently working to develop unique product identifiers

    for the industry.\298\ The Commission continues to work with other

    regulators and market participants to provide support during the

    development process for unique product identifiers. However, discussion

    of the assignment process for unique product identifiers is outside the

    scope of this rulemaking and the Commission does not find it

    appropriate to make compliance with the part 43 rules contingent upon

    the existence of unique product identifiers.

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

    \298\ The Technology Advisory Committee Subcommittee on Data

    Standards is one such group that is working to develop unique

    product identifiers.

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

    For the reasons discussed above, the Commission has determined that

    no substantial modifications are necessary to proposed Sec. 43.4(f).

    The Commission has made only technical and conforming changes to Sec.

    43.4(f). For example, the section was renumbered as Sec. 43.4(e), and

    the ``43'' was inserted after ``of this part.''

    7. Reporting of Notional or Principal Amounts to a Registered Swap Data

    Repository (Sec. 43.4(f))

    The information related to the ``price-forming continuation data''

    that must be publicly disseminated is included in the definition for

    ``publicly reportable swap transaction.'' Accordingly, because such

    provision is redundant, the Commission is not adopting proposed Sec.

    43.4(g).

    8. Public Dissemination of Rounded Notional or Principal Amounts (Sec.

    43.4(g))

    Proposed Sec. 43.4(i) established a rounding convention for the

    public dissemination of all swaps, as follows:

    The notional or principal amount data fields described in

    appendix A to this part shall be publicly disseminated as follows:

    (1) If the notional or principal amount is less than 1 million,

    round to nearest 100 thousand;

    (2) If the notional or principal amount is less than 50 million

    but greater than 1 million, round to the nearest million;

    (3) If the notional or principal amount is less than 100 million

    but greater than 50 million, round to nearest 5 million;

    (4) If the notional or principal amount is less than 250 million

    but greater than 100 million, round to the nearest 10 million;

    (5) If the notional or principal amount is greater than 250

    million, round to ``250+.

    Several commenters supported the rounding convention as an

    effective way to protect the anonymity of swap counterparties and

    recognized that rounding would provide a degree of protection against

    the front-running of larger transactions.\299\ Some commenters

    contended that because markets vary, so too should the

    [[Page 1213]]

    rounding convention and notional caps in order to account for the

    differences in trade sizes and liquidities in different markets.\300\

    These commenters asserted that these considerations would ensure that

    material information is not disclosed.\301\

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

    \299\ See CL-Coalition for Derivatives End-Users; CL-WMBAA; and

    CL-MFA.

    \300\ See CL-WMBAA; CL-MFA; CL-MetLife; and CL-ISDA/SIFMA.

    \301\ Id. If market participants in an illiquid market know that

    a large swap has been executed, they may be able to identify at

    least one counterparty, as well as certain market positions or

    business transactions.

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

    One commenter supported the use of a rounding convention but did

    not believe the Proposing Release considered the particularity of

    specific categories of swaps.\302\ The commenter suggested that the

    Commission adopt a more nuanced and granular rounding convention that

    recognizes that various categories of swaps and their markets.\303\

    Another commenter argued that the Proposing Release's perceived failure

    to consider the liquidity, type and tenor of swaps would lead to

    increased costs for market participants who transact in bespoke swaps

    in illiquid markets.\304\ This commenter further stated that SDs'

    concerns about the front-running of large transactions would cause them

    to include an additional premium in their swaps pricing, which

    ultimately would lead to increased costs of hedging in illiquid

    markets, and that such costs would, in turn, be passed on to end-users.

    In contrast, one commenter argued that a rounding convention should not

    be used and that the notional or principal amounts for all swaps should

    be publicly disseminated.\305\

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

    \302\ See CL-Coalition for Derivatives End-Users.

    \303\ Id.

    \304\ See CL-ABC/CIEBA.

    \305\ See CL-Chris Barnard.

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

    The Commission believes that the actual notional or principal

    amount should be reported to an SDR by reporting parties, SEFs and

    DCMs. Accordingly, the Commission is adopting Sec. 43.4(f), to assign

    responsibilities to reporting parties, SEFs and DCMs for reporting the

    notional or principal amount of a swap to an SDR. As adopted, Sec.

    43.4(f)(1) and (2) are similar to the provisions in proposed Sec.

    43.4(h)(1) and (2); however, certain conforming and clarifying changes

    have been made to these rules in light of changes to other provisions

    of the part 43 regulations.\306\

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

    \306\ Similarly, proposed part 45 requires that the actual

    notional or principal amount be reported for the purposes of

    regulatory reporting to registered swap data repositories.

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

    The Commission agrees that the rounding convention should be more

    nuanced to take into account the various types of swaps in different

    asset classes. However, the Commission does not believe it is necessary

    to have a different rounding convention for each asset class and sub-

    asset class. Rather, as explained below, the Commission is adopting

    different notional caps based on asset class as defined in Sec. 43.2

    and is separating the notional caps from the rounding convention.\307\

    The rounding convention is intended to protect the anonymity of swap

    counterparties. In addition, the rounding convention, combined with the

    notional caps discussed below and adopted in Sec. 43.4(h), will

    inhibit parties who may seek to front-run a swap transaction,

    especially for large swap transactions.

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

    \307\ The term ``asset class'' is defined in Sec. 43.2 and

    discussed in section II.B.2. (``Defined Terms'').

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

    The Commission does not believe the actual notional or principal

    amounts should be publicly disseminated. The public dissemination of

    the exact notional or principal amount presents a risk that

    confidential information would be disclosed in violation of CEA section

    2(a)(13). In the Adopting Release, the Commission has revised its

    proposed rounding convention to adopt a more granular rounding

    convention in Sec. 43.4(g). This rounding convention will apply to all

    swaps and should be read in conjunction with the notional caps provided

    in Sec. 43.4(h), which are asset class specific.\308\ The Commission

    believes that even with the rounding convention, price discovery will

    be enhanced, as market participants and the public will gain an

    understanding of the sizes of swaps in particular asset classes while

    the identities of the parties, market positions and business

    transactions are protected.

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

    \308\ Section 43.4(g) provides:

    ``Rounding of notional or principal amount. The notional or

    principal amount data fields, as described in appendix A to this

    part, shall be rounded as follows:

    (1) If the notional or principal amount is less than 1,000,

    round to nearest five, but in no case shall a publicly disseminated

    notional or principal amount be less than five;

    (2) If the notional or principal amount is less than 10 thousand

    but equal to or greater than 1 thousand, round to nearest 1 hundred;

    (3) If the notional or principal amount is less than 100

    thousand but equal to or greater than 10 thousand, round to nearest

    1 thousand;

    (4) If the notional or principal amount is less than 1 million

    but equal to or greater than 100 thousand, round to nearest 10

    thousand;

    (5) If the notional or principal amount is less than 100 million

    but equal to or greater than 1 million, round to the nearest 1

    million;

    (6) If the notional or principal amount is less than 500 million

    but equal to or greater than 100 million, round to the nearest 10

    million;

    (7) If the notional or principal amount is less than 1 billion

    but equal to or greater than 500 million, round to the nearest 50

    million;

    (8) If the notional or principal amount is less than 100 billion

    but equal to or greater than 1 billion, round to the nearest 1

    billion;

    (9) If the notional or principal amount is greater than 100

    billion, round to the nearest 50 billion.''

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

    9. Public Dissemination Caps on Notional or Principal Amounts (Sec.

    43.4(h))

    Proposed Sec. 43.4(h)(2)(i) established a cap on the public

    dissemination of notional or principal amounts that were embedded in

    the proposed rounding convention. The notional caps in the Proposing

    Release provided that, for all swaps, regardless of asset class or

    place of execution, ``[i]f the notional or principal amount is greater

    than 250 million, round to `250+''' for public dissemination

    purposes.\309\ The Commission proposed the notional cap to ensure the

    anonymity of the parties to a large swap and maintain the

    confidentiality of business transactions and market positions.

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

    \309\ Real-Time NPRM supra note 6, at 76174.

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

    The majority of comments addressing notional caps supported their

    use. Many commenters suggested modifications to the Proposing Release

    based on the belief that notional caps should be more granular to

    account for the differences in tenor, asset class, types of swaps and

    liquidity of different markets.\310\

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

    \310\ See CL-ABC/CIEBA. (``For instance, an interest rate swap

    with a 2 year duration may be highly liquid and thus the threshold

    of $250 million as the highest rounding threshold might be

    appropriate. However, an interest rate swap with a 35 year duration

    may be off-market and illiquid, and typical trades may be

    significantly less than $250 million, and as such, a lower rounding

    threshold would be appropriate.''). Id. at 9. See also CL-ISDA/

    SIFMA; CL-MetLife.

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

    Many commenters criticized the proposed cap of $250 million as too

    high and contended that the Commission failed to consider market

    liquidity, duration and type of swap. One commenter stated that the

    notional cap was sufficient to permit the most liquid interest rate

    derivative products to be executed in very large sizes and to enable

    dealers to offset risk, confident that the market does not know the

    actual size of the transaction.\311\ Another believed that the proposed

    notional cap unfairly disadvantaged the natural hedgers in the

    marketplace. These market participants may have specific portfolio

    needs that require trading swaps with longer tenors, which are less

    standardized and are more illiquid.\312\

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

    \311\ See CL-Coalition of Derivatives End-Users.

    \312\ See CL-SIFMA AMG (``For instance, for a low duration,

    plain vanilla, highly liquid swap, $250 million as the highest

    rounding threshold might be appropriate. For a higher duration, less

    standardized and more illiquid swap, a large trade is typically

    significantly less than $250 million in notional amount, and a much

    lower rounding threshold would be appropriate.''). Id. at 5.

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

    Others suggested that the Commission set the notional cap at the

    [[Page 1214]]

    predetermined, appropriate minimum block trade size.\313\ Several

    commenters agreed that the Commission should use FINRA's Trade

    Reporting and Compliance Engine (``TRACE'') framework to establish caps

    for public dissemination of the notional or principal amounts of

    swaps.\314\ One commenter believed that a TRACE-like approach, whereby

    full trade information is provided to regulators and publicly

    disseminated within a size range, would sufficiently protect

    counterparty anonymity and preserve liquidity and price competition in

    the markets.\315\ Another commenter opined that the use of a TRACE-type

    volume dissemination cap would ensure end-users have sufficient sources

    of liquidity.\316\ Another wrote that if the Commission extended the

    TRACE masking framework to swaps, the masking thresholds for plain

    vanilla fixed-floating interest rate swaps would be: $8 Million for 2

    year interest rate swaps; $3 million for 5 year interest rate swaps;

    and $1 million for 10-year and 30-year interest rate swaps.\317\

    However, this commenter recognized these notional caps were extremely

    low and suggested, as an alternative, that the Commission set the

    notional cap at the social size (as defined in proposed Sec.

    43.2(x)).\318\

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

    \313\ See CL-UBS; CL-SDMA; and CL-WMBAA.

    \314\ See Real-Time NPRM supra note 6, at 76161; CL-WMBAA.

    \315\ See CL-WMBAA.

    \316\ See CL-ISDA/SIFMA.

    \317\ See CL-JPM. The commenter calculated the suggested masking

    thresholds by ``computing how much market risk is represented by the

    TRACE masking thresholds and using those numbers to map the masking

    thresholds into other asset classes.'' Id. at 13. This commenter

    also suggested that the Commission should set masking levels near

    the level that represents the dividing line between retail and

    institutional trades.

    \318\ Id. In the Proposing Release, ``social size'' was defined

    to mean ``the greatest of the mode, median and mean transaction

    sizes for a particular swap contract or swap instrument, as commonly

    observed in the marketplace.'' Real-Time NPRM supra note 6, at

    76172.

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

    One commenter recommended that the Commission create a tiered

    system for different categories of swaps.\319\ This commenter suggested

    the following notional cap thresholds for interest rate swaps: $250

    Million for swaps with 0-2 year tenors; $200 million for swaps with 2-5

    year tenors; $100 million for swaps with 6-10 year tenors; $75 million

    for interest rate swaps with 11-20 year tenors; and $50 million for

    swaps with tenors over 20 years.\320\ The commenter also suggested

    three to five year tenor buckets and differentiating between high yield

    and investment grade for credit index swaps.\321\

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

    \319\ See CL-PIMCO.

    \320\ Id.

    \321\ See Meeting with PIMCO (February 4, 2011).

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

    Another commenter advocated that notional amounts for commodity

    swaps be reported and disseminated by units of measure (e.g., MMBtus

    for gas, MWh for power, etc.) rather than in dollar amounts.\322\ This

    commenter asserted that the sizes of commodity trades are typically

    smaller than interest rate swap trades, and therefore the notional cap

    should be smaller to take into account this difference.\323\

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

    \322\ See CL-ISDA/SIFMA.

    \323\ Id.

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

    One commenter suggested that the Commission could require end of

    day reporting of swap notional size to regulators until an appropriate

    minimum block size can be appropriately set, provided that all trades

    above a certain notional threshold would be reported as ``$X or

    above.'' This commenter recommended that the Commission revisit the

    threshold amounts periodically and that the effects on market liquidity

    be studied.\324\

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

    \324\ See CL-FIA/FSF/ISDA/SIFMA.

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

    Another commenter believed the Commission should set notional caps

    (embedded in the rounding convention) only after the Commission has had

    the opportunity to analyze data from an SDR.\325\ Two commenters

    objected to the Commission's proposal to use notional caps on the

    ground that failure to report the actual notional or principal amount

    would result in underreporting and would fail to enhance price

    discovery.\326\ Another, citing the substantial volume of trading in

    the FX markets, suggested that the Commission set a notional floor

    threshold of $1 million whereby all FX swaps which are smaller than the

    threshold would not be reported.\327\

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

    \325\ See CL-ABC/CIEBA.

    \326\ See CL-Chris Barnard; CL-SDMA.

    \327\ See CL-GFXD.

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

    A commenter stated that accurate aggregate trade volumes by

    instrument should be computed and disseminated by the end of the day,

    independent of the choice of masking threshold, and that un-masked

    trade-by-trade notional amounts should eventually be disseminated after

    the application of both the masking rule and timing delays in order to

    facilitate analysis of market trends by market participants and

    academics.\328\

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

    \328\ See CL-JPM.

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

    The Commission agrees with many of the comments and has, for some

    asset classes, adjusted the notional caps to take into account the

    differences between various types of swaps.\329\ In Sec. 43.4(h), the

    Commission proposed notional caps for public dissemination purposes.

    The Commission agrees that a ``one-size-fits-all'' notional cap was

    inappropriate, and accordingly has established notional caps according

    to each asset class. Additionally, the Commission extracted the

    notional caps from the rounding convention and made it a stand-alone

    section in the final rule to provide the flexibility to adjust the

    notional caps--as the Commission may determine is appropriate or when

    an appropriate minimum block size is determined--without having to also

    change the rounding convention.

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

    \329\ The Commission notes that many comments discussed ``block

    trades'' as being the only trades which would be able to avail

    themselves of the notional cap. The Commission did not intend the

    notional cap to be available only to swaps which would be considered

    ``block trades'' under the proposed rule, but rather intended that

    the notional cap be available to all swaps which were greater than a

    notional or principal amount of $250 MM.

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

    The notional caps provided in Sec. 43.4(h) will apply until an

    appropriate minimum block size is established for a particular group of

    swaps. However, when an appropriate minimum block size is established

    for a particular asset class, the notional cap will be adjusted to

    align with the appropriate minimum block size.\330\ The Commission also

    agrees with commenters that the appropriate minimum block size should

    have a direct relationship to the notional cap. The Commission believes

    that the notional cap for a publicly reportable swap transaction should

    never be less than the appropriate minimum block size for such swap.

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

    \330\ The Commission's block trade re-proposal will address the

    notional caps as they align with the appropriate minimum block

    sizes.

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

    The Commission has provided notional caps because it believes that

    market participants' anonymity should be protected during the period

    before appropriate minimum block trade sizes are established as well as

    after the establishment of appropriate minimum block sizes. The

    notional caps should be read in conjunction with the rounding

    convention of Sec. 43.4(g) and the publicly reportable data fields

    provided in appendix A to part 43. The Commission believes that the

    notional caps, the rounding convention and the data fields required to

    be publicly disseminated will adequately protect counterparties'

    identities, business transactions and market positions. The Commission

    further believes that the public dissemination of the capped notional

    amount, as opposed to the actual notional or principal amount, will

    help to prevent front-running of very large trades. In turn, the

    Commission expects

    [[Page 1215]]

    that the public dissemination of a notional cap for large trades will

    not adversely impact market liquidity because market participants will

    not have to exit the market over concerns that they will be unable to

    adequately offset their risk without being front run.\331\

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

    \331\ Commenters' concerns about front running are substantially

    mitigated by the time delays for public dissemination. See Time

    Delays discussion and Sec. 43.5.

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

    The Commission has considered the specific examples and data

    provided by the commenters for interest rate swaps and agrees that

    interest rate swaps with different tenors should be provided with

    different notional caps. The differences take into account the fact

    that interest rate swaps with longer-dated tenors tend to have smaller

    notional amounts than those with shorter dated tenors. The difference

    in notional amounts between longer tenor interest rate swaps (e.g., 30

    year) and shorter dated interest rate swaps (e.g., three months) can be

    attributed to the risk exposure that counterparties are willing to

    assume for such swaps. Because market participants are willing to

    assume larger notional sizes based on the duration-adjusted risk of the

    swap, large trade sizes are more frequently executed for interest rate

    swaps with a short tenor, as compared to those interest rate swaps with

    a longer tenor. Therefore, the Commission believes that the notional

    cap for short term interest rate swaps should be greater than the

    notional cap for interest rate swaps with longer tenors.

    Accordingly, the Commission is providing the following ``interim''

    notional caps until such time as an appropriate minimum block size is

    established. These notional caps are required to be applied by an SDR

    prior to the public dissemination of the swap transaction and pricing

    data.\332\

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

    \332\ As discussed above, pursuant to Sec. 43.3(f)(1) and (2),

    reporting parties, SEFs and DCMs are required to send the actual

    notional or principal amount of a publicly reportable swap

    transaction to a SDR. The SDR is then responsible for publicly

    disseminating the rounded (and capped, if applicable) amount.

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

    For Short Term (0-2 year (including 2 year)) interest

    swaps: $250 MM;

    For Intermediate Term (2-10 year (including 10 year))

    interest rate swaps: $100 MM; and

    For Long Term (Greater than 10 year): $75 MM.

    For credit swaps (broad-based group or index), pursuant to Sec.

    43.4(h)(2), the Commission considered specific examples provided by the

    commenters in establishing the notional caps for credit index swaps. In

    the Commission's view, the proposed cap of $250 MM was too high as an

    interim cap for credit swaps. The Commission recognizes that while

    certain credit indices may trade at larger notional values than other

    indices, one cap for the asset class is appropriate for an interim

    notional cap. Accordingly, the Commission is setting the notional cap

    for all credit swaps (broad-based group or index) at $100 MM.

    The Commission is retaining the $250 MM notional cap for both the

    equity (broad-based group or index) and FX asset classes. The

    Commission is confident that a $250 MM notional cap, along with the

    rounding convention discussed above, will sufficiently protect the

    anonymity, business transactions and market positions of the

    counterparties who engage in trades of a large size in these

    markets.\333\

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

    \333\ No commenters addressed this proposal with respect to

    notional caps for the equity and FX asset classes.

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

    The Commission agrees that the notional cap for commodity swaps

    should be lower than for other swaps and is setting the interim

    notional cap for ``other commodities'' at $25 MM. The Commission made

    this determination after reviewing block trade sizes for various

    commodities in the futures markets, exchange of futures for swaps

    (``EFS'') data on futures, and net position change data in

    futures.\334\ The Commission believes that setting the interim notional

    cap at such a low notional or principal amount will allow traders

    entering into very large swaps in the various ``other commodity''

    markets a sufficient opportunity to hedge a swap transaction in the

    market, and will protect the identities, business transactions and

    market positions of those counterparties who enter into large commodity

    swaps.

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

    \334\ See Sec. 43.4(h)(5).

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

    For the ``other commodity'' asset class, the Commission agrees that

    ``other commodity'' swaps are typically smaller than interest rate

    swaps. However, the Commission does not agree that it is appropriate to

    determine the notional cap according to units for each particular

    ``other commodity;'' such a rule is unnecessarily complicated and will

    lead to inconsistency across the various types of commodities and

    across all asset classes. Thus, the Commission believes that, at this

    time, the notional cap should be expressed as a dollar amount that will

    apply to all ``other commodities'' and not by different units of

    measurement (e.g., barrels, MWh, etc.). The Commission anticipates that

    a determination of whether a swap is capped will depend on whether the

    price of the underlying commodity as multiplied by the number of units

    is above the notional cap. Further, the Commission anticipates that the

    publicly disseminated information for a particular underlying asset may

    be in units that are adjusted based on the $25 MM cap described below.

    For example, if crude oil is priced at $100 a barrel and two parties

    enter into a swap with a notional value of 260,000 barrels, the SDR may

    publicly disseminate ``$25 MM+'' or may publicly disseminate ``250,000

    bbl+.''

    E. Section 43.5--Time Delays for Public Dissemination of Swap

    Transaction and Pricing Data

    CEA section 2(a)(13)(E)(iii) provides that, with respect to cleared

    swaps, the rule promulgated by the Commission shall contain provisions

    ``to specify the appropriate time delay for reporting large notional

    swap transactions (block trades) to the public.'' In exercising its

    authority under CEA section 2(a)(13)(B) to ``make swap transaction and

    pricing data available to the public in such form and at such times as

    the Commission determines appropriate to enhance price discovery,'' the

    Commission is authorized to prescribe rules reflecting those provisions

    in CEA section 2(a)(13)(E)(iii) for uncleared swap transactions

    described in CEA sections 2(a)(13)(C)(iii) and (iv). Consistent with

    the Commission's statutory obligations, proposed Sec. 43.5(k)(1)

    specified that the time delay for the public dissemination of swap

    transaction and pricing data for a block trade or large notional swap

    shall commence at the time of execution of such block trade or large

    notional swap.\335\

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

    \335\ Proposed Sec. 43.2(l) defined the term ``large notional

    swap.'' This term has been modified in final Sec. 43.2 to be called

    ``large notional off-facility swap.'' Accordingly, all references to

    ``large notional swap'' shall be interchangeable with the term

    ``large notional off-facility swap'' for the purposes of this final

    rule.

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

    Proposed Sec. 43.5(k)(2) set the time delay for public reporting

    of standardized block trades and large notional swaps \336\ at 15

    minutes from the time of execution. The Proposing Release did not

    provide specific time delays for customized large notional off-facility

    swaps. Instead, proposed Sec. 43.5(k)(3) provided that public

    dissemination of ``customized'' large notional swaps would be subject

    to a time delay that may be prescribed by the Commission. The

    Commission also noted in the preamble to the Proposing Release a

    presumption that large notional swaps in the equity, credit,

    [[Page 1216]]

    foreign exchange and interest rate asset classes (i.e., financial

    swaps) would be subject to the same 15 minute time delay proposed for

    block trades. The Commission solicited comments addressing whether 15

    minutes would be an appropriate time delay for large notional swaps in

    the ``other commodity'' asset class, but acknowledged that longer time

    delays for the ``other commodity'' asset class may be appropriate.\337\

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

    \336\ For example, those swaps that fall under CEA section

    2(a)(13)(C)(i) and (iv)--swaps subject to the mandatory clearing

    requirement or otherwise required to be cleared.

    \337\ The Commission asked specific questions regarding time

    delays for large notional off-facility swaps. See Real-Time NPRM

    supra note 6, at 76167.

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

    Twenty-three commenters expressed the view that the time delays for

    publicly disseminating block trades and large notional off-facility

    swaps should be longer than those described in the Proposing Release.

    The commenters recommended several alternatives for various types of

    swaps. Specifically, commenters recommended a range of time delays for

    public dissemination of block trades and large notional off-facility

    swaps, including end-of-day, 24 hours, T+1, T+2 for large notional

    swaps,\338\ a minimum of four hours and 180 days.\339\ One commenter

    recommended beginning with a time delay for block trades of 75 minutes

    and then decreasing the time delay to between 15 minutes and 45

    minutes.\340\ The approach described by this commenter would be similar

    to the method for reducing time delays utilized by TRACE. The same

    commenter recommended that the time delay for large notional swaps

    should be at least 24 hours.\341\ Five commenters advised the

    Commission to adopt tiered time delays based on average daily trading

    volume or appropriate minimum block size.\342\ One recommended that the

    time delay should be set at the lesser of time it takes a dealer to

    cover its risk and 24 hours after execution.\343\ Another commenter

    recommended that illiquid trades be allowed to report weekly; the same

    commenter recommended that the Commission conduct an exhaustive study

    of illiquid bilateral contracts before deciding on an appropriate time

    delay.\344\

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

    \338\ See supra note 97.

    \339\ See CL-BlackRock; CL-Coalition for Derivatives End-Users;

    CL-Chesapeake Energy; CL-PIMCO; CL-SIFMA AMG; CL-ATA; CL-Freddie

    Mac; CL-ICI; CL-Vanguard; CL-Working Group of Commercial Energy End-

    users; CL-MFA; CL-MetLife; CL-Fannie Mae; CL-Jackson; CL-Eris; and

    CL-Encana.

    \340\ See CL-FHLBanks.

    \341\ The Commission notes that although these commenters are

    suggesting time delays for block trades and large notional off-

    facility swaps, the Commission is not considering appropriate

    minimum block sizes in this Adopting Release.

    \342\ See CL-JPM; CL-WMBAA; CL-Barclays; CL-MetLife; and CL-GS.

    \343\ See CL-ATA.

    \344\ See CL-MS.

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

    A commenter recommended that the time delay for financial swaps

    should be one minute or, alternatively, that there should be no delay.

    This commenter argued that a time delay must be directly related to the

    market in which the block trade or large notional swap is

    executed.\345\

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

    \345\ See CL-Better Markets.

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

    Several commenters cautioned that the Commission needs more data

    before it can set time delays for block trades and large notional

    swaps.\346\ For example, one commenter noted that there is currently

    insufficient trading data available on which to base the determinations

    for block trades and public dissemination delays.\347\ This commenter

    suggested waiting until SDRs have collected the relevant data for the

    Commission to analyze.

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

    \346\ See, e.g., CL-JPM; CL-Barclays; CL-Coalition for

    Derivatives End-Users; CL-FHLBanks; CL-ISDA/SIFMA; CL-SIFMA AMG; CL-

    Freddie Mac; CL-GFXD; CL-ABC/CIEBA; CL-ATA; CL-Cleary; CL-ICI; and

    CL-MFA.

    \347\ See CL-SIFMA AMG.

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

    In its Proposing Release, the Commission solicited comments on the

    appropriate time delays for ``customized'' large notional swaps,

    particularly for commodity swaps with physical underlying assets.

    Several commenters stated that different markets should have different

    time delays for public dissemination of block trades and large notional

    swaps. Specifically, one commenter stated that time delays should be

    based on asset class, two commenters advised that longer time delays

    are appropriate for swaps with underlying physical risk (e.g., large

    notional customized commodities trades); two commenters argued that

    reporting should be tailored for illiquid markets; and one commenter

    stated that time delays should be tailored within the foreign exchange

    asset class.\348\ Another commenter stated that time delays should

    initially be based on current market practices.\349\

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

    \348\ See CL-ATA; CL-Barclays; CL-MS; CL-GFXD; CL-ISDA/SIFMA;

    and CL-BlackRock.

    \349\ See CL-Committee on Capital Markets Regulation.

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

    One commenter contended that time delays should not be based on the

    method of execution or market participant and that a 15 minute time

    delay is adequate.\350\ This commenter expressed concern that the voice

    or hybrid systems would be allowed a longer delay over their electronic

    competitors and recommended that there be one universal time delay.

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

    \350\ See CL-SDMA.

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

    A commenter argued that smaller transactions in illiquid markets

    should be handled similarly to block trades with respect to time

    delay.\351\ This commenter stated that, in illiquid markets, the

    notional or principal size of a swap may be lower and therefore may not

    qualify as a block trade or large notional swap. The commenter further

    explained that time delays for swaps with lower notional or principal

    amounts in illiquid markets may be just as important as the time delays

    for very large trades in more liquid markets.

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

    \351\ See CL-ATA.

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

    Commenters addressed harmonization between the CFTC and SEC time

    delay provisions. Some of these commenters asserted that the failure to

    harmonize the two Commissions' rules could create arbitrage

    opportunities.\352\ One commenter asserted that differences in market

    structure for swaps and SBS, particularly with regard to end-user

    participation in the commodity swap markets, should be reflected in the

    rules.\353\

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

    \352\ See, e.g., CL-Tradeweb; CL-CME; CL-Markit.

    \353\ See CL-NFPEEU.

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

    After considering the comments discussed above, the Commission is

    adopting Sec. 43.5 to address time delays for the public dissemination

    of swap data as described below. As adopted, Sec. 43.5 incorporates

    the language from proposed Sec. 43.5(k)(1) and replaces the language

    in proposed Sec. 43.5(k)(2) and (3) in order to address commenters'

    concerns and recommendations and to clarify the time delays for public

    dissemination of real-time data in consideration of the type of market

    participant, method of execution and asset class. Additionally, Sec.

    43.5 adopts interim time delays for all swaps until such time as

    appropriate minimum block sizes are finalized in a forthcoming

    Commission release.

    One commenter indicated that SEFs and DCMs should have the

    technological capability to electronically report the data fields

    described in proposed part 45.\354\ To ensure consistency and reduce

    reporting costs to market participants, the Commission has coordinated

    the time delays in this rule with the timeframes for regulatory

    reporting in the proposed part 45 (``Swap Data Recordkeeping and

    [[Page 1217]]

    Reporting Requirements'') rules.\355\ The Commission anticipates that

    reporting parties may use one data reporting stream for both regulatory

    and real-time reporting to reduce costs and optimize efficiency.\356\

    Accordingly, Sec. 43.5, as adopted, harmonizes the time delays between

    the two regulatory requirements.

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

    \354\ See CL-Tradeweb. The Commission notes that, since the data

    that is being required to be publicly disseminated under part 43 and

    reported for regulatory purposes (as described in proposed part 45)

    are substantially similar, the ability for SEFs and DCMs to report

    the data fields required for regulatory purposes indicates that SEFs

    and DCMs should be able to report the data to an SDR that is

    required for public dissemination under part 43.

    \355\ See 75 FR 76574.

    \356\ However, the Commission notes that although the same data

    stream for reporting may be utilized by reporting parties, SEFs and

    DCMs, real-time data for public dissemination and regulatory data

    required to be sent to an SDR are viewed as separate regulatory

    requirements.

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

    The Commission has added Sec. 43.5(b) to clarify the SDR's

    responsibilities to publicly disseminate swap transaction and pricing

    data that is subject to a time delay. Section 43.5(b) provides that,

    with respect to any time delay that is associated with a particular

    swap, the SDR shall publicly disseminate the swap transaction and

    pricing data upon the precise expiration of the time delay specified in

    Sec. 43.5 and as further described in appendix C to part 43 (``Time

    Delays for Public Dissemination''). The time delay period is measured

    from the time of execution of the swap transaction; in this regard, all

    publicly reportable swap transactions are required to have an execution

    timestamp. An SDR must hold the data for public dissemination for the

    precise amount of time specified in Sec. 43.5, as measured from the

    execution timestamp.\357\ For any publicly reportable swap transaction

    that is not subject to a time delay pursuant to Sec. 43.5 or that is

    received by an SDR after a time delay has expired, such publicly

    reportable swap transactions shall be publicly disseminated by the SDR

    ``as soon as technologically practicable'' after the SDR receives the

    swap transaction and pricing data.

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

    \357\ Appendix A to part 43 describes the ``execution

    timestamp'' requirement for public dissemination. See discussion,

    infra.

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

    One commenter recommended that the Commission require end of day

    reporting of aggregate trade volumes in order to facilitate analysis of

    market trends by market participants and the academic community.\358\

    Several other commenters recommended that the Commission phase in the

    real-time public reporting of swap transaction and pricing data.\359\

    The Commission acknowledges the commenter's concern that certain swaps

    in illiquid markets may have small notional sizes, but may still need a

    time delay. In response, the Commission in adopting Sec. 43.5(c) which

    provides interim time delays for all swaps, not just block trades and

    large notional off-facility swaps, but only to the extent that such

    swaps do not have an appropriate minimum block size.\360\ As previously

    discussed, the Commission intends to address appropriate minimum block

    sizes in its block trade re-proposal. Accordingly, it is possible that

    compliance with part 43 may be required before the establishment of

    appropriate minimum block sizes for certain asset classes and/or

    groupings of swaps within an asset class. In order to address this

    situation, Sec. 43.5(c) allows all swaps that do not have established

    appropriate minimum block sizes to utilize the time delays set forth in

    final Sec. 43.5(d)-(h). As appropriate minimum block sizes are

    established for a particular category of swap, all swaps in such

    category that are below the appropriate minimum block size must be

    publicly disseminated ``as soon as technologically practicable'' after

    execution.\361\ Those swaps that are at or above the appropriate

    minimum block size will continue to receive the time delays set forth

    in Sec. 43.5(d)-(h).

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

    \358\ See CL-JPM.

    \359\ See comments relating to Implementation and Phase in

    discussed in section IV (``Effectiveness/Implementation and Interim

    Period'') below.

    \360\ In addition to the initial temporary time delays for all

    swaps without appropriate minimum block sizes, as provided in final

    Sec. 43.5(c), Sec. 43.4(g) and (h) provide a rounding convention

    and caps on the public dissemination of notional or principal

    amounts to be applied to all swaps in order to help protect

    counterparties' anonymity and the parties' ability to hedge very

    large transactions. See discussion above.

    \361\ The Commission recognizes that the establishment of

    appropriate minimum block sizes may be an ongoing process. Swaps

    that do not have appropriate minimum block sizes would continue to

    receive time delays pursuant to Sec. 43.5(c), however once a swap

    has an appropriate minimum block size, only block trades and large

    notional off-facility swaps will receive the time delays Sec. 43.5.

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

    In response to commenters' arguments that the time delays for

    public dissemination of block trades and large notional off-facility

    swaps should be longer than 15 minutes, the Commission is phasing in

    the time delays for public dissemination. The Commission recognizes

    that it may take time for SEFs, DCMs and SDRs to ensure that the

    appropriate technology is in place; and market participants may need

    some phase in time to modify trading strategies to accommodate the new

    real-time public reporting rules. Thus, the Commission believes that

    providing longer time delays for public dissemination during the first

    year or years of real-time reporting will enable market participants to

    perfect and develop technology and to adjust hedging and trading

    strategies in connection with the introduction post-trade

    transparency.\362\

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

    \362\ TRACE, which introduced post-trade transparency into the

    corporate bond market, followed a similar approach by reducing the

    amount of time delay for public dissemination over time. See CL-JPM.

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

    As adopted, Sec. 43.5(d) describes the time delays for the public

    dissemination of swap transaction and pricing data relating to block

    trades executed pursuant to the rules of a SEF or DCM. With respect to

    such swaps, the Commission is imposing an initial time delay of 30

    minutes for the one year beginning on the compliance date \363\ (``Year

    1'') and a 15-minute delay beginning on the first anniversary of the

    compliance date. These time delays will be assigned to all block trades

    executed pursuant to the rules of a SEF or DCM regardless of asset

    class or whether such trade was made available for trading on the SEF

    or DCM. The Commission believes that SEFs and DCMs will have the

    technology available to ensure compliance to report data to SDRs within

    the time delays for public dissemination described in this

    section.\364\

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

    \363\ Compliance dates are described below in section III

    (``Effectiveness/Implementation and Interim Period'').

    \364\ See CL-Tradeweb.

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

    Further, until the Commission establishes an appropriate minimum

    block size for a swap or group of swaps, the time delays set forth in

    Sec. 43.5(d) shall apply to all swaps executed on or pursuant to the

    rules of a SEF or DCM that do not have an appropriate minimum block

    size (including swaps that are not made available for trading on the

    SEF or DCM, but are executed on or pursuant to the rules of a SEF or

    DCM), so that all such swaps will be subject to a 30 minute time delay

    for public dissemination for Year 1 and a 15 minute time delay

    beginning on the first anniversary of the compliance date, as described

    in Sec. 43.5(c)(2). When an appropriate minimum block size is set for

    a swap or group of swaps, and such swap is executed on or pursuant to

    the rules of a SEF or DCM, swap transactions that fall below the

    appropriate minimum block size are required to be publicly disseminated

    ``as soon as technologically practicable'' and only block trades would

    be subject to a 30- or 15-minute time delay.\365\ The

    [[Page 1218]]

    Commission believes that parties that choose to execute on or pursuant

    to the rules of a SEF or DCM consent to such price transparency; \366\

    therefore shorter time delays for public dissemination (i.e., post-

    trade transparency) are appropriate as compared to certain off-facility

    swaps.

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

    \365\ To the extent that an appropriate minimum block trade size

    is established after the compliance date of the rule, the time

    delays for the block trades (and large notional off-facility swaps,

    as described immediately below) would be reduced after the one year

    period expires. For example, if the compliance date for an interest

    rate swap is July 1, 2012 and an appropriate minimum block size for

    interest rate swaps is effective on September 15, 2012, from June 1,

    2012--September 14, 2012, all swaps in the interest rate asset class

    would receive the time delays for ``Year 1.'' From September 15,

    2012--June 30, 2013 only block trades and large notional off-

    facility swaps in the interest rate asset class will receive the

    time delays described under ``Year 1,'' while any swap in the

    interest rate asset class that is not a block trade or large

    notional off-facility swap must be reported and publicly

    disseminated ``as soon as technologically practicable.'' In this

    example, beginning on July 1, 2013 block trades and large notional

    off-facility swaps in interest rates will receive the time delay

    described for beginning on the first or second anniversary

    (depending on the type of execution and market participants) and

    non-block trades/non-large notional off-facility swaps in the

    interest rate asset class would be required to be reported and

    publicly disseminated ``as soon as technologically practicable''

    after execution.

    \366\ The price transparency with respect to SEFs and DCMs may

    be in the form of pre-trade price transparency (depending on the

    execution method) and post-trade price transparency (through sharing

    swap execution data with those that have trading privileges on the

    SEF or DCM).

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

    The Commission agrees that swaps in less liquid markets, as well as

    large notional off-facility swaps, may be subject to longer time

    delays, while shorter time delays are appropriate for swaps in more

    liquid markets. Swaps in the ``other commodity'' asset class and swaps

    in which non-SDs/non-MSPs are counterparties tend to be less liquid

    (particularly when such parties are end-users) and may require

    additional time to offset risk. The Commission also believes that large

    notional off-facility swaps that are subject to the mandatory clearing

    requirement (i.e., swaps that are not executed on or pursuant to the

    rules of a SEF or DCM but are required to be cleared pursuant to CEA

    section 2(h)(1) and Commission action) will tend to be more liquid than

    other large notional off-facility swaps.\367\

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

    \367\ Such large notional off-facility swaps will only be

    executed when there is an exception to the mandatory clearing

    requirement and to the trade execution mandate.

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

    For large notional off-facility swaps subject to the mandatory

    clearing requirement, the Commission believes that a distinction should

    be made between different classes of reporting parties for the purposes

    of time delays for public dissemination.\368\ Large notional off-

    facility swaps that are subject to mandatory clearing and that have at

    least one SD or MSP as a counterparty, should have the same time delays

    as block trades executed pursuant to the rules of a SEF or DCM. The

    Commission believes that SDs and MSPs will have the ability to report

    real-time data to SDRs within the time delay periods. Further, the

    Commission believes that a difference in the time delay between swaps

    executed off-facility that are subject to the mandatory clearing

    requirement and those executed on or pursuant to the rules a SEF or DCM

    could discourage SDs and MSPs from executing such swaps on or pursuant

    to the rules of a trading platform, which would inhibit the enhancement

    of price discovery.

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

    \368\ Additionally, the Commission believes that off-facility

    swaps that are excepted from the mandatory clearing requirement

    pursuant to CEA section 2(h)(7) and those swaps that are determined

    to be required to be cleared under CEA section 2(h)(2) but are not

    cleared should not be included.

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

    As adopted, Sec. 43.5(e) provides time delays for large notional

    off-facility swaps that are subject to the mandatory clearing

    requirement. Section 43.5(e)(1) provides that the time delays in Sec.

    43.5(e) do not apply to (i) off-facility swaps that are excepted from

    the mandatory clearing requirement in accordance with CEA section

    2(h)(7) and the Commission's regulations; and (ii) those swaps that are

    subject to the clearing mandate under CEA section 2(h)(2) but which are

    not cleared.\369\ The swaps that are not covered by Sec. 43.5(e) are

    subject to the longer time delays described in final Sec. 43.5(f)-(h).

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

    \369\ The description of these two scenarios is derived from the

    language in CEA Section 2(a)(13)(C).

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

    Section 43.5(e)(2) applies to large notional off-facility swaps

    that are subject to the mandatory clearing requirement, in which at

    least one party to such swap is an SD or MSP. Real-time data relating

    to such swaps shall be subject to a time delay for public dissemination

    of 30 minutes for the first year beginning on the compliance date.

    Section 43.5(e)(2)(B) specifies that the time delay shall be reduced to

    15 minutes beginning on the first anniversary of the compliance date of

    part 43. These time delays correspond to the time delays established in

    Sec. 43.5(d) for block trades. The Commission believes that SDs and

    MSPs will have the technology to ensure these swaps are reported to an

    SDR prior to the expiration of the time delays for public

    dissemination.\370\

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

    \370\ Accordingly, the Commission has sought to substantially

    align the time delays for public dissemination with the timeframes

    for regulatory reporting.

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

    With respect to large notional off-facility swaps subject to the

    clearing mandate in which neither party is an SD or MSP, such swaps

    will receive a longer time delay for public dissemination than those

    swaps in which an SD or MSP is a counterparty. The Commission believes

    that reporting parties that are not SDs or MSPs and that do not invoke

    the end-user exception pursuant to CEA section 2(h)(7) and Commission

    regulations,\371\ may not have the same level of infrastructure or

    reporting technology as SDs and MSPs. Large notional off-facility swaps

    that are subject to the mandatory clearing requirement will tend to be

    liquid and generally should be reported sooner than those not subject

    to the mandatory clearing requirement. Making such swap transaction and

    pricing data available to market participants quickly and efficiently

    will enhance price discovery in these markets, while the longer time

    delays for public dissemination in less liquid markets will provide

    market participants with a longer period in which to hedge the risk

    associated with their liquid large notional off-facility swaps.

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

    \371\ As mentioned above, Sec. 43.5(e)(1) excludes such swaps

    from this category of time delays for public dissemination. Sec.

    43.5(e)(1) also excludes swaps that are required to be cleared under

    CEA section 2(h)(2) but are not cleared because no DCO is available

    to clear.

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

    Accordingly, Sec. 43.5(e)(3), as adopted, provides longer time

    delays for large notional off-facility swaps that are subject to

    mandatory clearing and in which neither party is an SD or MSP.

    Specifically, Sec. 43.5(e)(3)(A) provides that for Year 1, which

    begins on the compliance date, such large notional off-facility swaps

    shall be subject to a four hour time delay from the time of execution

    to the time of public dissemination by the SDR. Section 43.5(e)(3)(B)

    provides that beginning on the first anniversary of the compliance date

    of part 43 and for the year following (``Year 2''), the time delay for

    public dissemination will be reduced to two hours from the time of

    execution; Sec. 43.5(e)(3)(C) provides that beginning on the second

    anniversary of the compliance date and thereafter, the time delay for

    large notional off-facility swaps will be reduced to one hour after

    execution.

    Additionally, Sec. 43.5(c)(3) provides that, until the Commission

    establishes an appropriate minimum block size for a particular swap or

    group of swaps, the time delays set forth in Sec. 43.5(e) shall apply

    to publicly reportable swap transactions that do not have appropriate

    minimum block sizes, with respect to (i) off-facility swaps that are

    subject to the mandatory clearing requirement, excluding those off-

    facility swaps that are excepted from the mandatory clearing

    requirement pursuant to CEA section 2(h)(7); and (ii) those swaps that

    are determined to be required to be cleared under CEA

    [[Page 1219]]

    section 2(h)(2) but which are not cleared. Those off-facility swaps

    that are subject to (i) and (ii), immediately above, will follow the

    time delay set forth in Sec. 43.5(e)(2) (i.e., 30 minutes for the year

    beginning on the compliance date and 15 minutes beginning on the first

    anniversary of the compliance date). Those off-facility swaps that are

    subject to the mandatory clearing requirement in which neither party is

    an SD or MSP will follow the time delay set forth in Sec. 43.5(e)(3)

    (i.e., four hours for the year beginning on the compliance date, two

    hours for the year beginning on the first anniversary of the compliance

    date and one hour beginning on the second anniversary of the compliance

    date). Once an appropriate minimum block size is established for a

    particular swap or group of swaps, all swaps described in Sec. 43.5(e)

    that are below the appropriate minimum block size shall be reported

    ``as soon as technologically practicable'' and only large notional off-

    facility swaps shall receive the time delays for public dissemination

    described in Sec. 43.5(e).

    The Proposing Release stated a presumption that the time delay for

    financial bilateral swaps would be shorter than the time delay for non-

    financial bilateral swaps. In this regard, two commenters asserted that

    commodity swaps should have longer time delays for public dissemination

    than swaps in other asset classes; one stated that financial swaps

    should have shorter time delays than ``other commodity'' swaps. The

    Commission agrees and believes that a distinction should be made

    between swaps that are in the interest rates, equity, credit and

    foreign exchange asset classes (i.e., financial swaps) and swaps in the

    ``other commodity'' asset class, since such ``other commodity'' swaps

    generally have physical commodities as the underlying asset or

    reference price/index. The Commission believes a longer time delay for

    the ``other commodity'' swaps is necessary because (i) such swaps

    reference underlying physical commodities; and (ii) the hedging

    strategies for swaps in the ``other commodity'' asset class are

    generally more complex and may take longer than financial swaps (e.g.,

    interest rate swaps, which can be quickly hedged in the swaps, futures

    or treasury markets).

    As adopted, Sec. 43.5(f) provides the time delays for public

    dissemination of large notional off-facility swaps in the interest

    rate, credit, foreign exchange and equity asset classes, that are not

    subject to the mandatory clearing requirement (or are excepted from

    such requirement pursuant to CEA section 2(h)(7)), in which at least

    one party is an SD or MSP. Section 43.5(f)(1) provides that the time

    delay for such large notional off-facility swaps for Year 1 shall last

    for one hour following execution of such large notional off-facility

    swap. However, Sec. 43.5(f)(1) includes a provision applicable to

    those large notional off-facility swaps in the interest rate, credit,

    foreign exchange and equity asset classes in which the non-SD/non-MSP

    counterparty is not a financial entity, as defined in CEA section

    2(h)(7)(C) and Commission regulations.\372\ Under this provision, for

    situations where real-time swap transaction and pricing data is

    received by the SDR later than one hour after the time of execution,

    the SDR must publicly disseminate such data ``as soon as

    technologically practicable'' after it receives such data. The purpose

    of this accommodation is to align the time delays for public

    dissemination with the timeframes provided in the regulatory reporting

    requirements in order to reduce reporting costs to market participants

    and to avoid inconsistencies between the reporting rules.\373\

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

    \372\ CEA section 2(h)(7)(C)(i) provides the financial entity

    definition as it relates to Section 723 of the Dodd-Frank Act.

    Specifically, the definition states that for the purposes of

    paragraph 2(h), the term ``financial entity'' means: ``(I) a swap

    dealer; (II) a security-based swap dealer; (III) a major swap

    participant; (IV) a major security-based swap participant; (V) a

    commodity pool; (VI) a private fund as defined in section 202(a) of

    the Investment Advisers Act of 1940 (15 U.S.C. 80-b-2(a)); (VII) an

    employee benefit plan as defined in paragraphs (3) and (32) of

    section 3 of the Employee Retirement Income Security Act of 1974 (29

    U.S.C. 1002); (VIII) a person predominantly engaged in activities

    that are in the business of banking, or in activities that are

    financial in nature, as defined in section 4(k) of the Bank Holding

    Company Act of 1956.'' Additionally, CEA section 2(h)(7)(C)(ii)

    provides exclusions to the definition by stating that ``the

    Commission shall consider whether to exempt small banks, savings

    associations, farm credit system institutions, and credit unions,

    including--(I) depository institutions with total assets of

    $10,000,000,000 or less; (II) farm credit system institutions with

    total assets of $10,000,000,000 or less; or credit unions with total

    assets of $10,000,000,000 or less.'' CEA section 2(h)(7)(C)(iii)

    further provides an important limitation to the definition of

    financial entity by stating that ``such definition shall not include

    an entity whose primary business is providing financing, and uses

    derivatives for the purpose of hedging underlying commercial risks

    related to interest rate and foreign currency exposures, 90 percent

    or more of which arise from financing that facilitates the purchase

    or lease of products, 90 percent or more of which are manufactured

    by the parent company or another subsidiary of the parent company.''

    \373\ Proposed part 45 recognizes that certain end-users may not

    have an ability to verify trade information electronically which may

    increase the time for the reporting party to verify the primary

    economic terms and real-time data and consequently, the time for the

    reporting party to report such data to an SDR pursuant to proposed

    part 45. See 75 FR 76574.

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

    Section 43.5(f)(2) establishes a time delay for public

    dissemination of such large notional off-facility swaps in the interest

    rate, credit, foreign exchange and equity asset classes of 30 minutes

    following the execution such swap for Year 2. Section 43.5(f)(2)

    provides the same accommodation for large notional off-facility swaps

    in the interest rate, credit, foreign exchange and equity asset classes

    in which the non-SD/non-MSP counterparty is not a financial entity, as

    defined in CEA section 2(h)(7)(C) and Commission regulations. Section

    43.5(f)(3) states that beginning on the second anniversary of the

    compliance date, the time delay for public dissemination for all large

    notional off-facility swaps in the interest rate, credit, foreign

    exchange and equity asset classes in which at least one counterparty is

    an SD or MSP shall be 30 minutes, regardless of the status of any non-

    SD/non-MSP counterparty.

    Section 43.5(c)(4) provides that until the Commission establishes

    an appropriate minimum block size for a particular swap or group of

    swaps, the time delays set forth in Sec. 43.5(f) shall apply to

    publicly reportable swap transactions that do not have appropriate

    minimum block sizes, with respect to off-facility swaps in the interest

    rate, credit, foreign exchange and equity asset classes that are not

    subject to the mandatory clearing requirement, and in which at least

    one counterparty is an SD or MSP. These time delays shall be one hour

    for Year 1 and reduced to 30 minutes beginning on the first anniversary

    of the compliance date. However, those off-facility swaps in the

    interest rate, credit, foreign exchange and equity asset classes, in

    which the non-SD/non-MSP counterparty is not a financial entity as

    defined in CEA section 2(h)(7)(C) and Commission regulations, shall

    receive the same accommodation to the time delay for public

    dissemination for Year 1 and Year 2, as described in Sec. 43.5(f)(1)

    and (2). Once an appropriate minimum block size is established for a

    particular swap or group of swaps, all swaps described in Sec. 43.5(f)

    that are below the appropriate minimum block size shall be publicly

    disseminated ``as soon as technologically practicable'' and only large

    notional off-facility swaps shall receive the time delays for public

    dissemination described in Sec. 43.5(f).

    As previously noted, the Commission believes that large notional

    off-facility swaps in the ``other commodity'' asset class should

    receive longer time delays for public dissemination, as it may take

    longer to hedge such swap transactions involving physical underlying

    assets. The Commission believes that the

    [[Page 1220]]

    ``other commodity'' asset class will likely have more non-SDs/non-MSPs

    that are excepted pursuant to CEA section 2(h)(7) (i.e., non-financial

    end-users) than the other defined asset classes. Market participants

    and commenters have expressed concern about the ability to hedge

    physical commodity swaps and suggested that longer time delays may be

    appropriate for such swaps. Accordingly, in Sec. 43.5(g), the

    Commission has established longer time delays for large notional off-

    facility swaps in the ``other commodity'' asset class.

    Section 43.5(g) establishes the time delays for the public

    dissemination of large notional off-facility swaps in the ``other

    commodity'' asset class that are not subject to the mandatory clearing

    requirement (or are excepted from such requirement pursuant to CEA

    section 2(h)(7)), in which at least one party is an SD or MSP.

    Specifically, Sec. 43.5(g)(1) provides that for Year 1, the time delay

    for public dissemination is four hours following the execution of the

    large notional off-facility swap. However, final Sec. 43.5(g)(1)

    includes a provision similar to that in Sec. 43.5(f)(1) and (2), for

    those large notional off-facility swaps in the ``other commodity''

    asset class that are not subject to the mandatory clearing requirement

    and in which the non-SD/non-MSP counterparty is not a financial entity

    as defined in CEA section 2(h)(7)(C) and Commission regulations. For

    such swaps, where the real-time swap transaction and pricing data is

    received by the SDR more than four hours after execution, the SDR must

    publicly disseminate such data ``as soon as technologically

    practicable'' after it receives such data. As noted above with respect

    to Sec. 43.5(f)(1) and (2), the purpose of the provision in Sec.

    43.5(g)(1) is to align the time delays for public dissemination with

    the timeframes for regulatory reporting in order to reduce reporting

    costs to market participants and to avoid inconsistencies between the

    reporting rules.

    Section 43.5(g)(2) provides a two-hour time delay for the public

    dissemination of large notional off-facility swaps in the ``other

    commodity'' asset class, in which at least one party is an SD or MSP,

    for Year 2. Section 43.5(g)(2) provides a similar accommodation to

    Sec. 43.5(f)(1) and (2) for large notional off-facility swaps in the

    ``other commodity'' asset class in which the non-SD/non-MSP

    counterparty is not a financial entity, as defined in CEA section

    2(h)(7)(C) and Commission regulations. Section 43.5(g)(3) specifies

    that the time delay for public dissemination, beginning on the second

    anniversary of the compliance date, for all large notional off-facility

    swaps in the ``other commodity'' asset class, in which at least one

    counterparty is an SD or MSP, shall be two hours, regardless of the

    status of any non-SD/non-MSP counterparty.

    Section 43.5(c)(5) additionally provides that until the Commission

    establishes an appropriate minimum block size for a particular swap or

    group of swaps, the time delays set forth in Sec. 43.5(g) shall apply

    to publicly reportable swap transactions that do not have appropriate

    minimum block sizes, with respect to off-facility swaps in the ``other

    commodity'' asset class that are not subject to the mandatory clearing

    requirement and in which at least one counterparty is an SD or MSP.

    Specifically, the time delays shall be four hours for Year 1 and two

    hours beginning on the first anniversary of the compliance date.

    However, those off-facility swaps in the ``other commodity'' asset

    class in which the non-SD/non-MSP counterparty is not a financial

    entity, as defined in CEA section 2(h)(7)(C) and Commission

    regulations, shall receive the same accommodation to the time delay for

    public dissemination during Year 1 and Year 2, as described in Sec.

    43.5(g)(1) and (2). Once an appropriate minimum block size is

    established for a particular swap or group of swaps, all swaps

    described in Sec. 43.5(g) that are below the appropriate minimum block

    size shall be reported ``as soon as technologically practicable'' and

    only large notional off-facility swaps shall receive the time delays

    for public dissemination described in Sec. 43.5(g).

    Several commenters recommended that end-user to end-user large

    notional swaps have longer time delays. The Commission agrees: Such

    swaps tend to be customized and the reporting party for such swaps may

    be less sophisticated and have less ability to leverage existing and

    new technology as compared to an SD or MSP. The longer time delays for

    public dissemination ensures consistency to allow the reporting party

    to mitigate reporting costs by sending real-time swap data at the same

    time that regulatory data is sent to an SDR.

    Section 43.5(h) prescribes the time delay for the public

    dissemination of large notional off-facility swaps in which neither

    counterparty is an SD or MSP. Pursuant to Sec. 43.5(h)(1), for Year 1,

    the time delay for public dissemination of swap transaction and pricing

    data for such swaps shall be 48 business hours after execution of the

    swap.\374\ Pursuant to Sec. 43.5(h)(2) the time delay for such swaps

    will reduce to 36 business hours for Year 2. Finally, pursuant to Sec.

    43.5(h)(3), beginning on the second anniversary of the compliance date

    for part 43, the time delay for such swaps will be 24 business hours.

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

    \374\ Section 43.2 defines ``business hours'' to mean

    consecutive hours during on one or more business days. Section 43.2

    also defines ``Business day'' to mean the twenty-four hour day, on

    all days except Saturdays, Sundays and legal holidays, in the

    location of the reporting party or registered entity reporting data

    for the swap.

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

    Additionally, Sec. 43.5(c)(6) provides that until the Commission

    establishes an appropriate minimum block size for a particular swap or

    group of swaps, the time delays set forth in Sec. 43.5(h) shall apply

    to publicly reportable swap transactions that do not have appropriate

    minimum block sizes, with respect to off-facility swaps in which

    neither counterparty is an SD or MSP. Once an appropriate minimum block

    size is established for a particular swap or group of swaps, all swaps

    described in Sec. 43.5(h) that are below the appropriate minimum block

    size shall be reported ``as soon as technologically practicable'' and

    only large notional off-facility swaps shall receive the time delays

    for public dissemination described in Sec. 43.5(h).

    With respect to the comment that 15 minutes is a sufficient time

    delay for all swaps, the Commission believes 15 minutes is a sufficient

    time delay for swaps executed on or pursuant to the rules of a SEF or

    DCM and those swaps subject to mandatory clearing in which at least one

    party is an SD or MSP. However, the Commission has determined to phase

    in time delays over a two year period and, consistent with comments

    received and in order to minimize implementation costs, has adopted

    Sec. 43.5(d) and (e)(2). Further, as discussed above, the Commission

    believes that large notional off-facility swaps should be provided

    longer time delays based on market participant and asset class.

    The Commission is also adopting Sec. 43.5(c)(7), which provides

    that, upon the establishment of an appropriate minimum block size for a

    particular swap or category of swaps, all publicly reportable swap

    transactions that are below the appropriate minimum block size shall be

    publicly disseminated ``as soon as technologically practicable'' after

    execution pursuant to Sec. 43.3. The Commission believes that Sec.

    43.5(c)(7) clarifies that, as an appropriate minimum block size becomes

    effective for a swap or group of swaps, registered entities, market

    participants and swap

    [[Page 1221]]

    counterparties should anticipate that public dissemination of swap data

    for transactions below the appropriate minimum block size will occur

    significantly sooner (i.e., ``as soon as technologically practicable'')

    following execution of a publicly reportable swap transaction.

    With respect to the contention that shorter or no time delays are

    appropriate, the Commission notes that CEA section 2(a)(13)(E)(iii)

    explicitly requires the Commission to promulgate rules establishing

    time delays for reporting large notional swaps (block trades). While

    the Commission agrees that financial swaps should have shorter time

    delays, the Commission believes that one minute--as suggested by one

    commenter--is insufficient for many large trades, particularly where

    transparency is being introduced into the swaps market for the first

    time.\375\ As noted above, the appropriate minimum block size for swaps

    will be addressed in the block trade re-proposal that will be published

    for comment in the Federal Register. Until an appropriate minimum block

    size is set for a swap or grouping of swaps, all such swaps will

    receive time delays for public dissemination. As explained above, the

    Commission is initially adopting longer time delays and is reducing

    those time delays over time in an effort to allow market participants

    to become accustomed to reporting and publicly disseminating, to

    minimize costs to market participants and registered entities and to

    ensure that market participants have adequate time to hedge their large

    swap transactions.

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

    \375\ See CL-Better Markets.

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

    Several commenters advised that the Commission needs more data

    before it can set appropriate minimum block sizes and time delays for

    public dissemination of block trades and large notional off-facility

    swaps. The Commission agrees that these concerns are valid with respect

    to the determination of appropriate minimum block sizes, but does not

    believe that additional data is needed for setting time delays for

    public dissemination. The Commission has considered all comments

    relating to the time delays for public dissemination, and as discussed

    above, Sec. 43.5 takes into account the liquidity of swaps; the

    ability for certain reporting parties to report to SDRs; the cost-

    benefit considerations of reporting real-time swap pricing and

    transaction data; the cost-benefit considerations of publicly

    disseminating swap pricing and transaction data; and the statutory

    mandate to provide post-trade transparency and enhance price discovery

    in the swaps markets.

    In its final rule, the Commission has added appendix C to part 43

    to further clarify the time delays discussed in Sec. 43.5(d)-(h) as

    well as the interim time delays described in Sec. 43.5(c); appendix C

    to part 43 provides Tables C1-C6, each of which represent the time

    delays for a particular type of swap or swaps described in Sec. 43.5.

    Several commenters requested that the SEC's and the Commission's

    respective public dissemination time delay rules be harmonized. The

    Commission has routinely coordinated with the SEC regarding the time

    delays for public dissemination of certain swap transaction and pricing

    data; however, the two Commissions have jurisdiction over different

    types of swaps and, as a result, a different concentration of market

    participants. For example, the ``other commodity'' asset class will

    tend to have significantly more non-SD/non-MSP counterparties than the

    credit or equity asset classes.

    By initially providing time delays for the public dissemination of

    all swaps, the Commission will ensure that some public dissemination

    occurs from the outset, prior to the adoption of rules for appropriate

    minimum block sizes. Once the appropriate minimum block sizes for

    particular swaps or swap categories are adopted, only swaps that have a

    notional or principal amount at or above the appropriate minimum block

    size threshold will receive a time delay for public dissemination, and

    all other swaps in the asset class (or sub-asset class or grouping of

    swaps) must be publicly disseminated by an SDR ``as soon as

    technologically practicable.'' Providing post-trade price transparency

    in the swaps markets, even if initially delayed during an interim

    period, will enhance price discovery and increase transparency.

    Additionally, as appropriate minimum block sizes are finalized,

    transparency and price discovery in the swaps markets will be further

    enhanced as swap transaction and pricing data for swaps below the

    appropriate minimum block size is publicly disseminated ``as soon as

    technologically practicable.''

    F. Appendix A to Part 43

    CEA section 2(a)(13)(B) ``authorizes the Commission to make swap

    transaction and pricing data available to the public in such form and

    at such times as the Commission determines appropriate to enhance price

    discovery.'' Consistent with this authorization, the Commission

    proposed appendix A to proposed part 43. That provision established the

    appropriate form and manner in which swap transaction and pricing data

    shall be publicly disseminated. Specifically, appendix A to proposed

    part 43 included: (1) Data fields to be publicly disseminated; (2) a

    description of the type of information to be captured in the data

    fields; (3) an example of how the data fields may be reported; and (4)

    the application of the data fields.

    To account for the differences in publicly reportable swap

    transactions among asset classes, the descriptions of the data fields

    in the Proposing Release were not intended to be prescriptive; rather,

    the data fields were intended to provide flexibility to report various

    types of swaps while achieving consistency in the data. Further,

    certain data fields described in the Proposing Release may not be

    relevant to certain types of transactions; for such transactions, such

    data fields would not be publicly disseminated. For example, the swap

    transaction and pricing data that is publicly disseminated with respect

    to an uncleared off-facility swap will likely be different than those

    swaps that are executed on a SEF or DCM. Appendix A to proposed part 43

    was intended to ensure that the swap transaction and pricing data that

    is publicly disseminated is sufficient to give meaning to the price of

    the publicly reportable swap transaction, while protecting the

    anonymity of the counterparties and considering both the potential

    effects of the proposal on market liquidity and the cost burden of

    reporting.

    The Commission requested general comments regarding all aspects of

    the data fields, and asked specific questions related to specific data

    field including (i) whether to add or delete data fields; (ii) effects

    on market liquidity; and (iii) the appropriate format for data and

    manner of public dissemination.

    Twenty-six commenters addressed various issues related to the data

    fields.\376\ These commenters focused on specific data fields, the

    value of reporting data, the Commission's ability to modify data

    fields, pricing information for customized swaps, end-user to end-user

    reporting of data and harmonization with the SEC with regard to data

    fields that must be publicly disseminated.

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

    \376\ Commenters include: FHL Banks; IPAA; IECA; MFA; Working

    Group of Commercial Energy Firms; ISDA/SIFMA; ABC/CIEBA; GFXD;

    Better Markets; Committee on Capital Markets Regulation; COPE;

    Coalition of Energy End-Users; NFPEEU; Markit; Tradeweb; DTCC;

    TriOptima; Reval; MarkitSERV; Cleary; Argus; Professor Darrell

    Duffie; Coalition for Derivatives End-Users; Barclays; API; and AGA.

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

    Two commenters asserted that end-users will face a greater burden

    in

    [[Page 1222]]

    reporting the real-time data for public dissemination since end-users

    only maintain trading capabilities and associated information

    technology to meet their current commercial needs.\377\ These

    commenters argue that the burden placed on end-users for reporting end-

    user to end-user trades (i.e., neither party is an SD or MSP) is not

    justified by the limited value of the data. These commenters argued

    that under the Proposing Release end-users would be required to create

    systems, hire additional personnel and purchase technology, which may

    compel such end-users to only enter into transactions with SDs and

    MSPs. According to the commenters, these requirements would hinder the

    ability of end-users to manage commercial risk and increase their

    costs, which they would then pass on to their consumers.

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

    \377\ See CL-COPE; CL-IECA.

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

    Similarly, two commenters argued that data for off-facility swaps

    involving end-users do not have value for the purposes of price

    discovery; in their view, the cost burdens to send the swap transaction

    and pricing data for public dissemination would be substantial.\378\

    They contend that off-facility end-user swaps should not be subject to

    Section 727 of the Dodd-Frank Act. One commenter contended that if the

    Commission were to subject off-facility end-user swaps to real-time

    reporting requirements, end-users should be allowed to utilize a number

    of options for compliance with the real-time reporting requirements and

    only core commercial terms applicable to the swap should be

    reported.\379\

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

    \378\ See CL-Coalition of Energy End-Users; CL-IPAA.

    \379\ See CL-Coalition of Energy End-Users.

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

    Two additional commenters similarly argued that until certain other

    definitions are finalized (e.g., swap, SD, MSP, non-financial

    commodity), it is premature to comment on the data fields described in

    appendix A with respect to energy commodity swaps.\380\

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

    \380\ See CL-NFPEEU; CL-Coalition of Energy End-Users.

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

    One commenter argued that the Commission should follow the approach

    taken by the SEC in its proposal to allow SDRs to define the relevant

    fields based on general guidelines so that real-time reporting can be

    flexible enough to track market trends.\381\ Another commenter

    expressed concern that the SDR may not have sufficient knowledge to

    identify all information in its possession and could inadvertently

    disclose the identity of a swap counterparty; the commenter therefore

    requested more guidance on what should and what should not be publicly

    disseminated.\382\

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

    \381\ See CL-MarkitSERV.

    \382\ See CL-ABC/CIEBA.

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

    Three commenters asserted that credit terms should not be publicly

    disseminated. One of these commenters contended that the public

    dissemination of such terms could cause confusion, while the other

    commenters wrote that public dissemination could have a negative impact

    since market participants could determine a counterparty's view on the

    creditworthiness of another counterparty.\383\

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

    \383\ See CL-Coalition for Derivatives End-Users; CL-Working

    Group of Commercial Energy Firms; and CL-ISDA/SIFMA.

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

    Three commenters argued that the public dissemination of an

    indication that a swap is bespoke could confuse the market since all of

    the other terms of the bespoke swap that make up the price would not be

    publicly disseminated.\384\ The commenters stated that since the public

    dissemination of bespoke swaps does not enhance price discovery, such

    swap transaction and pricing data should not be required to be

    reported. One commenter suggested that condition flags may be needed in

    the swaps markets to provide indications of established

    conventions.\385\

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

    \384\ See CL-DTCC; CL-FHLBanks; and CL-Reval.

    \385\ See CL-MarkitSERV.

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

    Several commenters addressed specific data fields set forth in

    appendix A to proposed part 43. The comments on these specific data

    fields are summarized as follows:

    Additional Price Notation--One commenter indicated that

    the ``Additional Price Notation'' field should not be publicly

    disseminated since it will provide information on one party's

    creditworthiness to another party.\386\ Another commenter argued that

    the ``Additional Price Notation'' data field is likely to have little

    application for most commodity transactions and that it will be

    challenging to compute and populate such field in real-time.\387\

    Another commenter stated that the pricing and separate display of an

    ``Additional Price Notation'' data field could make the price of

    publicly reported swaps more meaningful; however, the commenter

    cautioned that the implementation of a standardized approach for

    calculating the amount in the ``Additional Price Notation'' data field

    would be challenging, would take time and could confuse the market if

    parties took different approaches toward calculating this data

    field.\388\

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

    \386\ See CL-ISDA/SIFMA. The ISDA and SIFMA joint comment letter

    further argued that bilaterally executed trades may contain a

    premium over market which would also need to be excluded from public

    dissemination to prevent the price from being misinterpreted by

    market observers.

    \387\ See CL-Working Group of Commercial Energy Firms.

    \388\ See CL-MarkitSERV.

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

    Tenor--Three commenters responded to the Commission's

    request for specific comment regarding whether date information (i.e.,

    tenor information) should be rounded to the nearest month.\389\ One of

    the commenters stated that in illiquid markets, the rounding of tenor

    would be necessary to protect anonymity of parties to a trade. The

    commenter further suggested that with respect to illiquid foreign

    exchange markets, the tenor could map to one or two years, rather than

    to a specific month and year. Another commenter argued that public

    dissemination should follow market conventions for reporting. Yet

    another commenter stated that by not reporting the actual tenor of the

    swap, one of the primary economic terms of the swap would be

    manipulated and would therefore reduce post-trade price transparency.

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

    \389\ See CL-Working Group of Commercial Energy Firms; CL-GFXD;

    and CL-ISDA/SIFMA.

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

    Timestamp--Commenters argued that requiring that the

    timestamp be reported to the second is not reasonable and not

    consistent with current market practice.\390\ One commenter argued that

    the value derived of moving the industry to UTC appears minimal when

    compared to the costs involved.\391\

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

    \390\ See, e.g., CL-ISDA/SIFMA; CL-Working Group of Commercial

    Energy Firms.

    \391\ See CL-ISDA/SIFMA.

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

    Notional Amount--One commenter stated that reporting the

    notional amount in total dollar value for commodities provides little

    value in terms of price discovery value in the market.\392\ Therefore,

    the commenter recommended that the reporting of notional quantity in

    the units of the underlying quantity would provide more relevant

    information. Similarly, another commenter suggested that since there is

    not a universal definition of notional amount, the Commission should

    provide guidelines on how to publicly disseminate notional amount

    similar to the guidelines provided by the Federal Reserve Bank of New

    York (``FRBNY'').\393\ Another commenter

    [[Page 1223]]

    argued that the notional amount field should not be publicly

    disseminated for non-standardized swaps.\394\

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

    \392\ See CL-Working Group of Commercial Energy Firms.

    \393\ See CL-ISDA/SIFMA. The FRBNY's guidelines are included

    under ``Line Item Instructions for Derivatives and Off-Balance Sheet

    Items Schedule HC-L'' in the Board of Governors of the Federal

    Reserve System's ``Instructions for Preparation of Consolidated

    Financial Statements for Bank Holding Companies Reporting Form FR Y-

    9C,'' available at http://www.federalreserve.gov/reportforms/forms/FR_Y-9C20110630_i.pdf (last visited Nov. 9, 2011).

    \394\ See CL-MFA.

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

    Indication of Other Price Affecting Terms--One commenter

    argued that this field, which applies only to non-standardized or

    bespoke ``reportable swap transactions,'' should be deleted and only

    price and volume should be required, if anything, for bespoke swaps.

    The commenter further argued that there would be little price discovery

    value in reporting this field.\395\ Another commenter suggested that

    the Commission require that certain condition flags be publicly

    disseminated with respect to bespoke transactions that would provide

    market participants and the public with more information about the

    bespoke swap.\396\

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

    \395\ See CL-Working Group of Commercial Energy Firms.

    \396\ See Meeting with Markit (June 26, 2011).

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

    Price-Forming Continuation Data--Commenters stated that

    novations and partial novations should not be ``reportable swap

    transactions'' since they do not have a material impact on the primary

    economic terms of the transaction.\397\

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

    \397\ See Meeting with Barclays (January 24, 2011); CL-Working

    Group of Commercial Energy Firms.

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

    Contract Type--One commenter suggested that the ``Contract

    Type'' data field be modified to delete ``options'' (to the extent the

    Commission is referring to physical options) and ``forwards'' given

    that the Commission has no jurisdiction over physical

    transactions.\398\

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

    \398\ See CL-Working Group of Commercial Energy Firms.

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

    One commenter emphasized the importance of maintaining flexibility

    in the data fields described in appendix A to proposed part 43, which

    may mean that no information at all may be reported for certain

    fields.\399\ In contrast, another commenter recommended that the data

    elements be made more specific to provide clarity and avoid the risk of

    inconsistencies when specifying the data elements.\400\ Four commenters

    recommended that a standardized data format be required for the

    reporting and public dissemination of swap transaction and pricing

    data. These four commenters argued that a single data format would

    maximize efficient and cost-effective access to the information by the

    greatest number of users.\401\

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

    \399\ See CL-GFXD.

    \400\ See CL-ISDA/SIFMA.

    \401\ See CL-Barclays; CL-DTCC; CL-TriOptima; and CL-Better

    Markets.

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

    Several commenters also requested that the Commission and the SEC

    harmonize the data fields that are required to be publicly disseminated

    so that there can be an accurate depiction of prices within the same

    asset classes.\402\

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

    \402\ See CL-ISDA/SIFMA; CL-DTCC; CL-Committee on Capital

    Markets Regulation; and CL-MarkitSERV.

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

    The Commission received comments discussing the ``Swap Instrument''

    data field. The Commission is not including this data field in appendix

    A to part 43, as it intends to address this concept in the block trade

    re-proposal. Additionally, one commenter interpreted that Table A2

    would only relate to embedded options and as a result the primary

    economic terms for options were not covered by appendix A to part

    43.\403\

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

    \403\ See CL-GFXD.

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

    After considering the comments, the Commission has determined to

    adopt appendix A to proposed part 43 as described below.

    The Commission agrees with concerns expressed by some commenters

    regarding the costs and burdens that end-users will face in reporting

    the data fields described in appendix A to proposed part 43.

    Accordingly, the Commission is adopting data fields in appendix A to

    part 43 that provide sufficient flexibility for reporting both

    standardized and bespoke swap transactions in all asset classes. While

    the Commission recognizes that there will be costs associated with

    reporting the data fields described in appendix A to part 43, the

    Commission does not believe that a distinction should be made for swaps

    in which an end-user is a reporting party. The Commission believes that

    swaps with similar characteristics must have the same standards for

    public dissemination, regardless of the type of reporting party, so

    that identical data fields will be publicly disseminated for similar

    swaps. Such consistency in public dissemination will provide market

    participants and the public with uniform public reporting and enhanced

    transparency and price discovery. To the extent that non-SD/non-MSPs

    are reporting parties, these parties may use industry solutions, such

    as third-party reporting agents or web-based data reporting, to assist

    in reporting such swap transaction and pricing data to an SDR.\404\ The

    Commission believes that industry solutions, combined with the longer

    initial time delays for public dissemination,\405\ the flexibility of

    the data fields and the flexibility of the meaning of ``as soon as

    technologically practicable'' \406\ will mitigate the costs that may be

    incurred by non-SD/non-MSP reporting parties.

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

    \404\ The Commission notes that CEA section 2(a)(13)(F)

    explicitly permits that agents to the parties to a swap may report

    swap transaction and pricing information: ``Parties to a swap

    (including agents of the parties to a swap) shall be responsible for

    reporting swap transaction information to the appropriate registered

    entity in a timely manner as may be prescribed by the Commission.''

    See supra Sec. 43.3 discussion, which discusses the use of third

    parties for reporting and public dissemination.

    \405\ See supra discussion in section II.E (``Section 43.5--Time

    Delays for Public Dissemination of Swap Transaction and Pricing

    Data'').

    \406\ See supra discussion in section II.B.2 (``Defined

    Terms'').

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

    The Commission disagrees with commenters that stated that off-

    facility end-user swaps should not be publicly disseminated or

    alternatively should be permitted to report less information than the

    data fields required in appendix A to part 43. As noted in the previous

    discussion related to the scope of part 43,\407\ the Commission

    interprets CEA section 2(a)(13)(C) to cover all swap transactions,

    including bespoke swaps. The Commission nonetheless recognizes that

    there are differences among various types of swap transactions based on

    asset class and whether a swap is subject to mandatory clearing,

    standardized or bespoke. As further discussed below, the Commission

    believes that the reporting of swap transaction and pricing data for

    bespoke transactions, including off-facility end-user transactions,

    enhances price discovery by bringing transparency to the market.

    Requiring that certain data fields be reported--such as ``Indication of

    Other Price Affecting Term'' and ``Additional Price Notation''--adds

    value to the swap transaction and pricing data that is publicly

    disseminated without compromising the anonymity of the swap

    counterparties. It is possible that some of the data fields listed in

    Tables A1 and A2 in appendix A to part 43 may not be relevant to the

    terms of a particular publicly reportable swap transaction and

    therefore need not be publicly disseminated. However, to the extent

    that a data field for a particular swap is a relevant term of the

    publicly reportable swap transaction, the reporting party, SEF or DCM

    must provide the SDR with sufficient information to publicly

    disseminate such swap transaction and pricing data.

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

    \407\ See supra discussion in section II.A, regarding the scope

    of part 43.

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

    The Commission notes that the data fields described in appendix A

    to part 43 only reflect data that is to be publicly disseminated by an

    SDR. The Commission has added introductory language to appendix A to

    part 43 to clarify that reporting parties, SEFs and

    [[Page 1224]]

    DCMs must report to an SDR ``as soon as technologically practicable''

    after execution of the publicly reportable swap transaction, the swap

    transaction and pricing data that is needed to publicly disseminate the

    relevant data fields described in Tables A1 and A2.

    The Commission acknowledges the comment that it is premature to

    comment on the data fields described in appendix A to proposed part 43

    since certain definitions have not been finalized; however, the

    Commission disagrees that the absence of such definitions would

    preclude an interested party from commenting on the data fields in

    appendix A to proposed part 43. Further, in response to similar

    comments, the Commission previously re-opened the comment period for

    the Proposing Release so that market participants and interested

    parties would have an opportunity to comment after seeing the entire

    mosaic of proposed rules.\408\ The Commission did not receive any

    additional comments on the proposed data fields during the re-opened

    comment period.

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

    \408\ See Commission, Reopening and Extension of Comment Periods

    for Rulemakings Implementing the Dodd-Frank Wall Street Reform and

    Consumer Protection Act, 76 FR 25274 (May 4, 2011).

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

    The Commission sees merit in the suggestion that SDRs have

    discretion to determine how to publicly disseminate data fields. As

    discussed, Sec. 43.3(a) requires that all swap transaction and pricing

    data be reported by reporting parties, SEFs and DCMs to an SDR for

    public dissemination. Accordingly, the Commission anticipates that the

    SDRs will have discretion to publicly disseminate the swap transaction

    and pricing data in a form and manner that covers all of the

    information described in appendix A to part 43. The introductory

    language to appendix A to part 43 now makes clear that the form and

    manner in which an SDR publicly disseminates information should be

    consistent for swaps within a particular asset class. Such consistency

    will better enable market participants to compare prices for swaps

    within the same asset class. The data fields listed in appendix A to

    part 43 are intended to be informative and flexible to accommodate all

    types of publicly reportable swap transactions. Additionally, appendix

    A to part 43 provides examples of how each data element may be publicly

    disseminated. These examples are not meant to be prescriptive and may

    not be applicable to certain types of swaps. The Commission believes

    that part 43 and appendix A to part 43 provide sufficient guidance to

    SDRs regarding information that should and should not be publicly

    disseminated. With respect to the public dissemination of swap

    transaction and pricing data related to certain off-facility swaps in

    the ``other commodity'' asset class, the Commission intends to provide

    further guidance in its block trade re-proposal.\409\

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

    \409\ See supra discussion in section II.D.5 (``Anonymity of

    Parties to a Publicly Reportable Swap Transaction (Sec. 43.4(d)'').

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

    The Commission agrees with commenters that separate data fields

    that represent creditworthiness should not be publicly disseminated.

    The Commission does not agree, however, that reporting the value of

    creditworthiness as part of the ``Additional Price Notation'' data

    field, as stated in the Proposing Release, will disclose the business

    transactions or market positions of any person. Creditworthiness is one

    of several factors that would comprise the amount set forth in the

    ``Additional Price Notation'' field. In the description of the

    ``Additional Price Notation'' data field in the Proposing Release, the

    Commission stated that the field should include any premiums associated

    with, among other things, margin, collateral and independent amounts.

    To clarify, the actual amounts of variation margin and initial margin

    would not be included in this field; rather, any premiums associated

    with the presence of collateral that are factored into the price of the

    publicly reportable swap transaction would be included. The Commission

    believes that an indication whether an uncleared swap is collateralized

    should be publicly disseminated to provide greater meaning to the price

    of the swap in lieu of a separate field for creditworthiness. The

    Commission is therefore requiring that the margin, collateral and

    independent amount terms be reported as a separate field entitled

    ``Indication of Collateralization.'' The ``Indication of

    Collateralization'' field is only required for uncleared swaps, as,

    unlike cleared swaps, uncleared swaps have collateral arrangements. The

    inclusion of the ``Indication of Collateralization'' data field in the

    final rule requires that reporting parties for uncleared swaps must

    provide the SDR with the appropriate information so that the SDR can

    publicly disseminate one of four descriptions of the terms of the swap

    relating to the collateral arrangement for such swap. The four

    descriptions to be publicly disseminated are as follows:

    (1) ``Uncollateralized''--An uncleared swap shall be described as

    ``Uncollateralized'' when there is no credit arrangement between the

    parties to the swap or when the agreement between the parties states

    that no collateral (neither initial margin nor variation margin) is to

    be posted at any time.

    (2) ``Partially Collateralized''--An uncleared swap shall be

    described as ``Partially Collateralized'' when the agreement between

    the parties states that both parties will regularly post variation

    margin. The word ``regularly'' is used to exclude situations where the

    parties may set a threshold amount(s) that is so high that one or both

    parties will rarely post variation margin, if at all.

    (3) ``One-way Collateralized''--An uncleared swap shall be

    described as ``One-way Collateralized'' when the agreement between the

    parties states that only one party to such swap agrees to post initial

    margin, regularly post variation margin or both with respect to the

    swap. The word ``regularly'' is used to exclude situations where the

    parties may set a threshold amount(s) that is so high that one or both

    parties will rarely post variation margin, if at all.

    (4) ``Fully Collateralized''--An uncleared swap shall be described

    as ``Fully Collateralized'' when the agreement between the parties

    states that initial margin must be posted and variation margin must

    regularly be posted by both parties. The word ``regularly'' is used to

    exclude situations where the parties may set a threshold amount(s) that

    is so high that one or both parties will rarely post variation margin,

    if at all.

    The Commission does not agree that the public dissemination of

    bespoke swaps will confuse the market or fail to enhance price

    discovery. The public dissemination of bespoke swaps provides the

    public with the full scope of publicly reportable swap transactions

    that are being transacted in an asset class, which will inform market

    participants and the public of market depth and the execution of swaps

    with similar underlying assets. In the Commission's opinion, the

    designation of such swaps as ``bespoke'' in the ``Indication of Other

    Price Affecting Term'' data field (and the ``Additional Price

    Notation'' and ``Indication of Collateralization'' data fields) will

    provide information that enhances price discovery. While the Commission

    agrees with the comment that condition flags may provide greater

    clarity to the market as to the pricing of a bespoke swap, such

    indications may also disclose the identities, business transactions

    and/or market positions of the parties. Further, the Commission

    believes that the ``Additional Price Notation,'' ``Indication of

    [[Page 1225]]

    Collateralization'' and the ``Indication of Other Price Affecting

    Term'' data fields will provide sufficient information to the market to

    enhance price discovery with respect to these types of publicly

    reportable swap transactions.

    The Commission is modifying or adding certain data fields in

    response to comments received.

    Additional Price Notation--The Commission believes that

    the Additional Price Notation field will not disclose the

    creditworthiness of the counterparty as one commenter suggested. This

    data field provides a single number that accounts for the combined

    premiums associated with the publicly reportable swap transaction. The

    actual content of what constitutes this number will not be publicly

    disseminated. As discussed earlier, the references to margin,

    collateral and independent amount are being replaced in the description

    of this field with the term ``presence of collateral.'' Additionally,

    the description of this data field in the final rule makes clear that

    ``counterparty credit risk'' would be included as part of the number.

    With respect to the comment that the Additional Price Notation field

    will have little application to commodity transactions, the final rule

    provides that to the extent that this data field does not apply, the

    data field would not need to be publicly disseminated.

    The Commission does not anticipate that computing this field should

    be difficult, even for transactions in the ``other commodity'' asset

    class. The price of the swap should be known and the premium or spread

    is generally negotiated outside of the actual price of the swap. The

    Commission believes that the comment that a standardized approach for

    calculating the amount in the Additional Price Notation field would be

    challenging to achieve has merit. The Commission acknowledges that this

    field may be calculated slightly differently in different asset

    classes, by different swap counterparties, and even within the same

    asset class. Notwithstanding these potential discrepancies in the

    calculation of the ``Additional Price Notation'' data field, the

    Commission believes that breaking out the premiums for a swap would

    enhance price discovery and allow for better comparison for all swaps

    within an asset class--both platform executed swaps and off-facility

    swaps.

    Tenor--In response to comments regarding whether tenor

    should be reported as month and year, the Commission agrees with the

    commenter who stated that to not report the exact tenor of a swap would

    essentially mean not reporting a primary economic term of the swap. To

    not require the exact end date of swap would detract from the meaning

    of the price and therefore the Commission is requiring that the actual

    end date be required to be publicly disseminated for all swaps. The

    field that was called ``Tenor'' in the Proposing Release will be called

    ``End Date'' and the time between the ``Effective or Start Date'' and

    the ``End Date'' will provide market participants and the public with

    the exact tenor of the swap. Similarly, the ``Option Expiration Date''

    field should be reported as an actual date and not the month and year,

    as described in the Proposing Release.

    Execution Timestamp--While the Commission understands that

    the reporting of the timestamp to the second is a shift from the

    standard practice in the previous OTC derivatives market, the

    Commission does not believe that this historical practice is persuasive

    on the point of whether swaps under the new regulatory regime

    established by the Dodd-Frank Act should receive execution timestamps

    to the second. A timestamp to the second is necessary for both audit

    trail and enforcement purposes, as well as to allow market participants

    and the public an opportunity to re-create a trading day. Different

    market participants and different types of execution may receive

    different time delays, so the timestamp will become critical in

    determining the order of execution of transactions within a particular

    market. The Commission will also use the timestamps to determine

    whether swaps are being reported by reporting parties, SEFs and DCMs

    ``as soon as technologically practicable'' and to compare the speed at

    which similar market participants report swap transaction and pricing

    data to an SDR for public dissemination. Additionally, the Commission

    can use the timestamp to determine how quickly SDRs are publicly

    disseminating the information that they receive for public

    dissemination. Further, SDRs will use the Execution Timestamp to

    measure the time delays for public dissemination to be applied to

    publicly reportable swap transactions, as described in Sec. 43.5 and

    appendix C to part 43.

    A commenter suggested that the benefit of moving the industry to

    UTC appears minimal when compared to the costs involved. The Commission

    believes that consistency across the global swaps market is important

    and requiring public dissemination in UTC will allow market

    participants and reporting parties to re-create the order of trades and

    will reduce the need for market participants to convert different times

    to understand the order of trades in a particular market.\410\ Further,

    the appendix A to part 43 combines the ``Execution Date'' field to be

    included in the ``Execution Timestamp'' field so that both a time and

    date will be publicly disseminated to assist market participants and

    the public with understanding the trading of publicly reportable swap

    transactions.

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

    \410\ The use of UTC with regard to part 43 only refers to the

    execution timestamps that are publicly disseminated; reporting

    parties, SEFs and DCMs can agree to report different timestamps to

    the SDR that can then convert the time to UTC for public

    dissemination.

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

    Notional or Principal Amount--The Commission agrees with

    the comment that the notional quantity should be reported and publicly

    disseminated in the units of the underlying quantity, as it would

    provide more relevant information to enhance price discovery. The

    Commission, however, does not believe that the Commission needs to

    provide guidelines on how to publicly disseminate the notional or

    principal amount. The Commission believes that the SDR should have the

    discretion on how to publicly disseminate the notional amounts for

    certain types of commodity transactions that are traded in units. The

    Commission does not agree with the comment that the notional amount

    should not be disseminated for non-standardized swaps, as such public

    dissemination will enhance price discovery and provide information on

    market depth. The final rules provide for the rounding of the notional

    or principal amount as well as caps on the public dissemination of

    notional or principal amounts.\411\ Accordingly, the data fields in

    appendix A to part 43 indicate that it is the ``Rounded Notional or

    Principal Amount'' that is to be publicly disseminated.

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

    \411\ See Sec. 43.4(g) and (h).

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

    Indication of Other Price Affecting Term--One commenter

    argued that the ``Indication of Other Price Affecting Term'' data field

    should not be reported and only price and volume information should be

    reported for bespoke ``reportable swap transactions.'' The Commission

    intends that this data field will merely serve as an indication that a

    swap is not standardized (i.e., bespoke). The Commission believes that

    such indication will provide market participants and the public with an

    opportunity to more easily discern the differences in prices of bespoke

    swaps with those swaps that are standardized (e.g., executed on a SEF

    or DCM and subject to the clearing mandate). An indication of other

    price affecting terms will allow market participants and the

    [[Page 1226]]

    public to look to other fields such as ``Indication of

    Collateralization,'' ``Additional Price Notation'' and ``Day Count

    Convention'' to better understand the price of the swap. The Commission

    has deleted the reference to common material price affecting terms to

    avoid confusion and has added a description under the example to

    indicate that the field should be utilized if there is a material price

    affecting term that is not otherwise publicly disseminated.

    Price-Forming Continuation Data--The Commission agrees

    that novations and partial novations should not be publicly reportable

    swap transactions, but only to the extent that such swaps do not have a

    material effect on the price of the swap. To the extent there is any

    price effect from the novation (e.g., payments associated with the

    novation, changes to material terms of the swap, etc.), such novations

    would be publicly reportable swap transactions and an indication of the

    type of price forming continuation data would need to be publicly

    disseminated pursuant to part 43. The final rule clarifies the types of

    transactions that may be included in the price forming continuation

    data field to match with the types of transactions in the definition of

    publicly reportable swap transaction.\412\

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

    \412\ See entry for ``price forming continuation data'' in Table

    A1 (``Data Fields and Suggested Form and Order for Real-Time Public

    Reporting of Swap Transaction and Pricing Data'') in appendix A to

    this part. See Real-Time NPRM supra note 6, at 76179. Such price-

    forming continuation data may include: terminations, assignments,

    novations, exchanges, transfers, amendments and conveyances of

    extinguishing of rights that change the price of the swap.

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

    Contract Type--In response to the comment that options and

    forwards should be deleted to the extent they relate to physical

    transactions, the Commission does not believe that any action is

    necessary regarding the data field. The extent to which certain

    products fall under the Commission's jurisdiction will be defined in

    another Commission rulemaking. To that end, the list is meant to be

    illustrative and to ensure that all publicly reportable swap

    transactions would be included to the extent that they are under the

    Commission's jurisdiction.

    In response to the comment that Table A2 only applies to embedded

    options, the Commission notes that Table A2 applies to options,

    swaptions and embedded options; the Commission has added clarifying

    language to the description.\413\

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

    \413\ The Commission notes that the title of Table A2 in the

    Proposing Release was ``Additional real-time public reporting data

    fields for options, swaptions and swaps with embedded options.''

    Real-Time NPRM supra note 6, at 76181.

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

    It is the Commission's intent to ensure harmonization between the

    data fields in appendix A to proposed part 43 and the data fields

    required to be reported to an SDR for regulatory purposes. In light of

    the changes to proposed Sec. 43.3 that require reporting to an SDR,

    which in turn must publicly disseminate the data fields described in

    appendix A to part 43, the Commission believes that reporting parties,

    SEFs and DCMs may report the data elements for real-time reporting and

    regulatory reporting in the same data stream. Accordingly, it is

    important that the data fields for both the real-time and regulatory

    reporting requirements work together. Further, certain changes to the

    final rules make the public dissemination of additional data fields

    important to provide market participants and the public with an

    understanding of the swap. For these reasons, the Commission is adding

    to appendix A the following data fields that were not included in the

    Proposing Release:

    Indication of End-User Exception--Given the other changes

    in the final rules regarding the time delays for public dissemination,

    such indication is necessary to provide market participants and the

    public with information as to why such swap received a time delay for

    public dissemination as compared to other swaps with substantially

    similar terms. Additionally, such information would be required to be

    reported pursuant to the regulatory reporting requirements described in

    proposed part 45, thus reducing the cost for reporting parties to

    provide such information.\414\

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

    \414\ See 75 FR 76574.

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

    Day Count Convention--The day count convention is a

    description of how interest accrues over time and is a material term

    that is necessary for pricing certain swaps. Common day count

    convention methods include the 30/360 method and the Actual method. The

    day count convention is necessary to be publicly disseminated so that

    the public can better understand the price and the terms for how to

    value the swap.

    Settlement Currency--The settlement currency is a

    necessary data field for foreign exchange transactions that physically

    settle. To the extent that such transactions are subject to the real-

    time reporting requirements of part 43, this field should be publicly

    disseminated to give meaning to the price of a publicly reportable swap

    transaction. The field would be required to be reported pursuant to the

    regulatory reporting requirements in proposed part 45, thus reducing

    the cost for reporting parties to provide such information.\415\

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

    \415\ Id.

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

    All other data fields in appendix A to part 43 that are not

    discussed above are adopted as proposed with certain clarifying or

    conforming changes and certain changes to ensure that the language in

    the description is not unduly prescriptive. Some of the conforming or

    clarifying changes include matching changes to definitions and section

    numbers, describing the examples with a parenthetical and clarifying

    certain names of fields (e.g., ``Notional or principal amount 1'' has

    been changed to ``Rounded notional or principal amount 1'' since only

    the rounded notional amount will be publicly disseminated, and changed

    the name of ``Start Date'' to ``Effective or Start Date'' for clarity).

    Additionally, the Commission has removed certain language from the

    descriptions of the data fields that might have been construed as

    prescriptive. For example, the final rule removed ``[s]uch letter

    convention may be reported as follows: D (daily), W (weekly), M

    (monthly), Y (yearly)'' from the payment frequency data fields to make

    clear that payment frequency may be publicly disseminated in a

    different manner as long as an SDR is consistent in the way that data

    fields are publicly disseminated. With respect to the ``Execution

    Venue'' data field, the Commission has made clear that the actual SEF

    or DCM name need not be reported. Further, the Commission has modified

    the ``Price Notation'' field to clarify that this field indicates the

    price (and not the premium), and the language relating to netting to a

    present value of zero at execution was removed since it might not be

    true in all cases.

    The Commission has also added clarification to the examples

    described for each data element. These examples are meant to provide

    guidance with respect to the public dissemination of swap transaction

    and pricing data.

    In response to commenters who recommended that the Commission

    harmonize the data fields with the SEC, the Commission notes that it

    has consulted with the SEC regarding the data fields for public

    dissemination. The Commission believes that the data fields described

    in appendix A to part 43 are sufficiently flexible to cover swaps in

    all asset classes. The Commission has determined that the data elements

    described in Tables A1 and A2 of appendix A to part 43 are necessary to

    enhance price discovery.

    [[Page 1227]]

    III. Effectiveness/Implementation and Interim Period

    In its Proposing Release the Commission solicited responses to

    specific questions regarding the implementation of real-time public

    reporting, including whether (i) different reporting parties should

    have different implementation timeframes; (ii) different types of

    execution should have different reporting phase in timeframes; (iii)

    different asset classes, markets, or contracts should have different

    timeframes; and (iv) public dissemination of block trades should be

    implemented according to a different schedule than non-block trades.

    The Commission received responsive comments from 47 market

    participants, including SDs, non-financial end-users, financial end-

    users, industry groups/associations, asset managers, trading platforms

    and data vendors.\416\ Commenters discussed the following issues

    relating to implementation: (1) Timing for real-time reporting vis-a-

    vis other rules; (2) a phase in approach based on liquidity/

    standardization/asset class; (3) harmonization with the SEC and foreign

    regulators; (4) implementation schedules; (5) a testing phase; (6)

    technology challenges; (7) comparison to TRACE phase in; (8) large

    notional swaps/customized swaps; (9) end-users should be phased in

    last; and (10) re-proposal and re-open comment period.

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

    \416\ The Commission received comments specifically addressing

    the implementation of part 43 and additionally received general

    implementation comments in response to the Public Roundtable

    Discussion on Dodd-Frank Implementation.

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

    Twenty-seven comments supported a phase in approach with regard to

    real-time reporting requirements for the rules set forth in the

    Proposing Release. Commenters' proposed approaches to phasing in the

    rules varied in timing and scope. One commenter further suggested that

    a phase in be adopted similar to that proposed in the SD/MSP

    Recordkeeping NPRM.\417\ Five commenters recommended that in

    implementing the part 43 rules the Commission follow the manner in

    which FINRA phased in TRACE; \418\ some supported a testing phase in

    period during which compliance would not be required.\419\ These

    commenters further suggested that such a phase in period would provide

    an opportunity to both address anticipated technology challenges and

    allow parties to become familiar with the reporting process. Other

    comments advised the Commission to subject more liquid/standardized

    contracts to public real-time reporting first and phase in less liquid

    contracts later.\420\ Still others recommended beginning with reporting

    of more advanced asset classes with established infrastructure for

    reporting (e.g., credit) or by entity/market participants.\421\ In

    addition, commenters stated that real-time reporting for large notional

    swaps should be phased in.\422\

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

    \417\ See CL-ISDA/SIFMA.

    \418\ See CL-ISDA/SIFMA; CL-DTCC; CL-GFXD; CL-WMBAA; and CL-

    Cleary.

    \419\ See CL-Barclays; CL-Committee on Capital Markets

    Regulation; CL-DTCC; CL-Cleary; and CL-Working Group of Commercial

    Energy Firms.

    \420\ See CL-UBS; CL-Barclays; and CL-DTCC.

    \421\ See CL-Barclays; CL-AIMA; and CL-MarkitSERV.

    \422\ See CL-JPM; CL-MS.

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

    Twenty-six commenters contended that the Commission must first

    collect and analyze data per the Commission's data recordkeeping and

    reporting and SDR registration rules, before adopting final rules

    addressing certain aspects of the block trade rules (e.g., calculations

    and time delay).\423\ Consistent with this approach, four commenters

    asserted that the entire rulemaking should be re-proposed after the

    Commission has had the opportunity to review and analyze the data

    collected by SDRs. One commenter requested that the Commission wait

    until it publishes the standardized computer-readable algorithmic study

    before developing real-time reporting rules.\424\ One commenter urged

    the Commission to re-propose this rule, and all other rules

    establishing the new framework for swaps regulation, in the order in

    which they will be implemented--preferably starting with data gathering

    in order to capture most effectively the appropriate products and

    market participants. This commenter recommended a minimum sixty-day

    comment period for each of the re-proposed rules. While this process

    would delay implementation by some months, the commenter believed that

    the desire for an accelerated and/or premature regulatory certainty

    should not outweigh the need for comprehensive consideration of the

    market impact and potential market disruptions prior to finalizing the

    regulatory requirements.\425\

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

    \423\ Commenters include: Barclays; GS; UBS; Cleary; Freddie

    Mac; FHL Banks; MFA; GFXD; ISDA/SIFMA; Better Markets; ABC/CIEBA;

    SIFMA AMG; WMBAA; Coalition for Derivatives End-Users; FIA/SIFMA/

    ISDA/FSR; AII; Vanguard; MarkitSERV; JPM; ATA; MFA; WMBAA; Vanguard;

    MS; and SIFMA AMG.

    \424\ See CL-Cleary.

    \425\ See CL-ABA. As discussed throughout this Adopting Release,

    the Commission has determined not to adopt certain rules relating to

    block trades and other off-facility swaps in the ``other commodity''

    asset class in this Adopting Release.

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

    Several commenters stated that the Commission should adopt an

    implementation timeline similar to those of other federal regulators,

    including the SEC.\426\ One commenter observed that inconsistencies

    between the Commissions' proposals would, if adopted, significantly

    complicate implementation.\427\ Two additional commenters recommended

    that the Commissions harmonize their phase in approaches.\428\

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

    \426\ See CL-MFA; CL-UBS; CL-Reval; and Meeting with Markit

    (Jan. 13, 2011).

    \427\ See CL-Cleary.

    \428\ See CL-Commodity Markets Council; and CL-MarkitSERV.

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

    The Commission received comments from several commenters that

    recommended specific implementation schedules for the Commission's

    consideration.\429\

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

    \429\ See CL-DTCC; CL-ABC-CIEBA; and CL-Working Group of

    Commercial Energy Firms.

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

    One of these comments supported re-proposing the rule after data

    are collected.\430\ As discussed throughout this Adopting Release, the

    Commission has determined not to adopt certain aspects of the block

    trade rules pending further collection and analysis of data.

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

    \430\ See CL-ABC/CIEBA.

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

    One commenter stated that the Commission's implementation period

    and process should be broadly consistent with the proposed European

    implementation; in its view such consistency would foster consistency

    across regions and minimize regulatory arbitrage.\431\

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

    \431\ See CL-MarkitSERV.

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

    The Commission also received several comments asserting that end-

    user swap data reporting should be delayed. For example, one of these

    commenters commented that non-bank SDs and end-users should be able to

    establish information technology systems related to business process

    for approximately one year before reporting is required.\432\ Another

    commenter stated that end-users should not begin reporting until an SDR

    has been registered and the systems between the SDR and end-user can be

    set up and tested.\433\ Other comments contended that end-users should

    be phased in last.\434\

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

    \432\ See CL-Working Group of Commercial Energy Firms.

    \433\ See CL-Dominion.

    \434\ See CL-Dominion; CL-DTCC; and CL-Working Group of

    Commercial Energy Firms.

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

    A number of other commenters responded, directly or indirectly, to

    the Commission's decision to reopen the comment periods for all Dodd-

    Frank Act rulemakings and specific request for comment on the order in

    which the Commission should consider final rulemakings under the Dodd-

    Frank

    [[Page 1228]]

    Act.\435\ Six commenters challenged the sequencing and timing of the

    Proposing Release in relation to the publication of the final entity

    and/or product definitions rulemakings published after the Proposing

    Release. These commenters contended that the Commission's failure to

    sequence the proposals deprived them of the opportunity for meaningful,

    informed comment on the Proposing Release; they suggested that the

    Commission extend the comment periods on all rulemakings.

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

    \435\ See CL-ABA; CL-ABC/CIEBA; CL-COPE; CL-Citadel; CL-DC

    Energy; CL-BP; CL-Alice; CL-FHLBanks; CL-Cleary; CL-GFXD; CL-NFPEEU;

    CL-Working Group of Commercial Energy Firms; CL-FIA/FSR/IIB/IRI/

    ISDA/SIFMA/Chamber; and Meeting with Citi, MS and JPM (May 17,

    2011).

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

    Consistent with section 754 of the Dodd-Frank Act, part 43 of the

    Commission's Regulation will be effective on March 9, 2012 (``Effective

    Date''). In that regard, however, the Commission wishes to emphasize

    that implementation or compliance dates for various regulatory

    requirements in part 43 are contingent upon the adoption and effective

    dates of other, related, regulatory provisions and definitions. In

    consideration of these contingencies and in response to commenters, the

    Commission is adopting a three-phase schedule for compliance with part

    43, along with several new procedures.

    Compliance Date 1

    On the first compliance date (``Compliance Date 1''), all SEFs,

    DCMs, SDs and MSPs will be required to comply with all part 43

    requirements with respect to publicly reportable swap transactions in

    the interest rate and credit asset classes, including reporting such

    transactions to an SDR pursuant to the rules of part 43. On Compliance

    Date 1, all publicly reportable swap transactions in the interest rate

    and credit asset classes that are either (1) executed on or pursuant to

    the rules of a SEF or DCM, or (2) ``off-facility swaps'' in which at

    least one party to the swap is an SD or MSP (collectively, ``Compliance

    Date 1 transactions''), must be reported to an SDR for public

    dissemination, pursuant to part 43. In addition, on Compliance Date 1,

    all SDRs for the interest rate and credit asset classes will be

    required to accept and publicly disseminate real-time swap transaction

    and pricing data for the Compliance Date 1 transactions pursuant to

    part 43 and appendix A to part 43. With respect to swaps in the

    interest rate and credit asset classes that are executed on or pursuant

    to the rules of a SEF or DCM, Compliance Date 1 will be the date that

    is the later of (1) July 16, 2012, or (2) 60 calendar days after the

    publication in the Federal Register of Commission regulations defining

    the term ``swap'' pursuant to sections 721 and 712(d)(1) of the Dodd-

    Frank Act. With respect to swaps in the interest rate and credit asset

    classes that are not executed on or pursuant to the rules of a SEF or

    DCM and that have at least one party that is an SD or MSP, Compliance

    Date 1 will be the date that is the later of (1) July 16, 2012 of this

    Adopting Release in the Federal Register, or (2) 60 calendar days after

    the publication in the Federal Register of the last Commission

    regulations defining the terms ``swap,'' ``swap dealer'' and ``major

    swap participant'' pursuant to sections 721 and 712(d)(1) of the Dodd-

    Frank Act.

    Compliance Date 2

    On the second compliance date (``Compliance Date 2''), all SEFs,

    DCMs, SDs and MSPs will be required to comply with all part 43

    requirements with respect to publicly reportable swap transactions in

    the foreign exchange, equity and ``other commodity'' asset classes,

    including reporting such transactions to an SDR pursuant to the rules

    of part 43. On Compliance Date 2, all publicly reportable swap

    transactions in the foreign exchange, equity and ``other commodity''

    asset classes that are either (1) executed on or pursuant to the rules

    of a SEF or DCM, or (2) off-facility swaps in which at least one party

    to the swap is an SD or MSP (collectively, ``Compliance Date 2

    transactions''), must be reported to an SDR for public dissemination,

    pursuant to part 43. Consequently, on Compliance Date 2, all SDRs for

    the interest rate, credit, equity, foreign exchange and ``other

    commodity'' asset classes will be required to accept and publicly

    disseminate the Compliance Date 2 transactions pursuant to part 43.

    Compliance Date 2 shall begin 90 calendar days after the commencement

    of Compliance Date 1.

    Compliance Date 3

    On the third compliance date (``Compliance Date 3'') all publicly

    reportable swap transactions in all asset classes will be required to

    comply with all part 43 requirements. Compliance Date 3 will require,

    among other part 43 requirements, the reporting and public

    dissemination of all publicly reportable swap transactions in all asset

    classes by all SEFs, DCMs and reporting parties, including reporting

    parties that are non-SDs or non-MSPs. Compliance Date 3 shall begin 90

    calendar days after the commencement of Compliance Date 2.

    If no SDR for a particular asset class is registered or

    provisionally registered at the commencement of one or more compliance

    dates, compliance for swaps in such asset class shall not be required

    until registration or provisional registration of an SDR occurs in the

    asset class. Reporting parties, SEFs and DCMs may share and publicly

    disseminate swap transaction and pricing data without restriction until

    an SDR is registered or provisionally registered in an asset class.

    Further, the Commission notes that the compliance dates relating to the

    implementation of part 43 are not contingent on the publication of

    Commission regulations implementing Section 733 of the Dodd Frank Act

    relating to registration and compliance with core principles for SEFs.

    In addition to the compliance dates, the Commission is adopting a

    number of phasing procedures in response to commenters' concerns. As

    discussed above, the Commission expects to re-propose for comment a

    rulemaking to address the appropriate minimum block size criteria and

    determination. Consequently, until such time as an appropriate minimum

    block size is established for particular swaps, the Commission is

    providing initial time delays for all swaps subject to the reporting

    requirement in Sec. 43.5. Further, the Commission will be phasing in

    the time delays over time so that market participants can adjust

    hedging strategies and secure the technology or make arrangements

    necessary to comply with part 43. The Commission has provided longer

    time delays for the ``other commodity'' asset class, since such parties

    using such swaps tend to follow more complex hedging strategies to lay

    off risk. In response to comments regarding end-users, the Commission

    is providing longer time delays for public dissemination of swaps in

    which a non-SD/non-MSP is the reporting party since such parties may

    not have the technology available to report swap transaction and

    pricing data. Additionally, the Commission expects to address in the

    block trade re-proposal the reporting of publicly reportable swap

    transactions in the ``other commodity'' asset class that are not

    executed on or pursuant to a SEF or DCM and that do not reference one

    of the contracts listed in appendix B to part 43 or a swap that is

    economically related to such contracts. Until rules regarding such

    ``other commodity'' swaps are adopted, such swaps will not be subject

    to the real-time reporting requirements of part 43.

    [[Page 1229]]

    IV. Paperwork Reduction Act

    The Paperwork Reduction Act (``PRA'') imposes certain requirements

    on federal agencies in connection with their conducting or sponsoring

    any collection of information as defined by the PRA.\436\ This final

    rulemaking contains information collection requirements. An agency may

    not conduct or sponsor, and a person is not required to respond to, a

    collection of information unless it displays a currently valid control

    number issued by the Office of Management and Budget (``OMB''). The

    Commission submitted its proposing release and supporting documentation

    to OMB for review, and requested that OMB approve, and assign a new

    control number for, the collections of information covered by the

    Proposing Release, both in an information collection request associated

    with this rulemaking and the part 49 rulemaking that would establish

    requirements for SDRs. The Commission invited the public and other

    federal agencies to comment on any aspect of the information collection

    requirements discussed in the Proposing Release.

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

    \436\ 44 U.S.C. 3501 et seq.

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

    The Commission received comments from two interested parties on its

    burden estimates or on other aspects of the information collection

    requirements contained in its Proposing Release. One commenter asserted

    that the actual burden imposed on end-users to report swap data was

    significantly higher than the Proposing Release's estimate, and

    suggested that the actual burden would be several orders of magnitude

    higher than the Commission estimated.\437\ This same commenter said

    that the Commission failed to estimate the financial impact that would

    be imposed on the swap industry because of this rule, particularly

    those costs associated with end-users.\438\ Another commenter stated

    that when promulgating rules and estimating costs, the Commission

    should take into consideration ``issues of scale in participants and

    volumes.'' \439\

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

    \437\ See CL-Dominion.

    \438\ Id.; The Commission notes that its estimates regarding the

    costs related to ``collections of information'' required by the

    Proposing Release can be found in the supporting statement and form

    83-I posted on the Office of Management and Budget's Web site, which

    can be found at http://www.reginfo.gov/public/do/PRAMain. The

    revised supporting statement and form 83-I can be found at the same

    Web site.

    \439\ See CL-GXFD.

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

    OMB issued a notice of action providing that the Commission should

    examine the comments received and submit a revised supporting

    statement, including ``a description of how the agency has responded to

    any public comment on the [information collection request], including

    comments on maximizing the practical utility of the collection and

    minimizing the burden.'' \440\

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

    \440\ CL-OMB Notice of Action (received 04/01/11).

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

    The title for the collection of information under part 43 is

    ``Real-Time Public Reporting of Swap Transaction Data.'' OMB has

    assigned OMB control number 3038-0070 to this collection of

    information, but OMB is withholding its approval of this collection of

    information pending the submission of the revised supporting statement.

    The Commission has revised some of its assumptions and estimates as a

    result of changes in the requirements imposed by part 43 and after

    considering the comments received. The revised estimates are being

    submitted to OMB and can be found in the updated form 83-I and

    supporting statement, which can be found at http://www.reginfo.gov/public/do/PRAMain.

    The Proposing Release described the new collections of information

    in terms of four broad categories of requirements: Reporting, public

    dissemination, recordkeeping and determining appropriate minimum block

    size. As further described below, the Commission revised some of its

    estimates regarding the reporting, public dissemination and

    recordkeeping estimates from the Proposing Release. The Commission

    notes that part 43 does not require an SDR to determine an appropriate

    minimum block size.\441\ Additionally, part 43 no longer permits a SEF,

    DCM or reporting party to report swap transaction and pricing data to a

    third-party service provider for purposes of satisfying the public

    dissemination obligations under part 43 (i.e., all real-time swap data

    must be reported to an SDR for public dissemination).

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

    \441\ Rules related to block trades and large notional off-

    facility swaps will be addressed in a separate rulemaking.

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

    A. Burden Estimates for Reporting Requirements

    The Commission estimated in the Proposing Release that annual

    hourly burdens for SEFs and DCMs to report swap transaction and pricing

    data to a real-time disseminator would be approximately 2,080 hours per

    SEF and DCM. In addition, the Commission anticipated there would be 40

    SEFs and 17 DCMs who may be required to report pursuant to part 43's

    obligations.\442\

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

    \442\ At the time of the Proposing Release there were 17 DCMs;

    there are now 18 DCMs.

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

    For those swaps executed off-facility, the Proposing Release

    estimated the reporting burdens associated with SDs and MSPs to be

    approximately 2,080 annual burden hours. In the Proposing Release, the

    Commission took ``a conservative approach'' to calculating the burden

    hours for this information collection by estimating that as many as 250

    SDs and 50 MSPs would register.\443\ Since publication of the Proposing

    Release in November 2010, the Commission has had ample opportunity to

    meet with industry participants and trade groups, to discuss

    extensively the universe of potential registrants with the National

    Futures Association (``NFA''), and to review public market information

    about dealers active in the market and certain trade groups. Over time,

    and as the Commission has gathered more information on the swaps market

    and its participants, the estimated number of SDs and MSPs has

    decreased. In its FY 2012 budget drafted in February 2011, the

    Commission estimated that 140 SDs might register with the

    Commission.\444\ After recently receiving additional specific

    information from NFA on the regulatory program it is developing for SDs

    and MSPs,\445\ however, the Commission believes that approximately 125

    Swaps Entities, including only a handful of MSPs, will register.

    Therefore, the information collection's proposed total burden hour

    estimate of 624,000 burden hours for SDs and MSPs will decrease to

    260,000 burden hours, assuming there are 125 respondents and no

    adjustments to the response times for the registration forms.

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

    \443\ 75 FR 76169.

    \444\ CFTC, President's Budget and Performance Plan Fiscal Year

    2012 (Feb. 2011), p. 13-14, available at http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/cftcbudget2012.pdf. The

    estimated 140 SDs includes ``[a]pproximately 80 global and regional

    banks currently known to offer swaps in the United States;''

    ``[a]pproximately 40 non-bank swap dealers currently offering

    commodity and other swaps;'' and ``[a]pproximately 20 new potential

    market makers that wish to become swap dealers.'' Id.

    \445\ Letter from Thomas W. Sexton, Senior Vice President and

    General Counsel, NFA to Gary Barnett, Director, Division of Swap

    Dealer and Intermediary Oversight, CFTC (Oct. 20, 2011) (NFA Cost

    Estimates Letter).

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

    When an off-facility swap is executed and neither an SD nor MSP is

    a counterparty (e.g., an end-user to end-user swap), the reporting

    responsibility would fall on one of the end-users to the swap.\446\ For

    that reason, the Commission estimated that the total number of swap

    end-users that would be required to report their swap

    [[Page 1230]]

    transaction and pricing data would be 1,500 entities or persons.\447\

    The Commission estimated that swap end-users (i.e., non-SD/non-MSPs)

    would expend four (4) annual burden hours per reporting party or

    person, for a total of 6,000 aggregate annual burden hours.\448\

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

    \446\ Part 43 no longer uses the term end-user, but uses the

    term ``non-SD/non-MSP'' to represent a reporting party who is not an

    SD or MSP.

    \447\ In the Proposing Release, the Commission requested comment

    on the number of swap end-users that would be required to report

    their swap transaction and pricing data pursuant to proposed Section

    43.3. The Commission estimated that there would be a total of 30,000

    swap market participants and that 1,500 of those participants would

    engage in end-user-to-end-user swap transactions (5% of 30,000)

    requiring at least one of those participants to report such swap

    transaction and pricing data.

    \448\ This estimate included the expectation that end users who

    participate in end-user-to-end-user swaps will contract with other

    entities to report the swap transaction and pricing data to an SDR

    or third-party service provider.

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

    In the Proposing Release, the Commission assumed that end-users who

    would be required to report pursuant to part 43 would contract with a

    third party to satisfy their obligations. However, as one commenter

    indicated, some end-users may choose not to contract with a third

    party, but will build infrastructure and hire personnel for purposes of

    reporting swap transaction and pricing data to an SDR.\449\

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

    \449\ See CL-Dominion.

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

    After consideration of the comments received and further

    discussions with the Commission's technology experts, the Commission is

    retaining its estimates related to SEFs, DCMs, SDs and MSPs reporting

    burdens, but is revising its estimates as they relate to non-SDs/non-

    MSPs reporting burdens. The Commission cannot estimate with precision

    the number of non-SDs/non-MSPs that will be obligated to report under

    this rule, how many will conduct their own reporting or contract with a

    third party, or how many transactions they will have to report.

    Moreover, there will be significant deviations in reporting burdens on

    a reporting party-by-reporting party basis, based upon the type and

    transactional activity of each individual reporting party.

    Consequently, of the estimated 30,000 non-SDs/non-MSPs who will

    transact in the swaps markets, the Commission is estimating that only

    1,000 non-SDs/non-MSPs will be required to report in a year.\450\ Of

    those 1,000 non-SDs/non-MSPs, the Commission continues to believe a

    majority, estimated now at 75%, will contract with third parties to

    satisfy their reporting obligations. For those non-SDs/non-MSPs who are

    required to report swap transaction and pricing data to an SDR and

    contract with a third party, the Commission estimates that such non-

    SDs/non-MSPs will expend 22 annual burden hours per reporting party or

    entity for reporting errors and omissions. Thus, the Commission

    estimates that 750 non-SDs/non-MSPs that will contract with a third

    party will expend a total of 16,500 aggregate annual burden hours

    complying with the reporting requirements.\451\

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

    \450\ This is a change from the Proposing Release which

    estimated that 1,500 end-users (5% of 30,000) would be required to

    report swap transaction and pricing data to an SDR or third-party

    service provider.

    \451\ Non-SDs/non-MSPs reporting parties that contract with a

    third party to report swap transaction and pricing data to an SDR

    may still be required to submit corrected data to a SEF, DCM or SDR

    when they become aware of an error or omission.

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

    Conversely, for the 250 non-SDs/non-MSPs that the Commission

    estimates will not contract with a third party, the Commission

    estimates such non-SDs/non-MSPs will expend 676 annual burden hours per

    reporting party or entity, for a total of 169,000 aggregate annual

    burden hours.

    B. Burden Estimates for Public Dissemination Requirements

    Proposed Sec. 43.3 required an SDR to publish, through an

    electronic medium, swap transaction and pricing data received from

    reporting parties as soon as technologically practicable, unless such

    publicly reportable swap transaction is subject to a time delay.

    Moreover, SDRs would be required to receive and publicly disseminate

    real-time swap transaction and pricing data at all times, 24-hours a

    day. The Commission estimated that there would be approximately 15

    SDRs.\452\ In its Proposing Release, the Commission estimated that

    compliance with the public dissemination requirements would cause an

    SDR to expend 6,900 annual burden hours, resulting in estimated

    aggregate annual burden hours of 103,500 for all SDRs. The Commission

    received no comments on its proposed public dissemination estimates,

    and the Commission is not revising them.

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

    \452\ Because the Commission has not regulated the swap market,

    the Commission was unable to collect data relevant to the Proposing

    Release's estimates. For that reason, the Commission requested

    comment on these estimates.

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

    C. Burden Estimates for Recordkeeping Requirements

    Under proposed Sec. 43.3(i), SEFs and DCMs (an estimated 57

    entities or persons),\453\ SDRs (an estimated 15 entities or persons)

    and reporting parties would be required to retain all data relating to

    a reportable swap transaction for a period of not less than five years

    following the time at which such reportable swap transaction is

    publicly disseminated in real-time. With respect to SEFs, DCMs and

    real-time disseminators, the Commission estimated in the Proposing

    Release that the proposed recordkeeping requirement would be 250 annual

    burden hours per SEF, DCM and SDR. The Commission anticipated that

    1,500 swap end-users would be reporting parties for the purposes of

    this part of the Commission's regulations. Since the Commission

    anticipated that there would be lower levels of activity relating to

    the requirement for swap end-users, the Commission estimated that there

    would be two (2) annual burden hours per swap end-user.

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

    \453\ See supra note 442.

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

    Commenters on the substantive aspects of the proposed rulemaking

    argued that these recordkeeping requirements were duplicative of

    existing Commission regulations and provisions of other proposed

    rulemakings. In consequence, these recordkeeping requirements have been

    omitted from the final rulemaking, and thus the Commission will be

    withdrawing the burden estimates associated with them.

    The only remaining recordkeeping requirements retained from the

    Proposal Release are the timestamping requirements in Sec. 43.3(h).

    Specifically, timestamps will be required for all publicly reportable

    swap transactions and must be applied by SEFs, DCMs, SDRs, SDs and

    MSPs. Non-SDs/non-MSPs who are required to report will not be obligated

    to comply with the timestamping requirements. Accordingly, the

    Commission is revising downward the estimated burden associated with

    recordkeeping.

    For the estimated 57 SEFs and DCMs who must comply with the

    timestamping requirements with respect to receipt of certain swap

    transactions and transmission of all transactions, which the Commission

    expects will be conducted electronically, the Commission estimates 25

    annual burden hours per entity, which accounts for any system

    programming that may be required and periodic maintenance, for an

    aggregate of 1,425 annual burden hours. For the estimated 300 SDs and

    MSPs who must comply with the timestamping requirements only on

    transmission, which the Commission also expects to be conducted

    electronically, the Commission estimates that such entities will expend

    20 annual burden hours per entity, for an aggregate of 6,000 annual

    burden hours. Finally, for the estimated 15 SDRs who must comply with

    the

    [[Page 1231]]

    timestamping requirements on the receipt of transaction data as well as

    on its public dissemination, the Commission estimates that such

    entities will have 76 annual burden hours per entity, for an aggregate

    of 1140 annual burden hours.

    D. Cost Burden

    In addition to the hour burdens identified above, reporting

    parties, SEFs or DCMs where swaps are executed, and SDRs that must

    accept and ensure the public dissemination of real-time swap

    transaction and pricing data in their selected asset class will incur

    cost burdens in connection with reporting, public dissemination and

    recordkeeping obligations.\454\ The direct, quantifiable costs imposed

    on reporting parties, SEFs and DCMs will take the forms of (i) non-

    recurring expenditures in technology and personnel; and (ii) recurring

    expenses associated with systems maintenance, support, and compliance.

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

    \454\ SDRs may pass on costs of public dissemination through

    equitable and non-discriminatory fees to the real-time reporting

    market participants. See Sec. 43.3(i).

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

    Although the Commission is retaining the cost burden estimates

    described in connection with the Proposing Release in substantial part,

    after reviewing comments received and consulting with market

    participants, the Commission has revised some of these estimates.\455\

    Specifically, the Commission has revised its wage rate calculation from

    the wage rate used to calculate cost burdens in the Proposing

    Release.\456\ Additionally, the Commission has revised its cost burden

    estimates with respect to non-SD/non-MSP reporting parties. With

    respect to the cost burden estimates related to such non-SD/non-MSP

    reporting parties, the Commission has assumed a non-financial end-user

    lacking the technical capability and other infrastructure to comply

    with the part 43 requirements as the reference point for its cost

    burden estimates--in other words, a new market entrant with no prior

    swaps market participation or infrastructure. Further, the Commission

    has revised its estimates with respect to recordkeeping requirements,

    since part 43 now only requires recordkeeping with respect to

    timestamps. SDs, MSPs, non-SDs/non-MSPs, SEFs, DCMs and SDRs will incur

    initial and recurring costs, including capital and start-up costs

    related to reporting and public dissemination of swap transaction and

    pricing data pursuant to part 43. The Commission did not receive

    comments regarding the cost burden estimates for initial non-recurring

    costs for reporting with respect to SDs, MSPs, SEFs, DCMs and SDRs. The

    Commission is therefore retaining its estimates that the initial non-

    recurring costs for each SD, MSP, SD, SEF and DCM to be $300,000;

    however, the Commission has estimated that, annualized over a useful

    life of 6 years, and accounting for the total operational cost per year

    associated with these initial non-recurring costs, the annual total

    cost of these initial non-recurring costs will be $200,000.\457\

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

    \455\ As the Commission noted in the Proposing Release, the

    supporting statement submitted in connection with the proposal may

    be obtained by visiting RegInfor.gov. See Real-Time NPRM supra note

    6, at 76170.

    \456\ In so doing, the Commission at times has utilized wage

    rate estimates based on salary information for the securities

    industry compiled by the Securities Industry and Financial Markets

    Association (``SIFMA''). These wage estimates are derived from an

    industry-wide survey of participants and thus reflect an average

    across entities; the Commission notes that the actual costs for any

    individual company or sector may vary from the average.

    The Commission estimated the dollar costs of hourly burdens for

    each type of professional using the following calculations:

    [(2009 salary + bonus) * (salary growth per professional type,

    2009-2010)] = Estimated 2010 total annual compensation.] The most

    recent data provided by the SIFMA report describe the 2009 total

    compensation (salary + bonus) by professional type, the growth in

    base salary from 2009 to 2010 for each professional type, and the

    2010 base salary for each professional type; thus, the Commission

    estimated the 2010 total compensation for each professional type,

    but, in the absence of similarly granular data on salary growth or

    compensation from 2010 to 2011 and beyond, did not estimate dollar

    costs beyond 2010.

    [(Estimated 2010 total annual compensation)/(1,800 annual work

    hours)] = Hourly wage per professional type.]

    [Hourly wage) * (Adjustment factor for overhead and other

    benefits, which the Commission has estimated to be 1.3)] = Adjusted

    hourly wage per professional type.]

    [(Adjusted hourly wage) * (Estimated hour burden for

    compliance)] = Dollar cost of compliance for each hour burden

    estimate per professional type.]

    The sum of each of these calculations for all professional types

    involved in compliance with a given element of part 43 represents

    the total cost for each reporting party, SD/MSP, SEF, DCM or SDR, as

    applicable to that element of part 43.

    \457\ The capital and start-up costs for part 43's reporting

    requirements for high activity respondents is estimated as 5% of the

    entity's estimated average total capital and start-up cost of $6

    million.

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

    With respect to non-SDs/non-MSPs, the Commission estimates that the

    initial non-recurring costs for its reference point, a non-financial

    end-user that does not contract with a third party to report swap data

    (``non-financial end-user''), will likely consist of (i) developing an

    internal Order Management System (``OMS'') capable of capturing all

    relevant swap data in real-time; (ii) establishing connectivity with an

    SDR that accepts data; (iii) developing written policies and procedures

    to ensure compliance with part 43; and (iv) compliance with error

    correction procedures. Based on comments received and meetings with

    market participants, the Commission estimates that many non-financial

    end-users will likely engage in swap transactions in only one asset

    class.\458\ Accordingly, for purposes of estimating relevant cost

    burdens, the Commission estimates that a non-financial end-user will

    establish connectivity with one SDR.\459\ The Commission estimates that

    the total initial non-recurring costs to each non-financial end-user to

    be $56,369.\460\ Further, if non-SDs/non-MSPs utilize a third party to

    assist in reporting real-time swap transaction and pricing data to an

    SDR, the Commission estimates the initial non-recurring costs per non-

    SD/non-MSP to be $2,063.

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

    \458\ See, e.g., CL-NFPEEU.

    \459\ Depending on the number of swap asset classes in which a

    reporting party transacts (or that a SEF or DCM lists), and the

    number of SDRs that accept the resulting swap transaction and

    pricing data in such asset class, multiple connections to different

    SDRs may be necessary or desirable. As the regulatory structure

    develops and the swap markets evolve, the average number of SDR

    connections established and maintained by each reporting party,

    registered SEF and DCM may be different and fluid.

    \460\ The aggregate estimate represents the sum total of the

    following initial non-recurring costs: [$26,689 for 355 personnel

    hours to develop an internal order management system] + [$12,824 for

    172 burden hours to establish connectivity with an SDR] + [$14,793

    for 180 burden hours to develop written policies and procedures to

    comply with reporting requirements of part 43] + [$2,063 for 26

    burden hours to establish a program for reporting errors and

    omissions] = $56,369.

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

    The recurring cost burden estimates with respect to reporting and

    public dissemination of real-time swap transaction and pricing data

    have been revised from the estimates provided in connection with the

    Proposing Release, with respect to SDRs, SDs, MSPs, SEFs, DCMs and non-

    SDs/non-MSPs. The revisions to the cost burden estimate for recurring

    costs associated with reporting and public dissemination for SDRs have

    been adjusted to take into account the changes to the wage rate

    calculation. Accordingly, the Commission estimates the aggregate annual

    recurring costs for reporting and public dissemination for SDRs to be

    $23,255,210.\461\

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

    \461\ This estimate is the aggregate annual cost burden for 15

    SDRs, including the costs for burden hours, operational costs and

    annualized capital and start-up costs.

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

    The Commission has also revised its cost burden estimate for

    recurring costs for SEFs, DCMs, SDs and MSPs with respect to reporting

    and public dissemination. These estimates have been revised to take

    into account changes in the estimates for the number of entities, as

    well as changes to the wage rate calculation. Accordingly, the

    [[Page 1232]]

    Commission estimates the aggregate annual recurring costs for reporting

    and public dissemination for SEFs to be $17,245,242.\462\ Additionally,

    the Commission estimates the aggregate annual recurring costs for

    reporting and public dissemination for DCMs to be $7,760,359.\463\

    Further, the Commission estimates the aggregate annual recurring costs

    for reporting and public dissemination for SDs/MSPs to be

    $28,891,383.\464\

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

    \462\ This estimate is the aggregate annual cost burden for 40

    SEFs, including $100,000 per DCM to maintain connectivity to an SDR,

    costs for burden hours, operational costs and annualized capital and

    start-up costs.

    \463\ This estimate is the aggregate annual cost burden for 18

    DCMs, including $100,000 per DCM to maintain connectivity to an SDR,

    costs for burden hours, operational costs and annualized capital and

    start-up costs. The number of DCMs was changed from 17 to 18 to

    reflect the designation of an additional contract market since the

    publication of the NPRM in the Federal Register. As of December 13,

    2011. See http://sirt.cftc.gov/SIRT/SIRT.aspx?Topic=TradingOrganizations&implicit=true&type=DCM&CustomColumnDisplay=TTTTTTTT.

    \464\ This estimate is the aggregate annual cost burden for 125

    SDs/MSPs, including $100,000 per SD/MSP to maintain connectivity to

    an SDR, costs for burden hours, operational costs and annualized

    capital and start-up costs.

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

    With respect to non-SDs/non-MSPs, the Commission estimates that the

    recurring cost burdens for a non-financial end-user will likely consist

    of (i) capturing swap transaction and pricing data in a manner

    sufficient to comply with part 43; (ii) maintaining connectivity to an

    SDR; (iii) maintaining compliance and operational support programs; and

    (iv) reporting of errors and omissions. The Commission estimates the

    aggregate annual recurring costs for reporting and public dissemination

    for a non-financial end-user to be $45,159,000.\465\ Further, if non-

    SDs/non-MSPs utilize a third party to assist in reporting real-time

    swap transaction and pricing data to an SDR, the Commission estimates

    the aggregate annual recurring costs for reporting and public

    dissemination for such non-SD/non-MSP reporting parties to be

    $2,056,500.\466\

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

    \465\ The cost burden estimate represents the aggregate

    recurring costs relating to reporting and public dissemination for

    250 non-SDs/non-MSPs that do not utilize third parties at a total

    estimated cost of $180,636 per non-SD/non-MSP. The estimated cost

    per non-SD/non-MSP represents the sum total of [$27,943 for 436

    burden hours for capturing swap transaction and pricing data] +

    [$13,747 for 218 burden hours for maintenance of compliance and

    operational support programs] + [$1,366 for 22 burden hours to

    report errors and omissions] + [$100,000 to maintain connectivity to

    an SDR] + [$28,185 for operational costs] + [$9,395 for annualized

    capital and start up costs].

    \466\ This cost burden estimate represents the aggregate

    recurring costs relating for reporting and public dissemination

    requirements for 750 non-SDs/non-MSPs that utilize a third party for

    reporting requirements pursuant to part 43. The Commission

    recognizes that these costs may vary based on the level of swap

    activity by a non-SD/non-MSP.

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

    In addition to the costs burdens associated with reporting and

    public dissemination, part 43 imposes costs on SDRs, SDs, MSPs, SEFs

    and DCMs with respect to recordkeeping.\467\ These estimated cost

    burdens have been adjusted downward from the estimates associated with

    the Proposing Release since the part 43 rules only require

    recordkeeping in connection with timestamps. The Commission estimates

    the total aggregate non-recurring and recurring costs for recordkeeping

    as follows:\468\ $93,855 for SDRs; $328,000 for SDs/MSPs; $157,440 for

    SEFs; and $70,848 for DCMs.

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

    \467\ Non-SDs/non-MSPs do not have any recordkeeping obligations

    pursuant to part 43.

    \468\ The Commission estimates 15 SDRs, 125 SDs/MSPs, 40 SEFs

    and 18 DCMs.

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

    Accordingly, the estimated aggregate cost burden for all market

    participants to comply with part 43 is $150,017,837.00.\469\

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

    \469\ $150,017,837.00 (total) = $23,349,065 (SDRs) + $54,219,383

    (SDs and MSPs) + $17,402,682. (SEFs) + $7,831,207. (DCMs) +

    $45,159,000 (RP Non-SD/non-MSP) + $2,056,500 (RP non-SD/non-MSP that

    contracts with a third party).

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

    For further information relating to the revised cost burden

    estimates, please refer to the updated form 83-I and supporting

    statement submitted to OMB, which can be found at http://www.reginfo.gov/public/do/PRAMain.

    V. Cost-Benefit Considerations

    A. Introduction

    The swaps markets, which have grown exponentially in recent years,

    are now an integral part of the nation's financial system. As the

    financial crisis of 2008 demonstrated, the absence of transparency in

    the swaps markets can pose systemic risk to this system.\470\ In part,

    the Dodd-Frank Act seeks to promote the financial stability of the

    United States by improving financial system accountability and

    transparency. More specifically, Title VII of the Dodd-Frank Act

    directs the Commission to promulgate regulations to increase swaps

    markets' transparency and thereby reduce the potential for counterparty

    and systemic risk.\471\

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

    \470\ As the U.S. Senate Committee on Banking, Housing, and

    Urban Affairs explained concerning the 2008 financial crisis:

    Information on prices and quantities [in ``over-the-counter,''

    or ``OTC,'' derivatives contracts] is opaque. This can lead to

    inefficient pricing and risk assessment for derivatives users and

    leave regulators ill-informed about risks building up throughout the

    financial system. Lack of transparency in the massive OTC market

    intensified systemic fears during the crisis about interrelated

    derivatives exposures from counterparty risk. These counterparty

    risk concerns played an important role in freezing up credit markets

    around the failures of Bear Stearns, AIG, and Lehman Brothers.

    S. Rep. No. 111-176, at 30 (2010). More specifically with

    respect to credit default swaps (``CDSs''), the Government

    Accountability Office found that ``comprehensive and consistent data

    on the overall market have not been readily available,'' that

    ``authoritative information about the actual size of the CDS market

    is generally not available,'' and that regulators currently are

    unable ``to monitor activities across the market.'' Government

    Accountability Office, Systemic Risk: Regulatory Oversight and

    Recent Initiatives to Address Risk Posed by Credit Default Swaps,

    GAO-09-397T (March 2009) at 2, 5, 27.

    \471\ See Congressional Research Service Report for Congress,

    The Dodd-Frank Wall Street Reform and Consumer Protection Act: Title

    VII, Derivatives, by Mark Jickling and Kathleen Ann Ruane (August

    30, 2010); Dep't of the Treasury, Financial Regulatory Reform: A New

    Foundation: Rebuilding Financial Supervision and Regulation 1 (June

    17, 2009) at 47-48.

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

    Transaction reporting is a fundamental component of the

    legislation's objective to reduce risk, increase transparency, and

    promote market integrity within the financial system generally, and the

    swaps market in particular. Title VII designates the Commission to

    oversee the swaps markets and develop appropriate regulations.

    Specifically, section 727 of the Dodd-Frank Act amends the Commodity

    Exchange Act by inserting new section 2(a)(13), which requires that

    swap transaction and pricing data be made publicly available. The Dodd-

    Frank Act specifies that swap price and volume data be reported to the

    public as soon as technologically practicable after the swap has been

    executed, i.e., real-time public reporting, and at the same time

    requires that public dissemination not identify the participants to the

    swap transaction.\472\

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

    \472\ CEA section 2(a)(13)(B) authorizes the Commission to

    ``make swap transaction and pricing data available to the public in

    such form and at such times as the Commission determines appropriate

    to enhance price discovery.'' CEA sections 2(a)(13)(C) and (E)

    authorize and require the Commission ``to provide by rule for the

    public availability of swap transaction and pricing data.'' These

    provisions specify that the rules shall, with respect to the swaps

    that are subject to the clearing mandate (or excepted from such

    mandate pursuant to CEA section 2(h)(7)) or that are voluntarily

    cleared, provide for the ``real-time public reporting'' of such

    transactions in a manner that: (1) Preserves swap counterparty

    anonymity; (2) takes into account whether the public dissemination

    will materially reduce market liquidity; and (3) specifies the

    appropriate criteria and time delays for reporting large notional

    swaps (block trades). With respect to certain uncleared swaps, CEA

    section 2(a)(13)(C)(iii) requires that the rules require real-time

    public reporting for such transactions in a manner that does not

    disclose the business transactions and market positions or any

    person. CEA section 2(a)(13)(A) defines ``real-time public

    reporting'' as ``to report data relating to a swap transaction,

    including price and volume, as soon as technologically practicable

    after the time at which the swap transaction has been executed.'' In

    addition, section 721(b) of the Dodd-Frank Act authorizes the

    Commission to define certain terms added to the CEA by the Dodd-

    Frank Act, including the term ``as soon as technologically

    practicable.''

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

    [[Page 1233]]

    In promulgating part 43 of its regulations, the Commission

    implements Congress' mandate that swap transaction and pricing data be

    made available to the public in real-time. Together, the statute and

    Commission's rules promote transparency and enhance price discovery

    while protecting the anonymity of market participants.\473\ Part 43

    achieves the statutory objectives of transparency and enhanced price

    discovery by, inter alia, requiring that market participants ultimately

    report swap transaction and pricing data to an SDR \474\ and by

    requiring SDRs to ensure the public dissemination of such data in real

    time.\475\ The Commission expects that the increased transparency

    achieved by the increased availability of pricing information will

    enhance the price discovery process and improve financial market

    systemic risk management. In the sections that follow, the Commission

    considers the costs and benefits of part 43 as required by CEA section

    15(a).

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

    \473\ Part 43 covers all swaps under the Commission's

    jurisdiction (i.e., interest rate, foreign exchange, equity, credit

    and ``other commodity''), cleared and uncleared, regardless of the

    method of execution (e.g., executed on a SEF, DCM or bilaterally

    negotiated).

    \474\ Section 43.3(a)(1) states that for purposes of part 43, a

    ``registered swap data repository'' shall include swap data

    repositories that are provisionally registered pursuant to the

    Commission's part 49 rules.

    \475\ Section 43.4 and appendix A to part 43 specify the data an

    SDR is required to publicly disseminate. Consistent with its

    obligations under the statute, the Commission considered whether the

    public dissemination of such data would compromise the anonymity of

    the parties to a swap, or would disclose the business transactions

    and market positions of any party to an uncleared swap.

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

    1. Background

    CEA section 15(a) requires the Commission to consider the costs and

    benefits of its actions in light of five broad areas of market and

    public concern: (1) Protection of market participants and the public;

    (2) efficiency, competitiveness, and financial integrity of futures

    markets; (3) price discovery; (4) sound risk management practices; and

    (5) other public interest considerations.\476\ The Commission, in its

    discretion, may give greater weight to any one of the five enumerated

    areas and may determine that, notwithstanding costs, a particular rule

    protects the public interest.

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

    \476\ 7 U.S.C. 19(a).

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

    To the extent that these new rules reflect the statutory

    requirements of the Dodd-Frank Act, they will not create costs and

    benefits beyond those mandated by Congress in passing the legislation.

    However, the rules may generate costs and benefits attributable to the

    Commission's determinations regarding implementation of the Dodd-Frank

    Act's statutory requirements. Moreover, as this rulemaking is a

    reporting rule, many of the costs of the rulemaking are associated with

    collections of information. The Commission is obligated to estimate the

    burden of and provide supporting statements for any collections of

    information it seeks to establish under considerations contained in the

    PRA, 44 U.S.C. 3501 et seq., and to seek approval of those requirements

    from the OMB. Therefore, the estimated burden and support for the

    collections of information in this this rulemaking, as well as the

    consideration of comments thereto, are discussed in the PRA section of

    this rulemaking and the information collection requests filed with OMB

    as required by that statute. Otherwise, the costs and benefits of the

    Commission's determinations are considered in light of the five factors

    set forth in CEA section 15(a).

    To aid in fulfilling its statutory responsibility to consider the

    costs and benefits of its proposed rules, the Commission sought comment

    on its proposed rulemaking for a period of 60 days, and specifically

    requested that commenters submit any data or other information

    quantifying or qualifying the costs and benefits of the proposal with

    their comment letters. The Commission received approximately 60

    comments addressing the costs and benefit considerations of the

    proposed rule, which addressed primarily regulatory alternatives and

    the costs associated with the proposed information collection

    requirements, which are covered in the PRA section of this rulemaking

    and in the supporting statements that were filed and will be filed with

    OMB, as required under that statute. Nevertheless, wherever reasonably

    feasible, the Commission has endeavored to quantify the costs and

    benefits of the final rules, and did so in the proposed rule to the

    extent that the costs of the rulemaking were related to collections of

    information for which the Commission must account under the PRA. In a

    number of instances, however, it is not reasonably feasible to

    quantify, particularly with regard to the benefits of the final rules.

    Where quantification is not feasible, the Commission has considered the

    costs and benefits of the final rule in qualitative terms.

    In the paragraphs the follow, the Commission, after explaining its

    cost estimation methodology, discusses the economic effects of part 43

    along the two major drivers of the costs and benefits of the

    rulemaking: (1) Reporting and public dissemination; and (2)

    recordkeeping and timestamping.

    2. Cost Estimation Methodology

    The Commission recognizes that the costs of complying with part 43

    are largely attributable to reporting, the costs for which are covered

    in the Commission's PRA analysis, as required by that statute. With

    respect specifically to SDRs, the Commission has estimated their

    incremental costs to comply with the real-time reporting and public

    dissemination requirements of this rulemaking above the base operating

    costs reflected in a separate rulemaking and the PRA analysis

    associated with it.\477\ The Commission expects SDRs to recover these

    incremental costs in the form of fees assessed on reporting parties,

    SEFs and DCMs for use of the SDRs' public dissemination services.\478\

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

    \477\ See SDR Final Rule. 76 FR 54538 at 54572.

    \478\ Section 43.3(i) authorizes an SDR to charge fees to

    persons reporting the real-time data, so long as such fees are

    equitable and non-discriminatory.

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

    B. Reporting and Public Dissemination Requirements of Part 43

    CEA section 2(a)(13)(F) provides the Commission with the authority

    to determine the reporting requirements for parties to a swap.

    Consistent with this authority, Sec. 43.3(a)(2) provides that a

    reporting party satisfies its obligation to report real-time swap

    transaction and pricing data when it executes a swap on or pursuant to

    the rules of a SEF or DCM. In turn, Sec. 43.3(b)(1) requires SEFs and

    DCMs to report data related to publicly reportable swap transactions to

    an SDR for public dissemination. For ``off-facility swaps,''\479\ Sec.

    43.3(a)(3) establishes a protocol for determining counterparty

    responsibility to report real-time swap transaction and pricing data to

    an SDR.\480\ Further, Sec. 43.3(c)(2) specifies that an SDR must

    accept and publicly disseminate swap transaction and pricing data in

    real-time for all swaps in its selected asset class, unless otherwise

    prescribed by the Commission.\481\ Thus, depending on the place of

    execution and the counterparties to a swap, the reporting obligation

    may fall on a SEF, DCM, SD, MSP, or a non-SD/non-MSP.

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

    \479\ The term ``off-facility swap'' is defined in Sec. 43.2.

    \480\ Such responsible counterparty would be the ``reporting

    party,'' as defined in Sec. 43.2.

    \481\ See discussion regarding Sec. 43.3(c)(2).

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

    CEA section 2(a)(13)(D) provides that ``[t]he Commission may

    require registered entities to publicly disseminate the swap

    transaction and pricing data required to be reported under this

    paragraph.'' Pursuant to this authority, the Commission is adopting

    [[Page 1234]]

    rules requiring an SDR to ensure the public dissemination of all swap

    transaction and pricing data it accepts pursuant to part 43.

    Specifically, Sec. 43.3(b)(2) requires an SDR to ensure that swap

    transaction and pricing data for all publicly reportable swap

    transactions within an asset class are publicly disseminated as soon as

    technologically practicable, unless the transaction is subject to a

    time delay described in Sec. 43.5. In addition, Sec. 43.4(b)

    prescribes the manner in which an SDR must publicly disseminate the

    data to comply with part 43.\482\

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

    \482\ Section 43.4(b) provides ``Any registered swap data

    repository that accepts and publicly disseminates swap transaction

    and pricing data in real-time shall publicly disseminate the

    information described in appendix A to this part.''

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

    1. Benefits of the Reporting and Public Dissemination Requirements

    The Commission anticipates that part 43 will generate several

    overarching, if presently unquantifiable, benefits to swaps market

    participants and the public generally. These include: Improvements in

    market quality; price discovery; improved risk management; economies of

    scale and greater efficiencies; and improved regulatory oversight.

    The Commission believes these benefits, made possible by the public

    dissemination of comprehensive and timely swap transaction data, will

    accrue to market participants in a number of ways:

    Enhanced price discovery made possible by the

    comprehensive and timely swap transaction data that the part 43

    requires be reported and publicly disseminated.

    Enhanced ability to manage risk as a result of the greater

    visibility into swap market risk pricing, made possible by the

    comprehensive and timely swap transaction data that the part 43

    requires be reported and publicly disseminated.

    Enhanced swap market price competition made possible by

    the comprehensive and timely swap transaction data that the part 43

    requires be reported and publicly disseminated.\483\

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

    \483\ Congress recognized the competitive pricing benefit of

    real-time information in the related context of swap exchange

    trading. See S.Rep. No. 111-176, at 34 (2010) (```the relative

    opaqueness of the OTC market implies that bid/ask spreads are in

    many cases not being set as competitive as they would be on

    exchanges''') (quoting Stanford University Professor Darrel Duffie).

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

    Market price transparency provides a check against SDs or

    other market participants trading at noncompetitive prices; provides

    post-trade information market participants may use to negotiate lower

    transaction costs; and facilitates price competition between swap

    dealers.

    More robust risk monitoring and management capabilities as

    a result of the systems required under part 43 which, concurrent with

    real-time reporting capability, will monitor the participant's current

    swap market position.

    New tools to process transactions at a lower expense per

    transaction attributable to the systems required under part 43. These

    tools will enable participants to handle increased volumes of swaps

    with less marginal expense, or existing volumes of swaps with greater

    efficiency.

    Furthers the development of internationally recognized

    standards for the financial services industry by utilizing UTC.

    Transaction reporting and public dissemination under part 43 also

    benefits the public generally by supporting the Commission's

    supervisory function over the swaps market, as well as the broader

    supervisory responsibilities of U.S. financial regulators to protect

    against financial market systemic risk. Real-time public reporting

    provides a means for the Commission to gain a better understanding of

    the swaps market--including the pricing patterns of certain

    commodities. The public dissemination of swap transaction and pricing

    data will further enable the Commission, market participants and the

    public to observe the effects of transparency on the swaps markets.

    Public dissemination of swap transaction and pricing data will

    enhance the Commission's ability to detect anomalies in the market. For

    example, the availability of such data in real-time will help

    Commission monitor the markets subject to its jurisdiction.

    Transparency facilitated by real-time transaction reporting also

    will help provide a check against a reoccurrence of the type of

    systemic risk build-up that occurred in 2008, when ``the market

    permitted enormous exposure to risk to grow out of the sight of

    regulators and other traders [and d]erivatives exposures that could not

    be readily quantified exacerbated panic and uncertainty about the true

    financial condition of other market participants, contributing to the

    freezing of credit markets.'' \484\

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

    \484\ Congressional Research Service Report for Congress, The

    Dodd-Frank Wall Street Reform and Consumer Protection Act: Title

    VII, Derivatives, by Mark Jickling and Kathleen Ann Ruane (August

    30, 2010).

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

    While the Commission believes that part 43 will yield significant

    benefits to the public and swaps market participants, the Commission

    acknowledges that the final rules will entail costs. As discussed more

    fully below, the Commission is mindful of the costs of its rules and

    has carefully considered comments regarding the same. To the extent

    possible and consistent with the statutory and regulatory objectives of

    this rulemaking, the Commission has incorporated comments presenting

    cost-mitigating alternatives.

    2. Costs of the Reporting and Public Dissemination Requirements

    The Commission has not identified quantifiable costs of data

    collection that are not associated with an information collection

    subject to the PRA. These costs therefore have been accounted for in

    the PRA section of this rulemaking and the information collection

    requests filed with OMB, as required by the PRA.

    3. Reporting and Public Dissemination: Consideration of Studies,

    Alternatives and Cost-Mitigation

    i. Studies

    Several commenters cited economic or academic studies in their

    comment letters or submitted studies relating to the introduction of

    transparency resulting from the public reporting of trade data.\485\

    The comments and studies generally discussed the effects of

    transparency on liquidity and the costs to market participants.

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

    \485\ At least six commenters cited at least 13 studies by

    institutional, academic and industry professionals. See, e.g., CL-

    JPM; CL-Better Markets; CL-ATA; CL-FINRA; CL-Cleary; and CL-ISDA/

    SIFMA.

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

    None of these studies explicitly address the issue of market

    transparency as it pertains to the real-time public dissemination of

    swap transaction and pricing data and as adopted in part 43. Five of

    the studies cited by commenters addressed issues that were tangential

    to the issue of market transparency as it relates to part 43, since

    they did not analyze the effects of market transparency directly. One

    study identified, and differentiated among, a number of related

    concepts of market quality that fall under the umbrella of

    ``liquidity.'' \486\ One commenter analogized the benefits of

    transparency to the financial sector and the reticence of market

    participants to acknowledge those benefits to the energy and industrial

    sector of the early 1970s, citing a study that addressed the

    [[Page 1235]]

    benefits of environmental regulation to the energy and industrial

    sectors.\487\ One cited study addressed the manner in which airlines

    use jet fuel swaps to hedge risk.\488\ Another addressed the impacts of

    high-frequency trading on the marketplace, which the commenter cited in

    a discussion of high frequency and algorithmic trading.\489\ Another

    commenter cited a study that addressed differences in reporting

    obligations in domestic and foreign jurisdictions when discussing the

    real-time public reporting of cross-border transactions.\490\ The

    remaining studies cited by commenters addressed the general effects of

    transparency on the marketplace.

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

    \486\ See Kyle, Albert S., Continuous Auctions and Insider

    Trading, Econometrica 53, no. 6 (1985): 1315-1335. This study is

    also cited in Bessembinder et al. (2008). See infra note 497. See

    also, CL-JPM.

    \487\ See Porter, Michael E., and Claas van der Linde, Green and

    Competitive: Ending the Stalemate, Harvard Business Review 73, no. 5

    (1995): 120-134. See also CL-Better Markets.

    \488\ See Cobbs, Richard, and Alex Wolf, Jet Fuel Hedging

    Strategies: Options Available for Airlines and a Survey of Industry

    Practices (2004). See also CL-ATA.

    \489\ See Kirilenko, Andrei, Kyle, Albert S., Samadi, Mehrdad,

    and Tugkan Tuzun, The Flash Crash: The Impact of High Frequency

    Trading on an Electronic Market (2011). See also CL-Better Markets.

    \490\ See CFTC staff, Derivatives Reform: Comparison of Title

    VII of the Dodd-Frank Act to International Legislation (2010). See

    also CL-Cleary.

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

    One commenter \491\ cited five studies that addressed the benefits

    of the introduction of transparency through the Transaction Reporting

    and Compliance Engine (``TRACE'') system, which provides the real-time

    transaction reporting and public dissemination in the corporate bond

    market.\492\ Acknowledged differences between the swaps market and the

    corporate bond market notwithstanding, the Commission believes that to

    the extent the study discusses the benefits of transparency in the

    corporate bond market, such benefits may be relevant to the discussion

    of transparency in the swaps market. One study of TRACE cited by the

    commenter suggests that, according to transaction data, the transaction

    costs of bonds fell following the introduction of transparency to the

    corporate bond market.\493\ Another study suggests that the

    implementation of TRACE played a part along with other factors in

    reducing the dispersion of the valuation of corporate bonds.\494\ The

    commenter cited another study that suggests that post-trade

    transparency alone, while less beneficial than the full transparency

    (pre-trade and post-trade) offered by exchanges, could serve as a

    partial substitute for the price transparency offered by exchanges.

    This study further stated that the implementation of a TRACE-like price

    reporting system could ``offer substantial improvements in market

    efficiency'' for many actively-traded derivative products.\495\

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

    \491\ See CL-FINRA.

    \492\ TRACE enables real-time reporting and public dissemination

    in the corporate bond market. Currently, TRACE requires public

    dissemination to occur within 15 minutes of the time of execution

    for most trades. Congress was cognizant of TRACE in passing the

    Dodd-Frank Act. See S. Rep. No. 111-176, at 34 (2010) (```empirical

    evidence appearing in the academic literature has not given much

    support''' to claims of resistant bond dealers that ```more price

    transparency would reduce the incentives of dealers to make markets

    and in the end reduce market liquidity''') (quoting Stanford

    University Professor Darrell Duffie).

    \493\ See Edwards, Amy K., Harris, Lawrence E., and Michael S.

    Piwowar, Corporate Bond Market Transaction Costs and Transparency,

    The Journal of Finance 62, no. 3 (2007): 1421-1451.

    \494\ See Cici. Gjergji, Gibson, Scott, and John J. Merrick,

    Working Paper, Missing the Marks? Dispersion in Corporate Bond

    Valuations Across Mutual Funds (2010).

    \495\ See Duffie, Darrell, Li, Ada, and Theo Lubke, Federal

    Reserve Bank of New York Staff Reports, Policy Perspectives on OTC

    Derivatives Market Infrastructure (2010).

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

    Another study implied that the implementation of TRACE had either

    no effect or a positive effect on liquidity for BBB corporate bonds,

    and that spreads on newly transparent bonds declined relative to bonds

    that did not experience a change in transparency. The study further

    implied that additional transparency is not associated with greater

    trading volume.\496\

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

    \496\ See Goldstein, Michael A., Hotchkiss, Edith S., and Erik

    R. Sirri, Transparency and liquidity: A controlled experiment on

    corporate bonds, The Review of Financial Studies 20, no. 2 (2007):

    235-273.

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

    Another study discussing TRACE indicated that TRACE presented a

    number of important benefits to the corporate bond marketplace.\497\ As

    the authors note:

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

    \497\ See Hendrik Bessembinder, William Maxwell, and Kumar

    Venkataraman, Market transparency, liquidity externalities, and

    institutional trading costs in corporate bonds, Journal of Financial

    Economics 82 (2006): 251-288. See also, CL-Cleary, CL-FINRA, CL-

    ISDA/SIFMA, and CL-JPM.

    The results * * * are important because they verify that market

    design, and in particular decisions as to whether to make the market

    transparent to the public, have first-order effects on the costs

    that customers pay to complete trades. Further, since the sample

    employed * * * consists of institutional trades, these results

    indicate that public trade reporting is important not only to

    relatively unsophisticated small traders, but also to professional

    investors who make multi-million dollar transactions.\498\

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

    \498\ Id. at 284.

    In examining the effects of introducing transparency through TRACE,

    the same authors identify a ``remarkable'' average decrease in

    execution costs of 50% for TRACE-eligible bonds.\499\ Bessembinder et

    al. state that the magnitude of that estimate, which reflects the

    impact of implementing transparency in the corporate bond market

    through TRACE, ``emphasizes the potential economic importance of

    designing market mechanisms optimally.'' \500\ Indeed, it is entirely

    plausible that, should a similar savings effect be realized in the

    swaps markets as a result of real-time public reporting required under

    part 43, such savings would ultimately be passed on to the end-users of

    the swaps.

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

    \499\ The study indicates that this can be extrapolated by

    calculating a trading cost reduction of approximately $1 billion

    across the entire market for TRACE-eligible bonds.

    \500\ Bessembinder et al. at 283.

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

    Bessembinder et al. further identify a decrease of 20% in the

    execution costs of non-TRACE-eligible bonds. The authors state that

    this ``likely reflects a liquidity externality by which better pricing

    information regarding a subset of bonds improves valuation and

    execution cost monitoring for related bonds.'' \501\ The Commission

    believes it is entirely plausible that a similar savings effect could

    be realized in the swaps markets as a result of part 43's requirements.

    Improved pricing information for standardized swaps could improve the

    pricing of swaps, and thus reduce the transaction costs of non-

    standardized swaps whose prices could be sufficiently and reliably

    correlated with the prices of the standardized swaps by market

    participants.

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

    \501\ Id.

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

    In a subsequent work,\502\ Bessembinder and Maxwell acknowledge

    that liquidity can refer to a number of related but distinct concepts,

    but the literature regarding TRACE's effects on the corporate bond

    market have focused primarily on a single one of these concepts:

    Customers' trading costs.\503\ The study states that ``the cost of

    trading corporate bonds decreased [following the introduction of

    TRACE], but so did the quality and quantity of the services formerly

    provided by bond dealers.'' \504\ One commenter also stated that this

    study suggests that the implementation of TRACE reduced the market

    depth available to institutional customers.\505\

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

    \502\ See Bessembinder, Hendrik and Maxwell, William F.,

    Transparency and the Corporate Bond Market, Journal of Economic

    Perspectives, 22, no. 2 (2008): 217-234.

    \503\ As one commenter noted, ``most studies of TRACE have

    focused only on its effect on spreads (particularly in smaller

    transaction sizes) and have not examined its effect on either market

    depth or resiliency, particularly in the case of large-sized

    transactions.'' CL-Cleary. See also supra note 492.

    \504\ Bessembinder and Maxwell at 232.

    \505\ See CL-JPM.

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

    Bessembinder et al. state that ``consistent with the reasoning that

    market makers earned economic rents in

    [[Page 1236]]

    the opaque market, or that the costs of market making are lower in the

    more transparent environment,'' trading costs were reduced for large

    institutional traders after the implementation of TRACE.\506\ With

    regard to the economic rents earned by market makers in the ``opaque

    market,'' the authors' findings imply that in an opaque marketplace,

    dealers are able to extract economic rents from customers, especially

    less-informed customers, and that these rents are reduced after the

    introduction of transparency because customers are able to view more

    pricing information. In addition, the study suggests that introducing

    transparency could improve the ability of dealers to share risks, which

    may result in a decrease in inventory carry costs, translating into

    reduced costs of trading for customers.

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

    \506\ Bessembinder et al. at 283.

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

    The Commission anticipates that, just as trading costs were reduced

    in the corporate bond market following the implementation of TRACE, the

    requirements of part 43 will similarly result in reduced trading costs

    and increased efficiency in the swaps market.

    ii. Alternatives and Cost Mitigation

    In response to the Commission's Proposing Release, several

    commenters presented reasonable alternatives. The Commission carefully

    considered--and where reasonable, adopted--those in an effort to reduce

    the burden of its regulations while achieving the desired regulatory

    objective. Other alternatives presented, however, were not accepted

    because, in the Commission's judgment they would not have achieved the

    regulatory objectives discussed throughout this rulemaking.

    The comments and alternatives presented can be classified along

    several broad themes: (1) Who reports; (2) what is (and is not) to be

    reported; (3) when the data is to be reported and made public; (4) how

    the data is to be reported (i.e., data fields); and (5) phasing of

    compliance. These categories are discussed in the paragraphs that

    follow.

    Who Reports

    Commenters requested that the Commission allow parties to negotiate

    independently who will report rather than follow the reporting

    hierarchy for off-facility swaps discussed in the Proposing

    Release.\507\ The Commission accepted this alternative and as adopted

    Sec. 43.3(a)(3) permits independent negotiation between counterparties

    of off-facility swaps to determine the reporting party for such swap.

    The Commission anticipates that the party with the most cost-effective

    means for reporting will take that role.

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

    \507\ See CL-FSR.

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

    The reporting protocol established in Sec. 43.3(a)(3), which

    requires the SD to report an off-facility swap with a non-SD

    counterparty when the reporting responsibility is not negotiated, is

    also cost-mitigating.\508\ Section 43.3(a)(2) requires that for any

    swap executed on or pursuant to the rules\509\ of a SEF or DCM, the SEF

    or DCM--not the transacting party--must report the transaction and

    pricing data to an SDR for public dissemination.\510\ The Commission

    anticipates that SEFs and DCMs, as part of their registration and

    ongoing compliance requirements, will be required to have the

    technological capability to transmit real-time swap transaction and

    pricing data to SDRs, thus reducing the costs of transmission for

    persons that execute publicly reportable swap transactions on the SEF

    or DCM. The Commission further anticipates that SDs and MSPs will be

    more capable than financial and non-financial end-users of implementing

    the necessary infrastructure and personnel to comply with part 43, thus

    reducing the costs of reporting amongst the parties to the transaction.

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

    \508\ As one commenter noted: ``[D]ue to their commercial

    interests, technological know-how and business relationships, swap

    dealers and MSPs are more appropriate reporting counterparties than

    U.S. end-users and are just as, if not more, capable of complying

    with reporting obligations. * * * In addition, swap dealers and MSPs

    will be best positioned to develop at the lowest cost the

    technological infrastructure or relationships with third-party

    service providers necessary to meet the reporting obligation.'' CL-

    SIFMA AMG at 2.

    \509\ Swaps executed ``pursuant to the rules'' of a SEF or DCM

    would include block trades.

    \510\ See CL-Tradeweb.

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

    To further reduce the financial burden of complying with part 43,

    particularly for end-users, the Commission is allowing reporting

    parties to contract with a third party--including a DCO that clears the

    swap--to report the data to an SDR. The Commission recognizes that the

    use of a third party service provider will likely result in costs to

    the reporting party. However, the Commission anticipates that the costs

    to the reporting party will be less burdensome than those that would be

    incurred by certain non-SD/non-MSP counterparties to establish

    infrastructure and hire personnel to comply with the part 43 real-time

    reporting requirements. The Commission does not agree, however, that

    reporting for all swaps should be required to be processed through a

    SEF or DCM. Rather, the Commission believes it more efficient to allow

    flexibility for those capable of directly reporting real-time swap

    transaction and pricing data to an SDR.

    The proposed rule permitted public dissemination to occur through

    either an SDR or a third-party service provider.\511\ The Commission

    received several comments regarding this aspect of its proposal: Some

    commenters agreed with the Proposing Release and others thought it

    would be more appropriate to permit only registered entities to

    publicly disseminate swap data. One commenter stated that because many

    DCOs already have the necessary infrastructure and will establish

    connectivity with SEFs and DCMs, the Commission should require that

    public dissemination occur through DCOs.\512\ There is nothing in part

    43 that would prevent a DCO from registering as an SDR\513\ and

    ensuring that swap transaction and pricing data is publicly

    disseminated, or from operating as a third party; however, the

    Commission is not requiring that such dissemination occur through DCOs.

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

    \511\ See Proposed Sec. 43.4(a). 75 FR 76174.

    \512\ See CL-CME.

    \513\ See CEA section 21(a)(1)(B), added by section 728 of the

    Dodd-Frank Act: ``A derivatives clearing organization may register

    as a swap data repository.''

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

    What Is (and Is Not) To Be Reported

    Commenters expressed concern that the costs of reporting swaps

    between affiliates would be high.\514\ Many of these same commenters

    asserted that the benefits to reporting swaps between affiliates are

    minimal or non-existent.\515\ Others contended that the public

    dissemination of swaps between affiliates would distort, rather than

    enhance, price discovery.\516\ To address these concerns, and as

    discussed previously in sections II.A.2 and II.B.2 of this Adopting

    Release, the Commission's definition of ``publicly reportable swap

    transaction'' does not, at this time, include certain swaps that are

    not arm's length transactions.\517\ The Commission further clarified in

    an example that internal swaps\518\ between

    [[Page 1237]]

    wholly-owned subsidiaries of the same parent entity and portfolio

    compression exercises are not subject to part 43 because they fail to

    meet the definition of ``publicly reportable swap transaction.'' \519\

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

    \514\ See CL-Cleary.

    \515\ Id.

    \516\ See CL-Shell.

    \517\ See supra section II.B.2 for a discussion of definition of

    ``publicly reportable swap transaction'' in Sec. 43.2 and section

    II.A.1 for a discussion of Sec. 43.1.

    \518\ As discussed and referenced in this rule, internal swaps

    between wholly-owned subsidiaries of the same parent entity may

    include back-to-back swap transactions which are a combination of

    two or more swap transactions between or among affiliates to help

    manage the risks associated with a market-facing swap transaction.

    In general, a back-to-back swap transaction effectively transfers

    the risks associated with a market-facing swap transaction to an

    affiliate that was not an original party to such transaction. Back-

    to-back swap transactions may occur in a number of different ways.

    For example, an affiliate immediately may enter into a mirror swap

    transaction with its affiliate on the same terms as the marketing-

    facing swap transaction. By way of further example, a market-facing

    affiliate may enter into multiple transactions with affiliates that

    are not at arm's length in order to transfer the risks associated

    with an arm's length, market-facing transaction.

    \519\ See CL-TriOptima. The definition of ``publicly reportable

    swap transaction'' also states that portfolio compression exercises

    would be excluded from the definition. The Commission agrees with

    those commenters who asserted the reporting of portfolio compression

    exercises would be costly without the public dissemination of such

    swap transaction and pricing data enhancing price discovery.

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

    When the Data Is To Be Reported and Made Public

    Section 43.5 provides the time delays for public dissemination of

    swap transactions and pricing data for (i) publicly reportable swap

    transactions that have notional or principal amounts that are equal to

    or greater than the appropriate minimum block sizes for such swaps; and

    (ii) publicly reportable swap transactions that do not have established

    appropriate minimum block sizes. The Commission anticipates there will

    be technology costs associated with ensuring that the correct time

    delay is applied to a swap that is publicly disseminated by the SDR,

    including the cost to an SDR in holding swap data until the appropriate

    time delay expires and costs associated with adjusting the time delay

    in accordance with Sec. 43.5. In an effort to mitigate these costs,

    the Commission is phasing in the time delays for public dissemination.

    These time delays will reduce the potential for lost market liquidity

    by providing market participants adequate time to hedge prior to public

    dissemination. The Commission believes the phasing in of shorter time

    delays will support post-trade transparency in the swaps markets and

    will preserve market liquidity while enabling market participants to

    adjust trading strategies.

    Commenters offered numerous suggestions with respect to time delays

    for particular asset classes.\520\ However, the Commission does not

    believe that the direct costs associated with the various suggestions

    would be quantitatively significant (i.e., all the suggested time

    delays would require technological systems and operating systems). The

    Commission chose the time delays and phase in schedule adopted herein

    because it finds the approach reasonable in ensuring that all relevant

    swap data is eventually publicly disseminated, while minimizing the

    burden on the industry at the outset.

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

    \520\ See section II.E. (``Section 43.5--Time Delays for Public

    Dissemination of Swap Transaction and Pricing Data'').

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

    How the Data Is To Be Reported (i.e., Coordinate Universal Time and

    Data Fields)

    Commenters suggested that the value derived from moving the

    industry to Coordinate Universal Time (``UTC'') appears minimal when

    compared to the costs involved.\521\ Notwithstanding the comments

    regarding costs of requiring UTC, the Commission anticipates that the

    move to UTC will better facilitate the efficient dissemination of

    pricing data by eliminating the need to conduct time conversions. The

    Commission notes that use of UTC in the part 43 rules refers only to

    the execution timestamp that is publicly disseminated.\522\ Consistency

    across the global swaps market is an important goal, and the Commission

    believes that requiring UTC will allow market participants and

    reporting parties to recreate the order of trades, reduce fragmentation

    and reduce the need for market participants to convert different

    transaction times to understand the order of trades in a particular

    market.

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

    \521\ See CL-ISDA/SIFMA.

    \522\ Reporting parties, SEFs and DCMs may agree to report

    different timestamps to the SDR or to record different timestamps

    pursuant to Sec. 43.3(i).

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

    Commenters requested that the data fields required to be reported

    for off-facility swaps pursuant to part 43 be the same data fields that

    end-users typically record in their spreadsheets or trade capture

    systems.\523\ The Commission believes all the applicable data fields

    listed in Appendix A to part 43 are necessary to enhance price

    discovery by giving context and meaning to the price and volume

    information required to be publicly disseminated. The data recorded in

    end-user spreadsheets and trade capture systems typically are not

    sufficiently comprehensive for purposes of providing enhanced price

    discovery. However, the Commission has reduced the costs of reporting

    by coordinating the data fields in Appendix A to part 43 with those

    data fields that are expected to be required in part 45 for regulatory

    reporting. This coordination is expected to reduce costs by allowing

    reporting parties, SEFs and DCMs to send one set of data to an SDR for

    the purpose of satisfying the requirements of both rules.

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

    \523\ See, e.g., CL-Coalition of Energy End-Users.

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

    Phasing of Compliance

    In response to commenters' requests for a phased in implementation

    of the part 43 real-time reporting requirements,\524\ the Commission is

    adopting a three-phase schedule for compliance with part 43, in

    addition to several other phase in procedures, including the phasing in

    of time delays for public dissemination. The compliance schedule and

    additional phase in procedures will ensure efficient compliance with

    part 43 while considering the costs of implementation to market

    participants, registered entities and the public. In developing the

    part 43 compliance schedule and time delays for public dissemination,

    the Commission considered the different market characteristics of swap

    products and asset classes, differences in market participants and

    available technology and infrastructure. Accordingly, the Commission

    provides less developed markets and less sophisticated market

    participants longer lead time for compliance and public dissemination.

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

    \524\ See supra section III. (``Effectiveness/Implementation and

    Interim Period'').

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

    C. Reporting and Public Dissemination in Light of CEA Section 15(a)

    As noted above, CEA section 15(a) directs the Commission to

    consider particular criteria in evaluating the costs and benefits of a

    particular Commission action. These are considered below.

    1. Protection of Market Participants and the Public

    The reporting and public dissemination requirements described in

    part 43 will provide transparency and enhanced price discovery in the

    swaps market. The Commission anticipates that the increase in

    transparency will lead to greater competition for swap market

    participants' business and will increase liquidity in the swaps

    markets. Accordingly, the Commission anticipates that compliance by

    market participants and registered entities with part 43's reporting

    and public dissemination requirements will lower the cost of

    commodities, goods and services to American businesses. This, in turn,

    will support the overall economy and the general public.

    In deciding the manner in which to facilitate real-time reporting,

    the Commission was cognizant of how the current swap market operates.

    Thus, for example, the reporting requirements remain flexible to

    account for differences among market participants, including

    differences based on asset class, sophistication of swap

    [[Page 1238]]

    counterparties and differences based on the methods of execution.

    Section 43.2 provides a flexible definition of ``as soon as

    technologically practicable'' that would enable certain market

    participants, such as non-financial end-users, longer time periods for

    the reporting of swap transaction and pricing data to an SDR as

    compared to reporting parties with greater technological reporting

    capabilities (e.g., swap dealers). Further, the definition of ``as soon

    as technologically practicable'' aims to ensure that similarly situated

    market participants are subject to the same standards.

    The Commission believes that certain swaps in the ``other

    commodity'' asset class require further analysis before requiring

    public dissemination of such swaps. Therefore, Sec. 43.4(d) does not

    subject certain swaps in the ``other commodity'' asset class to part 43

    requirements at this time.\525\

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

    \525\ The Commission has indicated that it will address the

    public dissemination of such ``other commodity'' swaps in a

    forthcoming Commission release.

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

    The Commission also believes that the rounding convention and

    notional caps that an SDR must apply on the publicly disseminated

    notional or principal amount will enable market participants to

    effectively hedge risk without disclosing the actual size of the trade

    to the market. Such provisions will further protect the identities of

    parties, business transactions and market positions of market

    participants. Additionally, the Commission is providing time delays in

    Sec. 43.5 which will protect market participants by enabling them to

    enter into swaps with limited concern about other market participants

    trading ahead of such information.

    The definition of ``publicly reportable swap transaction'' in Sec.

    43.2 does not require that certain swaps that are not executed at arm's

    length be reported to an SDR for public dissemination. The Commission

    believes that public dissemination of swaps between affiliates may

    reveal the identities of the parties or disclose information about the

    business transactions or market positions of market participants. By

    not requiring the reporting and public dissemination of such

    transactions, the Commission is further protecting market participants

    who may engage in swaps between affiliates.

    The Commission also believes that the data fields in appendix A to

    part 43 will provide market participants and the public with the

    ability to analyze the data for similar swaps while adequately

    protecting the identities of market participants. The data fields do

    not require identifying information to be publicly disseminated and the

    Commission believes that the ``Additional Price Notation,''

    ``Indication of Other Price Affecting Term'' and ``Indication of

    Collateralization'' data fields, among others, will enable market

    participants and the public to more easily compare bespoke transactions

    to standardized transactions thereby enhancing the usefulness of such

    data for market participants and the public.

    2. Efficiency, Competitiveness and Financial Integrity of Markets \526\

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

    \526\ The Commission has identified no impact to the financial

    integrity of futures markets from part 43 in its consideration of

    CEA section 15(a)(2)(B). Although by its terms CEA section

    15(a)(2)(B).applies to futures, not swaps, the Commission finds this

    factor useful in analyzing the costs and benefits of swaps

    regulations as well.

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

    The Commission believes that part 43 promotes market efficiency in

    a number of respects, including:

    Reduced trading cost potential. As discussed above, the

    Commission anticipates that, similar to the reduction in corporate bond

    market trading costs following the implementation of TRACE, the

    requirements of part 43 will likely result in reduced trading costs and

    the lowering of economic rents earned by dealers in swaps markets.

    Straight-through processing. Sections 43.3(a)(2) and

    43.3(b)(1) establish a streamlined, straight-through process for SEFs

    and DCMs to utilize their technological expertise and ability to report

    swap transaction and pricing data ``as soon as technologically

    practicable'' to an SDR. The Commission believes this is the more

    efficient approach compared to alternatives that would interpose an

    intermediary in the data reporting chain.\527\

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

    \527\ However, as the Commission has noted previously, nothing

    would prevent a SEF or DCM from contracting with a third party to

    assist with reporting the real-time swap transaction and pricing

    data to an SDR.

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

    Assignment of off-facility swap reporting responsibilities

    to the presumptively more capable party. Section 43.3(a)(3) establishes

    a protocol that assigns greater reporting responsibility to

    counterparty categories presumed to possess greater technological

    capabilities and resources as a result of their likely greater swap

    transaction volume. For example, unless otherwise agreed to by the swap

    counterparties, SDs (and MSPs) are required to serve as the reporting

    party for off-facility swaps. The Commission believes responsibility

    assignment on this basis increases the potential to realize reporting

    scale economies.

    Choice of SDRs for real-time data dissemination. The

    Commission believes that Sec. 43.3(a)(1)'s designation of SDRs to

    receive real-time swap transaction and pricing data ``as soon as

    technologically practicable'' for public dissemination also promotes

    potential scale economy efficiencies. Under the proposed part 45 rules,

    reporting parties, SEFs and DCMs must transmit a separate set of data

    to SDRs for regulatory reporting purposes. Accordingly, Sec.

    43.3(a)(1) may accommodate SEFs' and DCMs' ability to utilize

    technology and connections with an SDR for both real-time and

    regulatory reporting purposes.

    Reduction of data fragmentation. The Commission believes

    that exercise of its authority under CEA section 2(a)(13)(D) to

    designate SDRs as the public disseminators of real-time reported swap

    transaction and pricing data will reduce fragmentation of swap data

    available to the public. Greater data consistency, in turn, will

    facilitate the ability of market participants, and the public

    generally, to efficiently access, interpret, and compile a complete

    data set.

    The Commission believes that part 43 promotes market

    competitiveness in a number of respects:

    Reduction of data fragmentation. As noted above, the

    Commission believes that exercise of its CEA section 2(a)(13)(D)

    authority to designate SDRs as the public disseminators of real-time

    reported swap transaction and pricing data will reduce fragmentation of

    swap data available to the public. Greater data consistency, in turn,

    should guard against information asymmetries that market participants

    with superior knowledge of, or access to, might arbitrage for

    competitive advantage.

    Front running prevention via SDR continuous receipt

    requirements. Sections 43.3(f) and (g) require that SDRs be able to

    accept real-time swap transaction and pricing data for public

    dissemination at all times, including during closing hours.

    Specifically, Sec. 43.3(g) provides that during closing hours real-

    time swap transaction and pricing data that is accepted by an SDR be

    held in queue. As a result, these provisions enable continuous

    reporting of real-time swap transaction and pricing data by reporting

    parties, SEFs and DCMs, notwithstanding reporting party or registered

    entity location and time zone. In so doing, the Commission believes the

    rules promote swaps market competitiveness by foreclosing avenues for

    market participants to arbitrage reporting by execution location for

    competitive advantage.

    [[Page 1239]]

    Time delay regime that protects market liquidity and

    prevents front-running. The Commission believes that the time delay

    regime established in Sec. 43.5 will enhance the competitiveness of

    swap markets by protecting market liquidity until appropriate minimum

    block sizes are adopted. Such time delays, which initially apply until

    a swap or group of swaps has an appropriate minimum block size, reduce

    the risk of large notional trade data being exposed to the market

    before the trade can be adequately hedged (e.g., front-running or

    trading ahead).\528\

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

    \528\ See supra, section II.E (``Time Delays for Public

    Dissemination of Swap Transaction and Pricing Data'').

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

    The Commission believes that part 43 promotes market integrity in a

    number of respects:

    Error correction. Section 43.3(e) provides reporting

    parties and SDRs with a clear process for addressing errors in real-

    time swap transaction and pricing data. These provisions will foster

    financial market integrity by ensuring that incorrectly disseminated

    swap transaction and pricing data is canceled and/or corrected.

    Further, this section gives the Commission enforcement powers,

    enhancing the Commission's ability to police market integrity.

    Time delay phase in to prevent front-running. The

    Commission believes that the phase in regime for time delays prescribed

    in Sec. 43.5, discussed above, will counter the possibility for front-

    running large block trades before they can be adequately hedged.

    SDR tools to ensure data accuracy. Section 43.4(c) enables

    SDRs to ensure that they receive the data necessary to process and

    publicly disseminate the data fields described in appendix A to part

    43. Section 43.4(c) provides that SDRs can ask reporting parties for

    additional data to ensure the accuracy of the real-time data (compared

    to regulatory data) as well as to ensure that the data is being

    reported in a timely manner. Such provisions will improve the integrity

    of the real-time reporting process by allowing SDRs an additional

    opportunity to ensure the accuracy of the data they received for public

    dissemination purposes.

    3. Price Discovery

    The Commission believes generally that swaps market price discovery

    will be enhanced by making useful, accurate swaps transaction price and

    volume data available to market participants and the public within the

    shortest time frame possible. The Commission further believes that the

    reporting and public dissemination requirements of part 43, working in

    concert, promote the goal of swaps market price discovery enhancement.

    The components that contribute to the attainment of this goal are

    described below.

    The provisions in part 43, reflecting the mandate of CEA

    section 2(a)(13)(A),\529\ generally require that reporting of real-time

    data by reporting parties--SEFs and DCMs and public dissemination by

    SDRs--occur ``as soon as technologically practicable.'' The Commission

    believes that this approach means that swap transaction and pricing

    data is to be publicly disseminated at the fastest rate allowable given

    a market participant's technological capability.

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

    \529\ That is: ``real-time public reporting means to report data

    relating to a swap transaction, including price and volume, as soon

    as technologically practicable after the time at which the swap

    transaction has been executed.''

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

    The error correction provisions of Sec. 43.3(e) assign

    swap counterparties and registered entities responsibility to correct

    erroneous or omitted swap data and require the public dissemination of

    cancellations and corrections to errors and omissions. These provisions

    will help ensure the accuracy of swap transaction and pricing data,

    thereby increasing the data's price discovery value to market

    participants and the public. Absent this provision, uncorrected

    erroneous data could distort price discovery.

    Appendix A to part 43 specifies the data fields an SDR

    must use in public dissemination, and what each data field represents.

    The Commission believes that the values assigned to the data fields are

    appropriately tailored to facilitate price transparency and inform

    price discovery. Moreover, data field consistency will enhance price

    discovery by ensuring the integrity of the price and volume reflected

    in a particular reported asset class.

    The definition of ``publicly reportable swap transaction''

    in Sec. 43.2 does not, at this time, require the public dissemination

    of swaps that are not executed at arm's length. Accordingly, certain

    swaps between affiliates of a corporate group and portfolio compression

    exercises are not subject to part 43. The Commission believes that not

    requiring such transactions to be publicly disseminated precludes the

    public dissemination of transaction and pricing data that could

    misinform the market and create an inaccurate appearance of market

    depth.

    Swap transaction and pricing data is to be publicly

    disseminated in a consistent, usable and machine-readable electronic

    format that allows the data to be downloaded, saved and analyzed, as

    described in Sec. 43.3(d)(1).

    SDRs are required pursuant to Sec. 43.3(f) to

    continuously accept and publicly disseminate swap transaction and

    pricing data (with the exception of certain closing hours). The

    Commission believes this requirement enhances the breadth of the swap

    data available and the speed at which such data is available to market

    participants and the public.

    The requirements of Sec. Sec. 43.4(d)(3) and (4), require

    the public dissemination of data that identifies the underlying asset

    for the transaction, except with respect to certain swaps in the

    ``other commodity'' asset class where dissemination could compromise

    anonymity.

    The rounding convention and the caps on the publicly

    disseminated notional or principal amounts provided for in Sec. Sec.

    43.4(g) and (h) allow for price discovery for market participants and

    the public while protecting swap counterparty anonymity.

    4. Sound Risk Management Practices

    The Commission believes that the enhanced price discovery afforded

    by reporting and public dissemination of swap transaction and pricing

    data will better enable market participants to measure risk.

    Accordingly, because market participants will be better able to manage

    their risk at an entity level, risk will be better managed. Allowing

    market participants and the public to measure risk will reduce the risk

    of another financial crisis.

    Additionally, the Commission is not requiring that portfolio

    compression exercises, which market participants use for risk

    management purposes, be subject to part 43 at this time. In so doing,

    the Commission is attempting to tailor real-time public dissemination

    requirements to accommodate, rather than chill, prudent risk management

    by market participants.

    Finally, commenters asserted that the costs of risk management to

    end-users may increase if data relating to large sized trades is

    publicly disseminated to the market before swap counterparties have an

    opportunity to hedge a publicly reportable swap transaction.\530\ The

    Commission believes that the provisions in Sec. 43.5 provide for

    adequate time delays for public dissemination of swap transaction and

    pricing data, providing end-users and other market participants the

    latitude necessary to manage their risks.

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

    \530\ See, e.g., CL-Chesapeake; CL-ATA.

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

    [[Page 1240]]

    5. Other Public Interest Considerations

    The Commission does not believe that the public dissemination

    requirements of part 43 discussed above will have a material effect on

    public interest considerations other than those previously identified.

    D. Recordkeeping and Timestamping Requirements of Part 43

    Proposed Sec. 43.3(i) provided recordkeeping requirements for data

    related to part 43, including a general provision that all data

    relating to a ``reportable swap transaction'' shall be maintained for a

    period of not less than five years after public dissemination of such

    swap. The provision also provided specific provision for the retention

    of data by a SEF or DCM and a provision for the retention of data by an

    SD or MSP. Further, proposed Sec. 43.5(f) provided timestamp

    requirements for block trades and large notional swaps, which included

    a requirement to maintain records of all timestamps. Upon consideration

    of the comments received and as discussed elsewhere in this rulemaking,

    the utility of the Commission's existing regulations in achieving the

    regulatory objective proposed, and the recordkeeping requirements

    proposed elsewhere, including part 45, the Commission significantly

    limited the recordkeeping requirements of proposed Part 43. The only

    recordkeeping requirements imposed will be the timestamping

    requirements as described in Sec. 43.3(h).

    Section 43.3(h) timestamps are required for all publicly reportable

    swap transactions and must be applied by SEFs and DCMs, SDRs, and

    registrants (SDs and MSPs). In consideration of a commenter's concerns

    regarding the costs to end-users to comply with any recordkeeping

    requirements, Sec. 43.3(h) is not applicable to non-SDs/MSPs.\531\

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

    \531\ In other words, when an end-user has a reporting

    obligation because it engaged in an off-facility swap, the end-user

    is not required to timestamp the data pursuant to Sec. 43.3(h).

    However, the execution timestamps in appendix A to part 43 must be

    performed.

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

    The Commission received multiple comments addressing the

    timestamping requirements of proposed Sec. 43.5(f). As proposed, the

    timestamping requirements would have applied only to swaps considered

    ``block trades.'' However, the Commission believes that there is a need

    for SEFs, DCMs, SDRs SDs and MSPs to record and maintain certain

    timestamps regarding the transmission and dissemination of all real-

    time swap transaction and pricing data,\532\ notwithstanding that

    proposed Sec. 43.5(f)'s timestamping requirement is inconsistent with

    current industry practice.

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

    \532\ This is swap transaction and pricing data associated with

    ``publicly reportable swap transactions.''

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

    1. Benefits of the Recordkeeping and Timestamping Requirements

    The Commission believes a timestamp remains necessary for two

    reasons: (1) It establishes an audit trail that serves enforcement

    purposes; and (2) it allows market participants and the public to re-

    create the trading day, thereby enhancing price discovery. Accordingly,

    the Commission is adopting in Sec. 43.3(h) timestamp requirements for

    all reportable swap transactions. However, in response to commenters'

    concerns about the costs of timestamping and retaining records for non-

    SDs/MSPs, the Commission is not requiring non-SDs/non-MSPs who engage

    in an off-facility swap to retain similar timestamp.\533\ The

    Commission believes that requiring non-SDs/MSPs to retain any timestamp

    other than the execution timestamp would be unduly burdensome to those

    parties.

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

    \533\ However, end-users must still submit a timestamp of the

    execution time if they are the reporting party to a swap.

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

    2. Costs of the Recordkeeping and Timestamping Requirements

    The Commission has not identified quantifiable costs of

    timestamping that are not associated with an information collection

    subject to the PRA. These costs therefore have been accounted for in

    the PRA section of this rulemaking and the information collection

    requests filed with OMB, as required by the PRA.

    E. Recordkeeping and Timestamping Requirements in Light of CEA Section

    15(a)

    1. Protection of Market Participants and the Public

    The Commission believes that the timestamp requirement of Sec.

    43.3(h) will enable the Commission to ensure that reporting parties,

    SEFs and DCMs are reporting and that SDRs are publicly disseminating

    swap transaction and pricing data ``as soon as technologically

    practicable.'' Absent a timestamp requirement, the Commission would be

    unable to create an audit trail to identify potential inadequacies in

    reporting and public dissemination. The Commission's oversight to

    ensure that similarly situated SD, MSPs, SEFs and DCMs are reporting in

    the same timeframes, and that SDRs are publicly disseminating in the

    same manner, is essential to protecting market participants and the

    public.

    2. Efficiency, Competitiveness and Financial Integrity of Markets \534\

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

    \534\ See supra, note 526.

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

    The Commission believes that the requirement to maintain timestamps

    will enable it to ensure the integrity of the data being disseminated.

    This in turn promotes the operational efficiency, competitiveness, and

    integrity of the swaps market to which the data pertains. Further, it

    provides a basis for the Commission to perform audit trail and

    compliance reviews with respect to SDs, MSPs, SEFs, DCMs and SDRs, thus

    bolstering the positive market benefits.

    3. Price Discovery

    The Commission believes that the requirement to maintain timestamps

    will promote price discovery in an important way. By providing a means

    for the Commission to ensure that SDs, MSPs, SEFs, DCMs and SDRs are

    reporting and publicly disseminating swap transaction and pricing data

    ``as soon as technologically practicable,'' timestamp information will

    promote price discovery because non-compliance will be readily

    detectable through timestamps and may be an effective enforcement tool

    in an enforcement action.

    4. Sound Risk Management Practices

    The Commission believes that the requirement for SDs, MSPs, SEFs,

    DCMs and SDRs to maintain the timestamps described in Sec. 43.3(h)

    will become part of these entities' risk management policies and

    procedures in an effort to ensure compliance with the part 43 rules.

    5. Other Public Interest Considerations

    The Commission does not believe that the timestamp recordkeeping

    requirements of part 43 discussed above will have a material effect on

    public interest considerations other than those identified above.

    VI. Regulatory Flexibility Act

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

    to consider the impact of its rules on ``small entities.'' \535\ A

    regulatory flexibility analysis or certification typically is required

    for ``any rule for which the agency publishes a general notice of

    proposed rulemaking pursuant to'' the notice-and-comment provisions of

    the Administrative Procedure Act, 5 U.S.C. 553(b).\536\

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

    \535\ 5 U.S.C. 601 et seq.

    \536\ 5 U.S.C. 601(2), 603, 604 and 605.

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

    [[Page 1241]]

    With respect to the proposed real-time public reporting rule, the

    Commission provided in its RFA statement that the proposed rule would

    have a direct effect on numerous entities, specifically DCMs, SDRs,

    SEFs, SDs, MSPs, and certain single end-users.\537\ In the proposal,

    the Chairman, on behalf of the Commission, certified that the

    rulemaking would not have a significant economic effect on a

    substantial number of small entities. Comments on that certification

    were sought.

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

    \537\ See 75 FR at 76170.

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

    In the Proposing Release, the Commission then provided that it

    previously had established that certain entities subject to its

    jurisdiction are not small entities for purposes of the RFA. Because of

    the central role they play in the regulatory scheme concerning futures

    trading, the importance of futures trading in the national economy, and

    the financial requirements needed to comply with the regulatory

    requirements imposed on them under the CEA, DCMs have long been

    determined not to be not small entities.\538\

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

    \538\ Id.

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

    The Commission also provided that certain entities that would be

    subject to the proposed rule--namely SDRs, SEFs, SDs, and MSPs--are

    entities for which the Commission had not previously made a size

    determination for RFA purposes. It proposed that these entities should

    not be considered to be small entities based upon their size and other

    characteristics.\539\

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

    \539\ Id.

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

    Finally, the Commission recognized that the proposed rule could

    have an economic effect on certain single end users, in particular

    those end users that enter into swap transactions with another end-

    user. Unlike the other parties to which the proposed rulemaking would

    apply, these end users are not subject to designation or registration

    with or to comprehensive regulation by the Commission. The Commission

    recognized that some of these end users may be small entities.

    Notwithstanding that some small entities may be subject to the

    real-time reporting rules, the determination to certify pursuant to

    section 605(b) of the RFA that the proposed rule would not have a

    significant economic effect on a substantial number of small entities

    was based upon the nature of the reporting hierarchy that was set forth

    in the proposal. The proposed rule was structured so that most swaps

    that are expected to be executed by an end user would not be required

    to be reported by the end user, but rather by a party that is subject

    to Commission registration and regulation.

    The reporting obligations primarily would fall on the trading

    facility on which an end-user executes a swap or, in the case of a swap

    executed ``off-facility'' with an SD or MSP, on the SD or MSP. Under

    the proposed rules, end users would only be required to report swaps

    that are executed ``off-facility'' with another end user, and in such

    circumstances, only one of the end users subject to the transaction

    would be required to report.

    The Commission received one comment respecting its RFA

    certification. An association of not-for-profit electric end users

    provided that its membership includes small entities as that term is

    defined in the RFA.\540\ The association commented that the Commission

    should conduct a regulatory flexibility analysis for each of its

    rulemakings individually, as well as a regulatory flexibility analysis

    for all of its rulemakings on a cumulative basis. The association

    supported its comment by providing that ``[e]ach of the complex and

    interrelated regulations currently being proposed by the Commission has

    both an individual, and a cumulative, effect on such small entities.''

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

    \540\ See CL-NFPEUU.

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

    Though the association asserted that some of its members are small,

    it did not provide any factual support to indicate that the proposed

    real-time reporting rule would have a significant economic effect on a

    substantial number of small entities, contrary to the Commission's

    certification. Nonetheless, in light of the association's comments, the

    Commission has given further consideration to the reporting hierarchy

    that was proposed.

    Critically, as noted above, the reporting hierarchy was established

    in order to ensure that any end users that may be required to comply

    with these real-time reporting rules would only have to do so with

    respect to transactions that are not conducted on or pursuant to the

    rules of a DCM or SEF or with a counterparty that is registered with

    and regulated by the Commission. Moreover, as the CEA as amended by the

    Dodd-Frank Act provides, most of the end users who will transact with

    each other ``off-facility'', are not expected to be small entities.

    Section 2(e) of the CEA was amended to provide that ``it shall be

    unlawful for any person, other than an eligible contract participant,

    to enter into a swap unless the swap is entered into on, or subject to

    the rules of [a regulated trading venue].'' \541\ Eligible Contract

    Participants (``ECPs'') were first defined in section 1a(12) of the CEA

    in the Commodity Futures Modernization Act (``CFMA'') in 2000, creating

    a category of individuals and entities that Congress determined to be

    sufficiently sophisticated in financial matters that they should be

    permitted to trade over-the-counter swaps without the protection of

    federal regulation.\542\ In the Dodd-Frank Act, Congress made two

    changes to the statutory ECP definition, both of which increased the

    thresholds to qualify as an ECP, making it harder for some entities and

    individuals to qualify.\543\ Thus, only entities that reach a

    significant level of financial resources or sophistication are eligible

    to transact in swaps ``off-facility.''

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

    \541\ 7 U.S.C. 2(e).

    \542\ See ``Report of the President's Working Group on Financial

    Markets'' (Nov. 1999) at 16 (recommending that ``sophisticated

    counterparties that use OTC derivatives simply do not require the

    same protections under the CEA as those required by retail

    investors''); H.R. Rep. No. 106-711 pt. 1, at 28 (2000) (Committee

    on Agriculture reporting that the CFMA ``implements the PWG

    recommendations,'' including the exclusion for ``bilateral swap

    agreements entered into by eligible parties (large and/or

    sophisticated) and done on a principal-to-principal basis)); and

    H.R. Rep. No. 106-711 pt. 2, at 212 (2000) (statement of

    Representative John J. LaFalce, providing that the ``rationale * * *

    is that swaps can be complex instruments requiring a variety of

    protections for financially unsophisticated consumers [and] come in

    a great variety of tailored obligations, some of which might,

    indeed, be so complex as to be inappropriate for all but the most

    seasoned of investors'').

    \543\ Compare section 1a(12) of the CEA, 7 U.S.C. 1a(12) (2009),

    with sections 721(a)(1) and (9) of the Dodd-Frank Act, respectively

    redesignating section 1a(12) as section 1a(18) and increasing

    thresholds for certain categories of ECP.

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

    We understand from the association's comments that some of their

    members who qualify as ECPs under the CEA have been determined to be

    ``small entities'' by the SBA. A member will be an SBA small entity if

    its total electric output for the preceding fiscal year did not exceed

    four million megawatt hours. Notwithstanding that some members that are

    ECPs may fall within the SBA small entity determination, the Commission

    understands this to be an anomaly. As a general rule, there are few

    small entities that will be eligible to transact in swaps ``off-

    facility'' under the CEA in light of the financial resource and

    sophistication thresholds established in the ECP definition.

    Accordingly, for the reasons stated in the proposal and foregoing

    discussion in response to the comments received from the association,

    the Commission continues to believe that the rulemaking will not 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

    [[Page 1242]]

    real-time reporting requirements being adopted herein will not have a

    significant economic impact on a substantial number of small entities.

    VII. List of Commenters

    1. Markit

    2. Asset Management Group of the Securities Industry and Financial

    Markets Association (``SIFMA AMG'')

    3. Managed Funds Association (``MFA'')

    4. Lawrence Schultz

    5. The Energy Authority

    6. Argus Media, Inc. (``Argus'')

    7. Professor Darrell Duffie, Stanford University (``Darrell Duffie'')

    8. Chesapeake Energy Corporation (``Chesapeake'')

    9. Members of Congress of the United States (House Committee on

    Financial Services--Congressman Spencer Bachus and Congressman Frank

    Lucas) (``Members of Congress'')

    10. Barclays Bank PLC, BNP Paribas S.A., Deutsche Bank AG, Royal Bank

    of Canada, The Royal Bank of Scotland Group PLC, Soci[eacute]t[eacute]

    G[eacute]n[eacute]rale, UBS AG (`` Seven Foreign Headquartered Banks'')

    11. J.P. Morgan (``JPM'')

    12. Gibson Dunn on behalf of the Coalition for Derivatives End-Users

    (``Coalition for Derivatives End-Users'')

    13. Committee on Capital Markets Regulation

    14. Goldman Sachs & Co. (``GS'')

    15. Not-For-Profit Energy End-User Coalition (``NFPEEU'')

    16. Barclays Capital, Inc. (``Barclays'')

    17. Air Transport Association (``ATA'')

    18. Pacific Investment Management Company, LLC (``PIMCO'')

    19. Committee on the Investment of Employee Benefit Assets & American

    Benefits Council (``ABC/CIEBA'')

    20. Commodity Markets Council (``CMC'')

    21. Better Markets, Inc. (``Better Markets'')

    22. Investment Company Institute (``ICI'')

    23. Intercontinental Exchange, Inc. (``ICE'')

    24. MarkitSERV

    25. Coalition of Physical Energy Companies (``COPE'')

    26. International Options Markets Association/World Federation of

    Exchanges (``WFE/IOMA'')

    27. UBS Securities LLC (``UBS'')

    28. Global Foreign Exchange Division of Association for Financial

    Markets in Europe (``AFME''), the Securities Industry and Financial

    Markets Association (``SIFMA'') and the Asia Securities Industry and

    Financial Markets Association (``ASIFMA'') (collectively, ``GFXD'')

    29. Edison Electrical Institute (``EEI'')

    30. Encana Marketing (USA) Inc. (``Encana'')

    31. LCH.Clearnet Group Limited (``LCH.Clearnet'')

    32. CME Group, Inc. (``CME'')

    33. Tradeweb Markets LLC (``Tradeweb'')

    34. Coalition of Energy End-Users

    35. Federal National Mortgage Association (``FNMA'')

    36. Reval.com, Inc. (``Reval'')

    37. Independent Petroleum Association of America (``IPAA'')

    38. PCS Nitrogen Fertilizer, L.P. (``PCS Nitrogen'')

    39. International Swaps and Derivatives Association & Securities

    Industry and Financial Markets Association (``ISDA/SIFMA'')

    40. International Energy Credit Association (``IE Credit Association'')

    41. Morgan Stanley (``MS'')

    42. Hunton & Williams LLP on behalf of the Working Group of Commercial

    Energy Firms (``Working Group of Commercial Energy Firms'')

    43. Freddie Mac

    44. Financial Services Roundtable (``FSR'')

    45. Vanguard

    46. TriOptima

    47. BlackRock, Inc. (``BlackRock'')

    48. Dominion Resources, Inc. (``Dominion'')

    49. Sadis & Goldberg LLP (``Sadis & Goldberg'')

    50. Metlife, Inc. (``Metlife'')

    51. Federal Home Loan Banks (``FHLBanks'')

    52. Wholesale Markets Brokers' Association, Americas (``WMBAA'')

    53. Depository Trust & Clearing Corporation (``DTCC'')

    54. Cleary Gottlieb on behalf of Bank of America Merrill Lynch, BNP

    Paribas, Citi; Credit Agricole Corporate and Investment Bank; Credit

    Suisse Securities (USA), Deutsche Bank AG, Morgan Stanley, Nomura

    Securities International, In., PNC Bank, National Association,

    Soci[eacute]t[eacute] G[eacute]n[eacute]rale, UBS Securities LLC, Wells

    Fargo & Company (``Cleary'')

    55. Barclays Bank PLC; BNP Paribas S.A.; Credit Suisse AG; Deutsche

    Bank AG; HSBC; Nomura Securities International, Inc.; Rabobank

    Nederland; Royal Bank of Canada; The Royal Bank of Scotland Group PLC;

    Soci[eacute]t[eacute] G[eacute]n[eacute]rale; The Toronto-Dominion

    Bank; UBS AG (``12 Foreign Headquartered Financial Institutions'')

    56. Financial Industry Regulatory Authority (``FINRA'')

    57. Soci[eacute]t[eacute] G[eacute]n[eacute]rale (``Soc Gen'')

    58. European Parliament Rapporteur for the Regulation on OTC

    Derivatives, Central Counterparties and Trade Repositories

    59. European Industry Representatives (Credit Suisse, Deutsche Bank,

    Citi, JP Morgan, Barclays, Goldman Sachs, UBS)

    60. Rabobank Nederland

    61. Insurance Groups (American Council of Life Insurers, Genworth,

    Manulife, John Hancock Life, New York Life, Northwestern Mutual,

    Prudential, MetLife, Allstate Life) (``Insurance Groups'')

    62. Fidelity Investments & Vanguard

    63. Credit Suisse

    64. ISDA & Kalorama Partners

    65. ISDA

    66. National Rural Electric Cooperative Association, American Public

    Power Association, Large Public Power Council, Edison Electric

    Institute, Electric Power Supply Association

    67. Futures Industry Association, Financial Services Forum,

    International Swaps and Derivatives Association, Securities Industry

    and Financial Markets Association (``FIA/FSF/ISDA/SIFMA'')

    68. The Bank of Tokyo-Mitsubishi UFJ, Ltd.; Mizuho Corporate Bank,

    Ltd.; Sumitomo Mitsui Banking Corporation (``Japanese Banks'')

    69. NextEra Energy, Inc. (``NextEra'')

    70. Chris Barnard

    71. Citi, Morgan Stanley, JP Morgan

    72. BP

    73. Industrial Energy Consumers of America (``IE Consumers of

    America'')

    74. Alice Corporation (``Alice'')

    75. Futures Industry Association, The Financial Services Roundtable,

    Institute of International Bankers, Insured Retirement Institute,

    International Swaps and Derivatives Association, Securities Industry

    and Financial Markets Association, U.S. Chamber of Commerce (``FIA/FSR/

    IIB/IRI/ISDA/SIFMA/Chamber'')

    76. Association of Institutional Investors (``AII'')

    77. American Gas Association (``AGA'')

    78. Natural Gas Exchange, Inc. (``NGX'')

    79. Shell Trading (US) Company & Shell Energy North America (``Shell'')

    80. American Petroleum Institute (``API'')

    81. Swaps & Derivatives Market Association (``SDMA'')

    82. Jackson National Life Insurance (``Jackson'')

    83. Eris Exchange, LLC (``Eris'')

    84. Citadel LLC (``Citadel'')

    [[Page 1243]]

    85. American Bankers Association & ABA Securities Association (``ABA/

    ABASA'')

    86. DC Energy, LLC (``DC Energy'')

    87. The Alternative Investment Management Association Ltd (``AIMA'')

    88. FXall

    List of Subjects in 17 CFR Part 43

    Real-time public reporting; Block trades; Large notional off-

    facility swaps; Reporting and recordkeeping requirements.

    In consideration of the foregoing, and pursuant to the authority in

    the Commodity Exchange Act, as amended, and in particular Section

    2(a)(13) of the Act, the Commission hereby adopts an amendment to

    Chapter I of Title 17 of the Code of Federal Regulations by adding part

    43 to read as follows:

    PART 43--REAL-TIME PUBLIC REPORTING

    Sec.

    43.1 Purpose, scope, and rules of construction.

    43.2 Definitions.

    43.3 Method and timing for real-time public reporting.

    43.4 Swap transaction and pricing data to be publicly disseminated

    in real-time.

    43.5 Time delays for public dissemination of swap transaction and

    pricing data.

    43.6 [Reserved]

    Appendix A to Part 43--Data Fields for Public Dissemination

    Appendix B to Part 43--Enumerated Physical Commodity Contracts and

    Other Contracts

    Appendix C to Part 43--Time Delays for Public Dissemination

    Authority: 7 U.S.C. 2(a), 12a(5) and 24a, as amended by Title

    VII of the Wall Street Reform and Consumer Protection Act, Pub. L.

    111-203, 124 Stat. 1376 (2010).

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

    (a) Purpose. This part implements rules relating to the reporting

    and public dissemination of certain swap transaction and pricing data

    to enhance transparency and price discovery pursuant to the Dodd-Frank

    Wall Street Reform and Consumer Protection Act of 2010, Pub. L. 111-

    203, 124 Stat. 1376 (2010).

    (b)(1) Scope. The provisions of this part shall apply to all swaps

    as defined in Section 1a(47) of the Act and any implementing

    regulations thereunder, including:

    (i) Swaps subject to the mandatory clearing requirement described

    in Section 2(h)(1) of the Act, including those swaps that are excepted

    from the requirement pursuant to Section 2(h)(7) of the Act;

    (ii) Swaps that are not subject to the mandatory clearing

    requirement described in Section 2(h)(1) of the Act, but are cleared at

    a registered derivatives clearing organization;

    (iii) Swaps that are not cleared at a registered derivatives

    clearing organization and are reported to a registered swap data

    repository that accepts and publicly disseminates swap transaction and

    pricing data in real-time; and

    (iv) Swaps that are required to be cleared under Section 2(h)(2) of

    the Act, but are not cleared.

    (2) This part also shall apply to registered entities as defined in

    the Act, as well as to parties to a swap including swap dealers, major

    swap participants and U.S.-based market participants in a manner as the

    Commission may determine.

    (c) Rules of construction. The examples in this part and in

    appendix A to this part are not exclusive. Compliance with a particular

    example or application of a sample clause, to the extent applicable,

    shall constitute compliance with the particular portion of the rule to

    which the example relates.

    (d) Severability. If any provision of this part, or the application

    thereof to any person or circumstance, is held invalid, such invalidity

    shall not affect other provisions or application of such provision to

    other persons or circumstances which can be given effect without the

    invalid provision or application.

    Sec. 43.2 Definitions.

    As used in this part:

    Act means the Commodity Exchange Act, as amended, 7 U.S.C. 1 et

    seq.

    Affirmation means the process by which parties to a swap verify

    (orally, in writing, electronically or otherwise) that they agree on

    the primary economic terms of a swap (but not necessarily all terms of

    the swap). Affirmation may constitute ``execution'' of the swap or may

    provide evidence of execution of the swap, but does not constitute

    confirmation (or confirmation by affirmation) of the swap.

    Appropriate minimum block size means the minimum notional or

    principal amount for a category of swaps that qualifies a swap within

    such category as a block trade or large notional off-facility swap.

    As soon as technologically practicable means as soon as possible,

    taking into consideration the prevalence, implementation and use of

    technology by comparable market participants.

    Asset class means a broad category of commodities including,

    without limitation, any ``excluded commodity'' as defined in Section

    1a(19) of the Act, with common characteristics underlying a swap. The

    asset classes include interest rate, foreign exchange, credit, equity,

    other commodity and such other asset classes as may be determined by

    the Commission.

    Block trade means a publicly reportable swap transaction that:

    (1) Involves a swap that is listed on a registered swap execution

    facility or designated contract market;

    (2) Occurs away from the registered swap execution facility's or

    designated contract market's trading system or platform and is executed

    pursuant to the registered swap execution facility's or designated

    contract market's rules and procedures;

    (3) Has a notional or principal amount at or above the appropriate

    minimum block size applicable to such swap; and

    (4) Is reported subject to the rules and procedures of the

    registered swap execution facility or designated contract market and

    the rules described in this part, including the appropriate time delay

    requirements set forth in Sec. 43.5 of this part.

    Business day means the twenty-four hour day, on all days except

    Saturdays, Sundays and legal holidays, in the location of the reporting

    party or registered entity reporting data for the swap.

    Business hours means the consecutive hours of one or more

    consecutive business days.

    Confirmation means the consummation (electronic or otherwise) of

    legally binding documentation (electronic or otherwise) that

    memorializes the agreement of the parties to all terms of a swap. A

    confirmation shall be in writing (electronic or otherwise) and shall

    legally supersede any previous agreement (electronic or otherwise)

    relating to the swap.

    Confirmation by affirmation means the process by which one party to

    a swap acknowledges its assent to the complete swap terms submitted by

    the other party to the swap. If the parties to a swap are using a

    confirmation service vendor, complete swap terms may be submitted

    electronically by a party to such vendor's platform and the other party

    may affirm such terms on such platform.

    Embedded option means any right, but not an obligation, provided to

    one party of a swap by the other party to the swap that provides the

    party holding the option with the ability to change any one or more of

    the economic terms of the swap as those terms previously were

    established at confirmation (or were in effect on the start date).

    [[Page 1244]]

    Executed means the completion of the execution process.

    Execution means an agreement by the parties (whether orally, in

    writing, electronically, or otherwise) to the terms of a swap that

    legally binds the parties to such swap terms under applicable law.

    Execution occurs simultaneous with or immediately following the

    affirmation of the swap.

    Large notional off-facility swap means an off-facility swap that

    has a notional or principal amount at or above the appropriate minimum

    block size applicable to such publicly reportable swap transaction and

    is not a block trade as defined in Sec. 43.2 of the Commission's

    regulations.

    Novation means the process by which a party to a swap transfers all

    of its rights, liabilities, duties and obligations under the swap to a

    new legal party other than the counterparty to the swap. The transferee

    accepts all of the transferor's rights, liabilities, duties and

    obligations under the swap. A novation is valid as long as the

    transferor and the remaining party to the swap are given notice, and

    the transferor, transferee and remaining party to the swap consent to

    the transfer.

    Off-facility swap means any publicly reportable swap transaction

    that is not executed on or pursuant to the rules of a registered swap

    execution facility or designated contract market.

    Other commodity means any commodity that is not categorized in the

    other asset classes as may be determined by the Commission.

    Public dissemination and publicly disseminate means to publish and

    make available swap transaction and pricing data in a non-

    discriminatory manner, through the Internet or other electronic data

    feed that is widely published and in machine-readable electronic

    format.

    Publicly reportable swap transaction means:

    (1) Unless otherwise provided in this part--

    (i) Any executed swap that is an arm's-length transaction between

    two parties that results in a corresponding change in the market risk

    position between the two parties; or

    (ii) Any termination, assignment, novation, exchange, transfer,

    amendment, conveyance, or extinguishing of rights or obligations of a

    swap that changes the pricing of the swap.

    (2) Examples of executed swaps that do not fall within the

    definition of publicly reportable swap may include:

    (i) Internal swaps between one-hundred percent owned subsidiaries

    of the same parent entity; and

    (ii) Portfolio compression exercises.

    (3) These examples represent swaps that are not at arm's length and

    thus are not publicly reportable swap transactions, notwithstanding

    that they do result in a corresponding change in the market risk

    position between two parties.

    Real-time public reporting means the reporting of data relating to

    a swap transaction, including price and volume, as soon as

    technologically practicable after the time at which the swap

    transaction has been executed.

    Remaining party means a party to a swap that consents to a

    transferor's transfer by novation of all of the transferor's rights,

    liabilities, duties and obligations under such swap to a transferee.

    Reporting party means the party to a swap with the duty to report a

    publicly reportable swap transaction in accordance with this part and

    section 2(a)(13)(F) of the Act.

    Transferee means a party to a swap that accepts, by way of

    novation, all of a transferor's rights, liabilities, duties and

    obligations under such swap with respect to a remaining party.

    Transferor means a party to a swap that transfers, by way of

    novation, all of its rights, liabilities, duties and obligations under

    such swap, with respect to a remaining party, to a transferee.

    Unique product identifier means a unique identification of a

    particular level of the taxonomy of the product in an asset class or

    sub-asset class in question, as further described in Sec. 43.4(f) and

    appendix A to this part. Such unique product identifier may combine the

    information from one or more of the data fields described in appendix

    A.

    Widely published means to publish and make available through

    electronic means in a manner that is freely available and readily

    accessible to the public.

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

    (a) Responsibilities of parties to a swap to report swap

    transaction and pricing data in real-time--(1) In general. A reporting

    party shall report any publicly reportable swap transaction to a

    registered swap data repository as soon as technologically practicable

    after such publicly reportable swap transaction is executed. For

    purposes of this part, a registered swap data repository includes any

    swap data repository provisionally registered with the Commission

    pursuant to part 49 of this chapter.

    (2) Swaps executed on or pursuant to the rules of a registered swap

    execution facility or designated contract market. A party to a publicly

    reportable swap transaction shall satisfy its reporting requirement

    under this section by executing a publicly reportable swap transaction

    on or pursuant to the rules of a registered swap execution facility or

    designated contract market.

    (3) Off-facility swaps. All off-facility swaps shall be reported by

    the reporting party as soon as technologically practicable following

    execution, to a registered swap data repository for the appropriate

    asset class in accordance with the rules set forth in this part. Unless

    otherwise agreed to by the parties prior to the execution of the

    publicly reportable swap transaction, the following persons shall be

    reporting parties for off-facility swaps:

    (i) If only one party is a swap dealer or major swap participant,

    then the swap dealer or major swap participant shall be the reporting

    party;

    (ii) If one party is a swap dealer and the other party is a major

    swap participant, then the swap dealer shall be the reporting party;

    (iii) If both parties are swap dealers, then the swap dealers shall

    designate which party shall be the reporting party;

    (iv) If both parties are major swap participants, then the major

    swap participants shall designate which party shall be the reporting

    party;

    (v) If neither party is a swap dealer or a major swap participant,

    then the parties shall designate which party (or its agent) shall be

    the reporting party.

    (b) Public dissemination of swap transaction and pricing data--(1)

    Publicly reportable swap transactions executed on or pursuant to the

    rules of a registered swap execution facility or designated contract

    market. A registered swap execution facility or designated contract

    market shall satisfy the requirements of this subparagraph by

    transmitting swap transaction and pricing data to a registered swap

    data repository, as soon as technologically practicable after the

    publicly reportable swap transaction has been executed on or pursuant

    to the rules of such trading platform or facility.

    (2) Public dissemination of swap transaction and pricing data by

    registered swap data repositories. A registered swap data repository

    shall ensure that swap transaction and pricing data is publicly

    disseminated, as soon as technologically practicable after such data is

    received from a registered swap execution facility, designated contract

    market or reporting party, unless such publicly reportable swap

    transaction is subject to a time delay described in Sec. 43.5 of this

    part, in which case the publicly reportable swap

    [[Page 1245]]

    transaction shall be publicly disseminated in the manner described in

    Sec. 43.5.

    (3) Prohibitions on disclosure of data. (i) If there is a

    registered swap data repository for an asset class, a registered swap

    execution facility or designated contract market shall not disclose

    swap transaction and pricing data relating to publicly reportable swap

    transactions in such asset class, prior to the public dissemination of

    such data by a registered swap data repository unless:

    (A) Such disclosure is made no earlier than the transmittal of such

    data to a registered swap data repository for public dissemination;

    (B) Such disclosure is only made to market participants on such

    registered swap execution facility or designated contract market;

    (C) Market participants are provided advance notice of such

    disclosure; and

    (D) Any such disclosure by the registered swap execution facility

    or designated contract market is non-discriminatory.

    (ii) If there is a registered swap data repository for an asset

    class, a swap dealer or major swap participant shall not disclose swap

    transaction and pricing data relating to publicly reportable swap

    transactions in such asset class, prior to the public dissemination of

    such data by a registered swap data repository unless:

    (A) Such disclosure is made no earlier than the transmittal of such

    data to a registered swap data repository for public dissemination;

    (B) Such disclosure is only made to the customer base of such swap

    dealer or major swap participant, including parties who maintain

    accounts with or have been swap counterparties with such swap dealer or

    major swap participant;

    (C) Swap counterparties are provided advance notice of such

    disclosure; and

    (D) Any such disclosure by the swap dealer or major swap

    participant is non-discriminatory.

    (c) Requirements for registered swap data repositories in providing

    the public dissemination of swap transaction and pricing data in real-

    time--(1) Compliance with 17 CFR part 49. Any registered swap data

    repository that accepts and publicly disseminates swap transaction and

    pricing data in real-time shall comply with part 49 of this chapter and

    shall publicly disseminate swap transaction and pricing data in

    accordance with this part as soon as technologically practicable upon

    receipt of such data, except as otherwise provided in this part.

    (2) Acceptance and public dissemination of all swaps in an asset

    class. Any registered swap data repository that accepts and publicly

    disseminates swap transaction and pricing data in real-time for swaps

    in its selected asset class shall accept and publicly disseminate swap

    transaction and pricing data in real-time for all publicly reportable

    swap transactions within such asset class, unless otherwise prescribed

    by the Commission.

    (3) Annual independent review. Any registered swap data repository

    that accepts and publicly disseminates swap transaction and pricing

    data in real-time shall perform, on an annual basis, an independent

    review in accordance with established audit procedures and standards of

    the registered swap data repository's security and other system

    controls for the purposes of ensuring compliance with the requirements

    in this part.

    (d) Availability of swap transaction and pricing data to the

    public. (1) Registered swap data repositories shall publicly

    disseminate swap transaction and pricing data in a consistent, usable

    and machine-readable electronic format that allows the data to be

    downloaded, saved and analyzed.

    (2) Data that is publicly disseminated pursuant to this part shall

    be available from an Internet Web site in a format that is freely

    available and readily accessible to the public.

    (3) Registered swap data repositories shall provide to the

    Commission a hyperlink to the Internet Web site where publicly

    disseminated swap transaction and pricing data can be accessed by the

    public.

    (e) Errors or omissions--(1) In general. Any errors or omissions in

    swap transaction and pricing data that were publicly disseminated in

    real-time shall be corrected or cancelled in the following manner:

    (i) If a party to the swap becomes aware of an error or omission in

    the swap transaction and pricing data reported with respect to such

    swap, such party shall promptly notify the other party of the error

    and/or correction.

    (ii) If a reporting party to a swap becomes aware of an error or

    omission in the swap transaction or pricing data which it reported to a

    registered swap data repository or which was reported by a registered

    swap execution facility or designated contract market with respect to

    such swap, either through its own initiative or through notice by the

    other party to the swap, the reporting party shall promptly submit

    corrected data to the same registered swap execution facility,

    designated contract market or registered swap data repository.

    (iii) If the registered swap execution facility or designated

    contract market becomes aware of an error or omission in the swap

    transaction or pricing data reported with respect to such swap, or

    receives notification from the reporting party, the registered swap

    execution facility or designated contract market shall promptly submit

    corrected data to the same registered swap data repository.

    (iv) Any registered swap data repository that accepts and publicly

    disseminates swap transaction and pricing data in real-time shall

    publicly disseminate any cancellations or corrections to such data, as

    soon as technologically practicable after receipt or discovery of any

    such cancellation or correction.

    (2) Improper cancellation or correction. Reporting parties,

    registered swap execution facilities, designated contract markets and

    registered swap data repositories shall not submit or agree to submit a

    cancellation or correction for the purpose of re-reporting swap

    transaction and pricing data in order to gain or extend a delay in

    public dissemination of accurate swap transaction or pricing data or to

    otherwise evade the reporting requirements in this part.

    (3) Cancellation. A registered swap data repository shall cancel

    any incorrect data that had been publicly disseminated by publicly

    disseminating a cancellation of such data, as soon as technologically

    practicable, in the manner described in appendix A to this part.

    (4) Correction. A registered swap data repository shall correct any

    incorrect data that had been publicly disseminated by publicly

    disseminating a cancellation of the incorrect swap transaction and

    pricing data and then publicly disseminating the correct data, as soon

    as technologically practicable, in the manner described in appendix A

    to this part.

    (f) Hours of operation of registered swap data repositories. Unless

    otherwise provided in this subsection, a registered swap data

    repository shall have systems in place to continuously receive and

    publicly disseminate swap transaction and pricing data in real-time

    pursuant to this part.

    (1) A registered swap data repository may declare closing hours to

    perform system maintenance.

    (2) A registered swap data repository shall, to the extent

    reasonably possible, avoid scheduling closing hours when, in its

    estimation, the U.S. market and major foreign markets are most active.

    [[Page 1246]]

    (3) A registered swap data repository shall comply with the

    requirements under part 40 of this chapter in setting closing hours and

    shall provide advance notice of its closing hours to market

    participants and the public.

    (g) Acceptance of data during closing hours. During closing hours,

    a registered swap data repository shall have the capability to receive

    and hold in queue any data regarding publicly reportable swap

    transactions pursuant to this part.

    (1) Upon any reopening after closing hours, a registered swap data

    repository shall promptly and publicly disseminate the swap transaction

    and pricing data of swaps held in queue, in accordance with the

    requirements of this part.

    (2) If at any time during closing hours a registered swap data

    repository is unable to receive and hold in queue swap transaction and

    pricing data pursuant to this part, then the registered swap data

    repository shall immediately upon reopening issue notice that it has

    resumed normal operations. Any registered swap execution facility,

    designated contract market or reporting party that is obligated under

    this section to report data to the registered swap data repository

    shall report the data to the registered swap data repository

    immediately after receiving such notice.

    (h) Timestamp requirements. In addition to the execution timestamp

    described in appendix A to this part, registered entities, swap dealers

    and major swap participants shall have the following timestamp

    requirements with respect to real-time public reporting of swap

    transaction and pricing data for all publicly reportable swap

    transactions:

    (1) A registered swap execution facility or designated contract

    market shall timestamp swap transaction and pricing data relating to a

    publicly reportable swap transaction with the date and time, to the

    nearest second of when such registered swap execution facility or

    designated contract market:

    (i) Receives data from a swap counterparty (if applicable); and

    (ii) Transmits such data to a registered swap data repository for

    public dissemination.

    (2) A registered swap data repository shall timestamp swap

    transaction and pricing data relating to a publicly reportable swap

    transaction with the date and time, to the nearest second when such

    registered swap data repository:

    (i) Receives data from a registered swap execution facility,

    designated contract market or reporting party; and

    (ii) Publicly disseminates such data.

    (3) A swap dealer or major swap participant shall timestamp swap

    transaction and pricing data relating to an off-facility swap with the

    date and time, to the nearest second when such swap dealer or major

    swap participant transmits such data to a registered swap data

    repository for public dissemination.

    (4) Records of all timestamps required by this subsection shall be

    maintained for a period of at least five years from the execution of

    the publicly reportable swap transaction.

    (i) Fees. Any fees or charges assessed on a reporting party,

    registered swap execution facility or designated contract market by a

    registered swap data repository that accepts and publicly disseminates

    swap transaction and pricing data in real-time for the collection of

    such data shall be equitable and non-discriminatory. If such registered

    swap data repository allows a fee discount based on the volume of data

    reported to it for public dissemination, then such discount shall be

    made available to all reporting parties, registered swap execution

    facilities and designated contract markets in an equitable and non-

    discriminatory manner.

    Sec. 43.4 Swap transaction and pricing data to be publicly

    disseminated in real-time.

    (a) In general. Swap transaction and pricing information shall be

    reported to a registered swap data repository so that the registered

    swap data repository can publicly disseminate swap transaction and

    pricing data in real-time in accordance with this part, including the

    manner described in this section and appendix A to this part.

    (b) Public dissemination of data fields. Any registered swap data

    repository that accepts and publicly disseminates swap transaction and

    pricing data in real-time shall publicly disseminate the information

    described in appendix A to this part, as applicable, for any publicly

    reportable swap transaction.

    (c) Additional swap information. A registered swap data repository

    that accepts and publicly disseminates swap transaction and pricing

    data in real-time may require reporting parties, registered swap

    execution facilities and designated contract markets to report to such

    registered swap data repository, such information that is necessary to

    compare the swap transaction and pricing data that was publicly

    disseminated in real-time to the data reported to a registered swap

    data repository pursuant to Section 2(a)(13)(G) of the Act or to

    confirm that parties to a swap have reported in a timely manner

    pursuant to Sec. 43.3 of this part. Such additional information shall

    not be publicly disseminated by the registered swap data repository.

    (d) Anonymity of the parties to a publicly reportable swap

    transaction--(1) In general. Swap transaction and pricing data that is

    publicly disseminated in real-time shall not disclose the identities of

    the parties to the swap or otherwise facilitate the identification of a

    party to a swap. A registered swap data repository that accepts and

    publicly disseminates swap transaction and pricing data in real-time

    shall not publicly disseminate such data in a manner that discloses or

    otherwise facilitates the identification of a party to a swap.

    (2) Actual product description reported to registered swap data

    repository. Reporting parties, registered swap execution facilities and

    designated contract markets shall provide a registered swap data

    repository with swap transaction and pricing data that includes an

    actual description of the underlying asset(s). This requirement is

    separate from the requirement that a reporting party, registered swap

    execution facility or designated contract market shall report swap data

    to a registered swap data repository pursuant to Section 2(a)(13)(G) of

    the Act and the Commission's regulations.

    (3) Public dissemination of the actual description of underlying

    asset(s). Notwithstanding the anonymity protection for certain swaps in

    the other commodity asset class in Sec. 43.4(d)(4)(ii), a registered

    swap data repository shall publicly disseminate the actual underlying

    asset(s) of all publicly reportable swap transactions in the interest

    rate, credit, equity and foreign exchange asset classes.

    (4) Public dissemination of the underlying asset(s) for certain

    swaps in the other commodity asset class. A registered swap data

    repository shall publicly disseminate swap transaction and pricing data

    in the other commodity asset class as described in this subsection.

    (i) A registered swap data repository shall publicly disseminate

    swap transaction and pricing data for publicly reportable swap

    transactions in the other commodity asset class in the manner described

    in Sec. 43.4(d)(4)(ii).

    (ii) The actual underlying asset(s) shall be publicly disseminated

    for the following publicly reportable swap transactions in the other

    commodity asset class:

    (A) Any publicly reportable swap transaction that references one of

    the contracts described in appendix B to this part;

    (B) Any publicly reportable swap transaction that is economically

    related

    [[Page 1247]]

    to one of the contracts described in appendix B to this part; and

    (C) Any publicly reportable swap transaction executed on or

    pursuant to the rules of a registered swap execution facility or

    designated contract market.

    (e) Unique product identifier. If a unique product identifier is

    developed that sufficiently describes one or more of the swap

    transaction and pricing data fields for real-time reporting described

    in appendix A to this part, then such unique product identifier may be

    publicly disseminated in lieu of the data fields that it describes.

    (f) Reporting of notional or principal amounts to a registered swap

    data repository--(1) Off-facility swaps. The reporting party shall

    report the actual notional or principal amount of any off-facility swap

    to a registered swap data repository that accepts and publicly

    disseminates such data pursuant to part 43.

    (2) Swaps executed on or pursuant to the rules of a registered swap

    execution facility or designated contract market. (i) A registered swap

    execution facility or designated contract market shall transmit the

    actual notional or principal amount for all swaps executed on or

    pursuant to the rules of such registered swap execution facility or

    designated contract market, to a registered swap data repository that

    accepts swaps in the asset class.

    (ii) The actual notional or principal amount for any block trade

    executed pursuant to the rules of a registered swap execution facility

    or designated contract market shall be reported to the registered swap

    execution facility or designated contract market pursuant to the rules

    of the registered swap execution facility or designated contract

    market.

    (g) Public dissemination of rounded notional or principal amounts.

    The notional or principal amount of a publicly reportable swap

    transaction, as described in appendix A to this part, shall be rounded

    and publicly disseminated by a registered swap data repository as

    follows:

    (1) If the notional or principal amount is less than one thousand,

    round to nearest five, but in no case shall a publicly disseminated

    notional or principal amount be less than five;

    (2) If the notional or principal amount is less than ten thousand

    but equal to or greater than one thousand, round to nearest one

    hundred;

    (3) If the notional or principal amount is less than 100 thousand

    but equal to or greater than ten thousand, round to nearest one

    thousand;

    (4) If the notional or principal amount is less than one million

    but equal to or greater than 100 thousand, round to nearest ten

    thousand;

    (5) If the notional or principal amount is less than 100 million

    but equal to or greater than one million, round to the nearest one

    million;

    (6) If the notional or principal amount is less than 500 million

    but equal to or greater than 100 million, round to the nearest ten

    million;

    (7) If the notional or principal amount is less than one billion

    but equal to or greater than 500 million, round to the nearest 50

    million;

    (8) If the notional or principal amount is less than 100 billion

    but equal to or greater than one billion, round to the nearest one

    billion;

    (9) If the notional or principal amount is greater than 100

    billion, round to the nearest 50 billion.

    (h) Public dissemination caps on notional or principal amounts. The

    rounded notional or principal amount that is publicly disseminated for

    a publicly reportable swap transaction shall be capped in a manner that

    adjusts in accordance with the appropriate minimum block size that

    corresponds to such publicly reportable swap transaction. If there is

    no appropriate minimum block size applicable to a publicly reportable

    swap transaction, then the cap on the notional or principal amount that

    is publicly disseminated shall be applied in the following manner:

    (1) Interest rate swaps. (i) The publicly disseminated notional or

    principal amount for an interest rate swap subject to the rules in this

    part with a tenor greater than zero up to and including two years shall

    be capped at USD 250 million.

    (ii) The publicly disseminated notional or principal amount for an

    interest rate swap subject to the rules in this part with a tenor

    greater than two years up to and including ten years shall be capped at

    USD 100 million.

    (iii) The publicly disseminated notional or principal amount for an

    interest rate swap subject to the rules in this part with a tenor

    greater than ten years shall be capped at USD 75 million.

    (2) Credit swaps. The publicly disseminated notional or principal

    amount for a credit swap subject to the rules in this part shall be

    capped at USD 100 million.

    (3) Equity swaps. The publicly disseminated notional or principal

    amount for an equity swap subject to the rules in this part shall be

    capped at USD 250 million.

    (4) Foreign exchange swaps. The publicly disseminated notional or

    principal amount for a foreign exchange swap subject to the rules in

    this part shall be capped at USD 250 million.

    (5) Other commodity swaps. The publicly disseminated notional or

    principal amount for any other commodity swap subject to the rules in

    this part shall be capped at USD 25 million.

    Sec. 43.5 Time delays for public dissemination of swap transaction

    and pricing data.

    (a) In general. The time delay for the real-time public reporting

    of a block trade or large notional off-facility swap begins upon

    execution, as defined in Sec. 43.2 of this part. It is the

    responsibility of the registered swap data repository that accepts and

    publicly disseminates swap transaction and pricing data in real-time to

    ensure that the block trade or large notional off-facility swap

    transaction and pricing data is publicly disseminated pursuant to this

    part upon the expiration of the appropriate time delay described in

    Sec. 43.5(d) through (h).

    (b) Public dissemination of publicly reportable swap transactions

    subject to a time delay. A registered swap data repository shall

    publicly disseminate swap transaction and pricing data that is subject

    to a time delay pursuant to this paragraph, as follows:

    (1) No later than the prescribed time delay period described in

    this paragraph;

    (2) No sooner than the prescribed time delay period described in

    this paragraph; and

    (3) Precisely upon the expiration of the time delay period

    described in this paragraph.

    (c) Interim time delay--(1) In general. The public dissemination of

    swap transaction and pricing data relating to any publicly reportable

    swap transaction shall receive the same time delays for block trades

    and large notional off-facility swaps, as described in this subsection,

    until such time as an appropriate minimum block size is established

    with respect to such publicly reportable swap transaction.

    (2) Swaps executed on or pursuant to the rules of a registered swap

    execution facility or designated contract market. Any publicly

    reportable swap transaction that does not have an appropriate minimum

    block size and that is executed on or pursuant to the rules of a

    registered swap execution facility or designated contract market shall

    follow the time delays set forth in Sec. 43.5(d) until such time that

    an appropriate minimum block size is established for such publicly

    reportable swap transaction.

    (3) Off-facility swaps subject to the mandatory clearing

    requirement. Any

    [[Page 1248]]

    off-facility swap that does not have an appropriate minimum block size

    and that is subject to the mandatory clearing requirement described in

    Section 2(h)(1) of the Act and Commission regulations, with the

    exception of those off-facility swaps that are either excepted from the

    mandatory clearing requirement pursuant to Section 2(h)(7) of the Act

    and Commission regulations or that are required to be cleared under

    Section 2(h)(2) of the Act and Commission regulations but are not

    cleared, shall follow the time delays set forth in Sec. 43.5(e) until

    such time that an appropriate minimum block size is established for

    such off-facility swap.

    (4) Off-facility swaps in the interest rate, credit, foreign

    exchange and equity asset classes not subject to the mandatory clearing

    requirement with at least one swap dealer or major swap participant

    counterparty. Any off-facility swap in the interest rate, credit,

    foreign exchange or equity asset classes, where at least one party is a

    swap dealer or major swap participant, that is not subject to the

    mandatory clearing requirement or is excepted from such mandatory

    clearing requirement and that does not have an appropriate minimum

    block size shall follow the time delays set forth in Sec. 43.5(f)

    until such time that an appropriate minimum block size is established

    for such off-facility swap.

    (5) Off-facility swaps in the other commodity asset class not

    subject to the mandatory clearing requirement with at least one swap

    dealer or major swap participant counterparty. Any off-facility swap in

    the other commodity asset class, where at least one party is a swap

    dealer or major swap participant, that is not subject to the mandatory

    clearing requirement or is excepted from such mandatory clearing

    requirement and that does not have an appropriate minimum block size

    shall follow the time delays set forth in Sec. 43.5(g) until such time

    that an appropriate minimum block size is established for such off-

    facility swap.

    (6) Off-facility swaps in all asset classes not subject to the

    mandatory clearing requirement in which neither counterparty is a swap

    dealer or major swap participant. Any off-facility swap, in all asset

    classes, where neither party is a swap dealer or major swap

    participant, that is not subject to the mandatory clearing requirement

    or is excepted from such mandatory clearing requirement and that does

    not have an appropriate minimum block size shall follow the time delays

    set forth in Sec. 43.5(h) until such time that an appropriate minimum

    block size is established for such off-facility swap.

    (7) Time delays for public dissemination upon establishment of an

    appropriate minimum block size. After an appropriate minimum block size

    is established for a particular swap or category of swaps, all publicly

    reportable swap transactions that are below the appropriate minimum

    block size shall be publicly disseminated as soon as technologically

    practicable after execution pursuant to Sec. 43.3 of this part.

    (d) Time delay for block trades executed pursuant to the rules of a

    registered swap execution facility or designated contract market. Any

    block trade that is executed pursuant to the rules of a registered swap

    execution facility or designated contract market shall receive a time

    delay in the public dissemination of swap transaction and pricing data

    as follows:

    (1) Time delay during Year 1. For one year beginning on the

    compliance date of this part, the time delay for public dissemination

    of swap transaction and pricing data for all publicly reportable swap

    transactions described in Sec. 43.5(d) shall be 30 minutes immediately

    after execution of such publicly reportable swap transaction.

    (2) Time delay after Year 1. Beginning on the first anniversary of

    the compliance date of this part, the time delay for public

    dissemination of swap transaction and pricing data for all publicly

    reportable swap transactions described in Sec. 43.5(d) shall be 15

    minutes immediately after execution of such publicly reportable swap

    transaction.

    (e) Time delay for large notional off-facility swaps subject to the

    mandatory clearing requirement--(1) In general. This subsection shall

    not apply to off-facility swaps that are excepted from the mandatory

    clearing requirement pursuant to Section 2(h)(7) of the Act and

    Commission regulations, and this subsection shall not apply to those

    swaps that are required to be cleared under Section 2(h)(2) of the Act

    and Commission regulations but are not cleared.

    (2) Swaps subject to the mandatory clearing requirement where at

    least one party is a swap dealer or major swap participant. Any large

    notional off-facility swap that is subject to the mandatory clearing

    requirement described in Section 2(h)(1) of the Act and Commission

    regulations, in which at least one party is a swap dealer or major swap

    participant, shall receive a time delay as follows:

    (i) Time delay during Year 1. For one year beginning on the

    compliance date of this part, the time delay for public dissemination

    of swap transaction and pricing data for all swaps described in Sec.

    43.5(e)(2) shall be 30 minutes immediately after execution of such

    swap.

    (ii) Time delay after Year 1. Beginning on the first anniversary of

    the compliance date of this part, the time delay for public

    dissemination of swap transaction and pricing data for all swaps

    described in Sec. 43.5(e)(2) shall be 15 minutes immediately after

    execution of such swap.

    (3) Swaps subject to the mandatory clearing requirement where

    neither party is a swap dealer or major swap participant. Any large

    notional off-facility swap that is subject to the mandatory clearing

    requirement described in Section 2(h)(1) of the Act and Commission

    regulations, in which neither party is a swap dealer or major swap

    participant, shall receive a time delay as follows:

    (i) Time delay during Year 1. For one year beginning on the

    compliance date of this part, the time delay for public dissemination

    of swap transaction and pricing data for all swaps described in Sec.

    43.5(e)(3) shall be four hours immediately after execution of such

    swap.

    (ii) Time delay during Year 2. For one year beginning on the first

    anniversary of the compliance date of this part, the time delay for

    public dissemination of swap transaction and pricing data for all swaps

    described in Sec. 43.5(e)(3) shall be two hours immediately after

    execution of such swap.

    (iii) Time delay after Year 2. Beginning on the second anniversary

    of the compliance date of this part, the time delay for public

    dissemination of swap transaction and pricing data for all swaps

    described in Sec. 43.5(e)(3) shall be one hour immediately after

    execution of such swap.

    (f) Time delay for large notional off-facility swaps in the

    interest rate, credit, foreign exchange or equity asset classes not

    subject to the mandatory clearing requirement with at least one swap

    dealer or major swap participant counterparty. Any large notional off-

    facility swap in the interest rate, credit, foreign exchange or equity

    asset classes where at least one party is a swap dealer or major swap

    participant, that is not subject to the mandatory clearing requirement

    or is excepted from such mandatory clearing requirement, shall receive

    a time delay in the public dissemination of swap transaction and

    pricing data as follows:

    (1) Time delay during Year 1. For one year beginning on the

    compliance date of this part, the time delay for public dissemination

    of swap transaction and pricing data for all swaps described in Sec.

    43.5(f) shall be one hour immediately

    [[Page 1249]]

    after execution of such swap; however, any large notional off-facility

    swap in the interest rate, credit, foreign exchange or equity asset

    classes in which one party is not a swap dealer or major swap

    participant and such party is not a financial entity as defined in

    Section 2(h)(7)(C) of the Act and Commission regulations, shall receive

    a time delay of one hour immediately after execution of such swap; or

    if such swap transaction or pricing data is received by the registered

    swap data repository later than one hour immediately after execution,

    the registered swap data repository shall publicly disseminate such

    data as soon as technologically practicable after the data is received.

    (2) Time delay during Year 2. For one year beginning on the first

    anniversary of the compliance date of this part, the time delay for

    public dissemination of swap transaction and pricing data for all swaps

    described in Sec. 43.5(f) shall be 30 minutes immediately after

    execution of such swap; however, any large notional off-facility swap

    in the interest rate, credit, foreign exchange or equity asset classes

    in which one party is not a swap dealer or major swap participant and

    such party is not a financial entity as defined in Section 2(h)(7)(C)

    of the Act and Commission regulations, shall receive a time delay of 30

    minutes immediately after execution of such swap; or if such swap

    transaction or pricing data is received by the registered swap data

    repository later than 30 minutes immediately after execution, the

    registered swap data repository shall publicly disseminate such data as

    soon as technologically practicable after the data is received.

    (3) Time delay after Year 2. Beginning on the second anniversary of

    the compliance date of this part, the time delay for public

    dissemination of swap transaction and pricing data for all swaps

    described in Sec. 43.5(f) shall be 30 minutes immediately after

    execution of such swap.

    (g) Time delay for large notional off-facility swaps in the other

    commodity asset class not subject to the mandatory clearing requirement

    with at least one swap dealer or major swap participant counterparty.

    Any large notional off-facility swap in the other commodity asset class

    where at least one party is a swap dealer or major swap participant,

    that is not subject to the mandatory clearing requirement or is exempt

    from such mandatory clearing requirement, shall receive a time delay in

    the public dissemination of swap transaction and pricing data as

    follows:

    (1) Time delay during Year 1. For one year beginning on the

    compliance date of this part, the time delay for public dissemination

    of swap transaction and pricing data for all swaps described in Sec.

    43.5(g) shall be four hours immediately after execution of such swap;

    however, any large notional off-facility swap in the other commodity

    asset class in which only one party is not a swap dealer or major swap

    participant and such party is not a financial entity as defined in

    Section 2(h)(7)(C) of the Act and Commission regulations, shall receive

    a time delay of four hours immediately after execution of such swap, or

    if such swap transaction or pricing data is received by the registered

    swap data repository later than four hours immediately after execution

    of such swap, the registered swap data repository shall publicly

    disseminate such data as soon as technologically practicable after the

    data is received.

    (2) Time delay during Year 2. For one year beginning on the first

    anniversary of the compliance date of this part, the time delay for

    public dissemination of swap transaction and pricing data for all swaps

    described in Sec. 43.5(g) shall be two hours immediately after

    execution of such swap; however, any large notional off-facility swap

    in the other commodity asset class in which only one party is not a

    swap dealer or major swap participant and such party is not a financial

    entity as defined in Section 2(h)(7)(C) of the Act and Commission

    regulations, shall receive a time delay of two hours immediately after

    execution of such swap, or if such swap transaction or pricing data is

    received by the registered swap data repository later than two hours

    immediately after execution, the registered swap data repository shall

    publicly disseminate such data as soon as technologically practicable

    after the data is received.

    (3) Time delay after Year 2. Beginning on the second anniversary of

    the compliance date of this part, the time delay for public

    dissemination of swap transaction and pricing data for all swaps

    described in Sec. 43.5(g) shall be two hours after the execution of

    such swap.

    (h) Time delay for large notional off-facility swaps in all asset

    classes not subject to the mandatory clearing requirement in which

    neither counterparty is a swap dealer or a major swap participant. Any

    large notional off-facility swap in which neither party is a swap

    dealer or a major swap participant, which is not subject to the

    mandatory clearing requirement or is exempt from such mandatory

    clearing requirement, shall receive a time delay in the public

    dissemination of swap transaction and pricing data as follows:

    (1) Time delay during Year 1. For one year beginning on the

    compliance date of this part, the time delay for public dissemination

    of swap transaction and pricing data for all swaps described in Sec.

    43.5(h) shall be 48 business hours immediately after execution of such

    swap.

    (2) Time delay during Year 2. For one year beginning on the first

    anniversary of the compliance date of this part, the time delay for

    public dissemination of swap transaction and pricing data for all swaps

    described in Sec. 43.5(h) shall be 36 business hours immediately after

    the execution of such swap.

    (3) Time delay after Year 2. Beginning on the second anniversary of

    the compliance date of this part, the time delay for public

    dissemination transaction and pricing data for all swaps described in

    Sec. 43.5(h) shall be 24 business hours immediately after the

    execution of such swap.

    Sec. 43.6 [Reserved]

    Appendix A to Part 43--Data Fields for Public Dissemination

    The data fields described in Table A1 and Table A2, to the extent

    applicable for a particular publicly reportable swap transaction, shall

    be publicly disseminated pursuant to part 43. Table A1 and Table A2

    provide guidance for compliance with the reporting and public

    dissemination of each data field. Reporting parties, registered swap

    execution facilities and designated contract markets shall report swap

    transaction and pricing data necessary to publicly disseminate such

    data, pursuant to part 43 and this appendix A to part 43, to a

    registered swap data repository as soon as technologically practicable

    after execution of the publicly reportable swap transaction. A

    registered swap data repository shall publicly disseminate the

    information in Table A1 and A2 in a consistent form and manner for

    swaps within the same asset class.

    BILLING CODE 6351-01-P

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    BILLING CODE 6351-01-C

    Appendix B to Part 43--Enumerated Physical Commodity Contracts and

    Other Contracts

    Enumerated Physical Commodity Contracts

    Agriculture

    ICE Futures U.S. Cocoa

    ICE Futures U.S. Coffee C

    Chicago Board of Trade Corn

    ICE Futures U.S. Cotton No. 2

    ICE Futures U.S. FCOJ-A

    Chicago Mercantile Exchange Live Cattle

    Chicago Board of Trade Oats

    Chicago Board of Trade Rough Rice

    Chicago Board of Trade Soybeans

    Chicago Board of Trade Soybean Meal

    Chicago Board of Trade Soybean Oil

    ICE Futures U.S. Sugar No. 11

    ICE Futures U.S. Sugar No. 16

    Chicago Board of Trade Wheat

    Minneapolis Grain Exchange Hard Red Spring Wheat

    Kansas City Board of Trade Hard Winter Wheat

    Chicago Mercantile Exchange Class III Milk

    Chicago Mercantile Exchange Feeder Cattle

    Chicago Mercantile Exchange Lean Hogs

    Metals

    Commodity Exchange, Inc. Copper

    New York Mercantile Exchange Palladium

    New York Mercantile Exchange Platinum

    Commodity Exchange, Inc. Gold

    Commodity Exchange, Inc. Silver

    Energy

    New York Mercantile Exchange Light Sweet Crude Oil

    New York Mercantile Exchange New York Harbor Gasoline Blendstock

    New York Mercantile Exchange Henry Hub Natural Gas

    [[Page 1264]]

    New York Mercantile Exchange New York Harbor Heating Oil

    Other Contracts

    Brent Crude Oil (ICE)

    Appendix C to Part 43--Time Delays for Public Dissemination

    The tables below provide clarification of the time delays for

    public dissemination set forth in Sec. 43.5. The first row of each

    table describes the asset classes to which each chart applies. The

    column entitled ``Yearly Phase-In'' indicates the periods beginning

    on the compliance date of this part and beginning on the anniversary

    of the compliance date thereafter. The column entitled ``Time Delay

    for Public Dissemination'' indicates the precise length of time

    delay, starting upon execution, for the public dissemination of such

    swap transaction and pricing data by a registered swap data

    repository.

    Table C1. Block Trades Executed on or Pursuant to the Rules of a

    Registered Swap Execution Facility or Designated Contract Market

    (Illustrating Sec. Sec. 43.5(d)(1) and (d)(2))

    Table C1 also designates the interim time delays for swaps

    described in Sec. 43.5(c)(2).

    All Asset Classes

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

    Yearly phase-in Time delay for public dissemination

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

    Year 1........................................................... 30 minutes.

    After Year 1..................................................... 15 minutes.

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

    Table C2. Large Notional Off-Facility Swaps Subject to the

    Mandatory Clearing Requirement With at Least One Swap Dealer or

    Major Swap Participant Counterparty (Illustrating Sec. Sec.

    43.5(e)(2)(A) and (e)(2)(B))

    Table C2 excludes off-facility swaps that are excepted from the

    mandatory clearing requirement pursuant to Section 2(h)(7) of the

    Act and Commission regulations and those off-facility swaps that are

    required to be cleared under Section 2(h)(2) of the Act and

    Commission regulations but are not cleared.

    Table C2 also designates the interim time delays for swaps

    described in Sec. 43.5(c)(3).

    All Asset Classes

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

    Yearly phase-in Time delay for public dissemination

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

    Year 1........................................................... 30 minutes.

    After Year 1..................................................... 15 minutes.

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

    Table C3. Large Notional Off-Facility Swaps Subject to the

    Mandatory Clearing Requirement in Which Neither Counterparty Is a

    Swap Dealer or Major Swap Participant (Illustrating Sec. Sec.

    43.5(e)(3)(A), (e)(3)(B), and (e)(3)(C))

    Table C3 excludes off-facility swaps that are excepted from the

    mandatory clearing requirement pursuant to Section 2(h)(7) of the

    Act and Commission regulations and those swaps that are required to

    be cleared under Section 2(h)(2) of the Act and Commission

    regulations but are not cleared.

    Table C3 also designates the interim time delays for swaps

    described in Sec. 43.5(c)(3).

    All Asset Classes

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

    Yearly phase-in Time delay for public dissemination

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

    Year 1........................................................... 4 hours.

    Year 2........................................................... 2 hours.

    After Year 2..................................................... 1 hour.

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

    Table C4. Large Notional Off-Facility Swaps Not Subject to the

    Mandatory Clearing Requirement With at Least One Swap Dealer or

    Major Swap Participant Counterparty (Illustrating Sec. Sec.

    43.5(f)(1), (f)(2) and (f)(3))

    Table C4 includes large notional off-facility swaps that are not

    subject to the mandatory clearing requirement or are exempt from

    such mandatory clearing requirement pursuant to Section 2(h)(7) of

    the Act and Commission regulations.

    Table C4 also designates the interim time delays for swaps

    described in Sec. 43.5(c)(4).

    Interest Rates, Credit, Foreign Exchange, Equity Asset Classes

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

    Yearly phase-in Time delay for public dissemination

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

    Year 1........................................................... 1 hour.

    However, if such swap includes a non-swap

    dealer/non-major swap participant

    counterparty that is not a financial entity

    as defined in Section 2(h)(7)(C) of the Act

    and Commission regulations, then one hour

    immediately after execution; or if received

    later than one hour by the registered swap

    data repository, then public dissemination

    shall occur as soon as technologically

    practicable after the data is received.

    Year 2........................................................... 30 minutes.

    [[Page 1265]]

    However, if such swap includes a non-swap

    dealer/non-major swap participant

    counterparty that is not a financial entity

    as defined in Section 2(h)(7)(C) of the Act

    and Commission regulations, then 30 minutes

    immediately after execution; or if received

    later than 30 minutes by the registered swap

    data repository, then public dissemination

    shall occur as soon as technologically

    practicable after the data is received.

    After Year 2..................................................... 30 minutes.

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

    Table C5. Large Notional Off-Facility Swaps Not Subject to the

    Mandatory Clearing Requirement With at Least One Swap Dealer or

    Major Swap Participant Counterparty (Illustrating Sec. Sec.

    43.5(g)(1), (g)(2), and (g)(3))

    Table C5 includes large notional off-facility swaps that are not

    subject to the mandatory clearing requirement or are excepted from

    such mandatory clearing requirement pursuant to Section 2(h)(7) of

    the Act and Commission regulations.

    Table C5 also designates the interim time delays for swaps

    described in Sec. 43.5(c)(5).

    Other Commodity Asset Class

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

    Yearly phase-in Time delay for public dissemination

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

    Year 1........................................................... 4 hours.

    However, if such swap includes a non-swap

    dealer/non-major swap participant

    counterparty that is not a financial entity

    as defined in Section 2(h)(7)(C) of the Act

    and Commission regulations, then four hours

    immediately after execution; or if received

    later than four hours by the registered swap

    data repository, then public dissemination

    shall occur as soon as technologically

    practicable after the data is received.

    Year 2........................................................... 2 hours.

    However, if such swap includes a non-swap

    dealer/non-major swap participant

    counterparty that is not a financial entity

    as defined in Section 2(h)(7)(C) of the Act

    and Commission regulations, then two hours

    immediately after execution; or if received

    later than two hours by the registered swap

    data repository, then public dissemination

    shall occur as soon as technologically

    practicable after the data is received.

    After Year 2..................................................... 2 hours.

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

    Table C6. Large Notional Off-Facility Swaps Not Subject to the

    Mandatory Clearing Requirement in Which Neither Counterparty Is a

    Swap Dealer or Major Swap Participant (Illustrating Sec. Sec.

    43.5(h)(1), (h)(2) and (h)(3))

    Table C6 includes large notional off-facility swaps that are not

    subject to the mandatory clearing requirement or are exempt from

    such mandatory clearing requirement pursuant to Section 2(h)(7) of

    the Act and Commission regulations.

    Table C6 also designates the interim time delays for swaps

    described in Sec. 43.5(c)(6).

    All Asset Classes

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

    Time delay for

    Yearly phase-in public dissemination

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

    Year 1............................................ 48 business hours.

    Year 2............................................ 36 business hours.

    After Year 2...................................... 24 business hours.

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

    Issued in Washington, DC, on December 20, 2011, by the

    Commission.

    David A. Stawick,

    Secretary of the Commission.

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

    Federal Regulations

    Appendices to Real-Time Public Reporting of Swap Transaction Data--

    Commission Voting Summary and Statements of Commissioners

    Appendix 1--Commission Voting Summary

    On this matter, Chairman Gensler and Commissioners Sommers,

    Chilton, O'Malia and Wetjen voted in the affirmative; no Commissioner

    voted in the negative.

    Appendix 2--Statement of Chairman Gary Gensler

    I support the final rule to implement a real-time, public reporting

    regime for swaps. This rule fulfills Congress' direction under the

    Dodd-Frank Wall Street Reform and Consumer Protection Act to bring

    public transparency to the entire swaps market for both cleared and

    uncleared swaps. This rule will give the public critical information on

    the pricing of transactions--similar to what has been working for

    decades in the securities and futures markets.

    [[Page 1266]]

    Real-time reporting introduces post-trade transparency to the swaps

    market, which lowers costs for market participants and consumers.

    In response to commenters, the final rule provides for the phasing

    in of compliance dates and time delays based on market participant,

    place of execution and underlying asset. As directed by Congress, the

    final rule protects the anonymity of counterparties to a swap and takes

    into account the effect of the rule on market liquidity.

    [FR Doc. 2011-33173 Filed 1-6-12; 8:45 am]

    BILLING CODE 6351-01-P

    Last Updated: January 9, 2012