Font Size: AAA // Print // Bookmark

2011-33199

  • Federal Register, Volume 77 Issue 9 (Friday, January 13, 2012)[Federal Register Volume 77, Number 9 (Friday, January 13, 2012)]

    [Rules and Regulations]

    [Pages 2136-2224]

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

    [FR Doc No: 2011-33199]

    [[Page 2135]]

    Vol. 77

    Friday,

    No. 9

    January 13, 2012

    Part II

    Commodity Futures Trading Commission

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

    17 CFR Part 45

    Swap Data Recordkeeping and Reporting Requirements; Final Rule

    Federal Register / Vol. 77 , No. 9 / Friday, January 13, 2012 / Rules

    and Regulations

    [[Page 2136]]

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

    COMMODITY FUTURES TRADING COMMISSION

    17 CFR Part 45

    RIN 3038-AD19

    Swap Data Recordkeeping and Reporting Requirements

    AGENCY: Commodity Futures Trading Commission.

    ACTION: Final rule.

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

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

    ``CFTC'') is adopting rules to implement the Commodity Exchange Act

    (``CEA'' or ``Act'') relating to swap data recordkeeping and reporting

    requirements. These sections of the CEA were added by the Dodd-Frank

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

    The rules being adopted apply to swap data recordkeeping and reporting

    requirements for swap data repositories, derivatives clearing

    organizations, designated contract markets, swap execution facilities,

    swap dealers, major swap participants, and swap counterparties who are

    neither swap dealers nor major swap participants. The recordkeeping and

    reporting requirements of this rule further the goals of the Dodd-Frank

    Act to reduce systemic risk, increase transparency and promote market

    integrity within the financial system.

    DATES: The effective date of this rule is March 13, 2012. Compliance

    dates: (1) Swap execution facilities, designated contract markets,

    derivatives clearing organizations, swap data repositories, swap

    dealers, and major swap participants shall commence full compliance

    with this part with respect to credit swaps and interest rate swaps on

    the later of: July 16, 2012; or 60 calendar days after the publication

    in the Federal Register of the later of the Commission's final rule

    defining the term ``swap'' or the Commission's final rule defining the

    terms ``swap dealer'' and ``major swap participant. '' (2) Swap

    execution facilities, designated contract markets, derivatives clearing

    organizations, swap data repositories, swap dealers, and major swap

    participants shall commence full compliance with this part with respect

    to equity swaps, foreign exchange swaps, and other commodity swaps on

    or before 90 days after the compliance date for credit swaps and

    interest rate swaps. (3) Non-SD/MSP counterparties shall commence full

    compliance with this part with respect to all swaps on or before 90

    days after the compliance date applicable to swap execution facilities,

    designated contract markets, derivatives clearing organizations, swap

    data repositories, swap dealers, and major swap participants with

    respect to equity swaps, foreign exchange swaps, and other commodity

    swaps.

    FOR FURTHER INFORMATION CONTACT: David Taylor, Associate Director,

    Division of Market Oversight, (202) 418-5488, dtaylor@cftc.gov, or Anne

    Schubert, Economist, Division of Market Oversight, (202) 418-5436,

    aschubert@cftc.gov; Commodity Futures Trading Commission, Three

    Lafayette Centre, 1155 21st Street NW., Washington, DC 20851.

    SUPPLEMENTARY INFORMATION:

    Table of Contents

    I. Background

    A. Introduction

    B. Swap Data Provisions of the Dodd-Frank Act

    C. International Considerations

    D. Consultations With Other U.S. Financial Regulators

    E. Summary of the Proposed Part 45 Rule

    1. Fundamental Goal

    2. Swap Recordkeeping

    3. Swap Data Reporting: Creation Data and Continuation Data

    4. Unique Identifiers

    6. Third-Party Facilitation of Reporting

    7. Reporting a Swap to a Single SDR

    8. Reporting Swaps in an Asset Class Not Accepted by Any SDR

    9. Data Standards

    10. Reporting Errors and Omissions in Previously Reported Data

    F. Overview of Comments Received

    II. Part 45 of the Commission's Regulations: The Final Rules

    A. Recordkeeping Requirements--Sec. 45.2

    1. Proposed Rule

    2. Comments Received

    3. Final Rule: Sec. 45.2

    B. Swap Data Reporting: Creation Data--Sec. 45.3

    1. Proposed Rule

    2. Comments Received

    3. Final Rule: Sec. 45.3

    C. Swap Data Reporting: Continuation Data--Sec. 45.4

    1. Proposed Rule

    2. Comments Received

    3. Final Rule: Sec. 45.4

    D. Summary of Creation Data and Continuation Data Reporting--

    Sec. Sec. 45.3 and 45.4

    F. Unique Swap Identifiers--Sec. 45.5

    1. Proposed Rule

    2. Comments Received

    3. Final Rule: Sec. 45.5

    G. Legal Entity Identifiers--Sec. 45.6

    1. Proposed Rule

    2. Comments Received

    3. Final Rule: Sec. 45.6

    H. Unique Product Identifiers--Sec. 45.7

    1. Proposed Rule

    2. Comments Received

    3. Final Rule: Sec. 45.7

    I. Determination of Which Counterparty Must Report--Sec. 45.8

    1. Proposed Rule

    2. Comments Received

    3. Final Rule: Sec. 45.8

    J. Third-Party Facilitation of Swap Data Reporting--Sec. 45.9

    1. Proposed Rule

    2. Comments Received

    3. Final Rule: Sec. 45.9

    K. Reporting to a Single Swap Data Repository--Sec. 45.10

    1. Proposed Rule

    2. Comments Received

    3. Final Rule: Sec. 45.10

    L. Data Reporting for Swaps in a Swap Asset Class Not Accepted

    by Any Swap Data Repository--Sec. 45.11

    1. Proposed Rule

    2. Comments Received

    3. Final Rule: Sec. 45.11

    M. Voluntary Supplemental Reporting--Sec. 45.12

    1. Proposed Rule

    2. Comments Received

    3. Final Rule: Sec. 45.12

    N. Required Data Standards--Sec. 45.13

    1. Proposed Rule

    2. Comments Received

    3. Final Rule: Sec. 45.13

    O. Reporting of Errors and Omissions in Previously Reported

    Data--Sec. 45.14

    1. Proposed Rule

    2. Comments Received

    3. Final Rule: Sec. 45.14

    III. Related Matters

    A. Regulatory Flexibility Act

    B. Paperwork Reduction Act

    1. Introduction

    2. Proposed Information Collection

    3. Comments on Proposed Information Collection

    4. Revised Information Collection Estimates

    C. Consideration of Costs and Benefits

    1. Introduction

    2. General Cost-Benefit Comments Received

    3. Recordkeeping

    4. Swap Data Reporting

    5. Unique Identifiers

    IV. Compliance Dates

    A. Proposed Rule

    B. Comments Received

    1. Initial Compliance Date

    2. Phasing in the Start of Reporting

    C. Determination of Compliance Dates

    1. Initial Compliance Dates

    2. Phasing in the Start of Reporting

    3. Compliance Dates

    Final Rules

    I. Background

    A. Introduction

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

    Act.\1\ Title VII of the Dodd-Frank Act \2\ amended the CEA \3\ to

    establish a comprehensive new regulatory framework for swaps and

    security-based

    [[Page 2137]]

    swaps. The legislation was enacted to reduce systemic risk, increase

    transparency, and promote market integrity within the financial

    system by, among other things: Providing for the registration and

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

    participants (``MSPs''); imposing clearing and trade execution

    requirements on standardized derivative products; creating rigorous

    recordkeeping and data reporting regimes with respect to swaps,

    including real time reporting; and enhancing the Commission's

    rulemaking and enforcement authorities with respect to, among

    others, all registered entities, intermediaries, and swap

    counterparties subject to the Commission's oversight.

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

    \1\ See Dodd-Frank Wall Street Reform and Consumer Protection

    Act, Pub. L. 111-203, 124 Stat. 1376 (2010). The text of the Dodd-

    Frank Act may be accessed at http://www.cftc.gov./LawRegulation/

    OTCDERIVATIVES/index.htm.

    \2\ Pursuant to Section 701 of the Dodd-Frank Act, Title VII may

    be cited as the ``Wall Street Transparency and Accountability Act of

    2010.''

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

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

    B. Swap Data Provisions of the Dodd-Frank Act

    To enhance transparency, promote standardization, and reduce

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

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

    or uncleared, to be reported to swap data repositories

    (``SDRs''),\4\ which are new registered entities created by section

    728 of the Dodd-Frank Act to collect and maintain data related to

    swap transactions as prescribed by the Commission, and to make such

    data electronically available to regulators.\5\ New section 21(b) of

    the CEA, added by section 728 of the Dodd-Frank Act, directs the

    Commission to prescribe standards for swap data recordkeeping and

    reporting. Specifically, CEA section 21(b)(1)(A) provides that:

    \4\ See also CEA section 1a(40)(E).

    \5\ Regulations governing core principles and registration

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

    of this chapter.

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

    The Commission shall prescribe standards that specify the data

    elements for each swap that shall be collected and maintained by

    each registered swap data repository.

    These standards are to apply to both registered entities and

    counterparties involved with swaps.

    CEA section 21(b)(1)(B) provides that:

    In carrying out [the duty to prescribe data element standards],

    the Commission shall prescribe consistent data element standards

    applicable to registered entities and reporting counterparties.

    CEA section 21 also directs the Commission to prescribe data

    standards for SDRs. Specifically, CEA section 21(b)(2) provides that:

    The Commission shall prescribe data collection and data

    maintenance standards for swap data repositories.

    These standards are to be comparable to those for clearing

    organizations. CEA section 21(b)(3) provides that:

    The [data] standards prescribed by the Commission under this

    subsection shall be comparable to the data standards imposed by the

    Commission on derivatives clearing organizations in connection with

    their clearing of swaps.

    In addition, CEA section 21(c)(3) provides that, once the data

    elements prescribed by the Commission are reported to an SDR, the SDR

    shall:

    Maintain the data [prescribed by the Commission for each swap] in

    such form, in such manner, and for such period as may be required by

    the Commission.

    Section 727 of the Dodd Frank Act, which added to the CEA new

    section 2(a)(13), provides that ``Each swap (whether cleared or

    uncleared) shall be reported to a registered swap data repository.''

    \6\ Section 729 of the Dodd-Frank Act added to the CEA new section 4r,

    which addresses reporting and recordkeeping requirements for uncleared

    swaps. Pursuant to this section, each swap not accepted for clearing by

    any derivatives clearing organization (``DCO'') must be reported to an

    SDR (or to the Commission if no repository will accept the swap). In a

    July 15, 2010 floor statement concerning swap data reporting as well as

    other aspects of the Dodd-Frank Act, Senator Blanche Lincoln emphasized

    that these provisions should be interpreted as complementary to one

    another to assure consistency between them, stating that: ``All swap

    trades, even those which are not cleared, would still be reported to

    regulators, a swap data repository, and subject to the public reporting

    requirements under the legislation.'' \7\

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

    \6\ CEA section 2(a)(13)(G).

    \7\ Senator Blanche Lincoln, ``Wall Street Transparency and

    Accountability Act,'' Congressional Record, July 15, 2010, at S5905.

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

    CEA section 4r ensures that at least one counterparty to a swap has

    an obligation to report data concerning that swap. The determination of

    this reporting counterparty depends on the status of the counterparties

    involved. If only one counterparty is an SD, the SD is required to

    report the swap. If one counterparty is an MSP, and the other

    counterparty is neither an SD nor an MSP (``non-SD/MSP counterparty''),

    the MSP must report. Where the counterparties have the same status--two

    SDs, two MSPs, or two non-SD/MSP counterparties--the counterparties

    must select a counterparty to report the swap.\8\

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

    \8\ See CEA section 4r(a)(3).

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

    In addition, CEA section 4r provides for reporting to the

    Commission of swaps neither cleared nor accepted by any SDR. Under this

    provision, counterparties to such swaps must maintain books and records

    pertaining to their swaps in the manner and for the time required by

    the Commission, and must make these books and records available for

    inspection by the Commission or other specified regulators if requested

    to do so.\9\ It also requires counterparties to such swaps to provide

    reports concerning such swaps to the Commission upon its request, in

    the form and manner specified by the Commission.\10\ Such reports must

    be as comprehensive as the data required to be collected by SDRs.\11\

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

    \9\ CEA section 4r(c)(2) requires individuals or entities that

    enter into a swap transaction that is neither cleared nor accepted

    by an SDR to make required books and records open to inspection by

    any representative of the Commission; an appropriate prudential

    regulator; the Securities and Exchange Commission; the Financial

    Stability Oversight Council; and the Department of Justice.

    \10\ CEA sections 4r(a)(1)(B) and 4r(c).

    \11\ CEA section 4r(d).

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

    C. International Considerations

    Section 752 of the Dodd-Frank Act directs the Commission to consult

    and coordinate with foreign regulatory authorities regarding

    establishment of consistent international standards for the regulation

    of swaps and swap entities. The Commission is committed to a

    cooperative international approach to swap recordkeeping and swap data

    reporting, and has consulted extensively with various foreign

    regulatory authorities in the process of promulgating both its proposed

    and final part 45 rules. During this process, the Commission has served

    as Co-Chair of the Committee on Payment and Settlement Systems

    (``CPSS'') and the International Organization of Securities Commissions

    (``IOSCO'') Task Force that has prepared a Report on OTC Derivatives

    Data Reporting and Aggregation Requirement for presentation to the

    Financial Stability Board (``FSB'') in December 2011. The Commission

    also served as a member of the organizing committee for the FSB Legal

    Entity Identifier Workshop held in Basel, Switzerland in September

    2011. In the course of preparing the proposed and final part 45 rules,

    Commission staff met with financial regulatory authorities from

    Argentina, Australia, Brazil, Canada, China, Dubai (United Arab

    Emirates), France, Germany, Hong Kong, Indonesia, India, Italy, Japan,

    Korea, Mexico, the Netherlands, Portugal, Russia, Saudi Arabia,

    Singapore, Spain, Sweden, Switzerland, Turkey, and the United Kingdom.

    Staff also met with representatives of FSB, IOSCO, CPSS, the

    International Monetary Fund, the FSB Data Gaps and Systemic Linkages

    Group, the Bank for International Settlements, the Committee on the

    Global Financial System, the OTC Derivatives Regulatory Forum, the OTC

    Derivatives Supervisors Group, the European Central Bank, the European

    Commission, the European Union, the

    [[Page 2138]]

    Commission of European Securities Regulators, the European Systemic

    Risk Board, the International Organisation for Standardisation

    (``ISO''), and the Association of National Numbering Agencies

    (``ANNA'').

    In September 2009, the G-20 \12\ leaders made a number of

    commitments regarding OTC derivatives, including the statement that:

    \12\ The G-20 include leaders and representatives of the core

    members of the G-20 major economies, which comprises 19 countries

    and the European Union which is represented by its two governing

    bodies, the European Council and the European Commission.

    All standardized OTC derivative contracts should be traded on

    exchanges or electronic trading platforms, where appropriate, and

    cleared through central counterparties by end-2012 at the latest.

    OTC derivative contracts should be reported to trade

    repositories.\13\

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

    \13\ Leaders' Statement, Pittsburgh Summit, September 25, 2009,

    at 9; available at http://www.g20.org/Documents/pittsburgh_summit_leaders_statement_250909.pdf.

    The Commission's part 45 rules, if adopted by the Commission, which

    requires reporting of swap data to SDRs to begin in mid-2012, may be

    the first set of regulatory requirements in the world to fulfill this

    commitment.

    D. Consultations With Other U.S. Financial Regulators

    In developing the swap data recordkeeping and reporting rule,

    Commission staff has also engaged in extensive consultations with U.S.

    domestic financial regulators. The agencies and institutions consulted

    include the Federal Reserve Board of Governors (``Federal Reserve'')

    (including the Federal Reserve Bank of New York), the Federal Deposit

    Insurance Corporation (``FDIC''), the Office of Financial Research

    (``OFR''), the Office of the Comptroller of Currency (``OCC''), the

    Securities and Exchange Commission (``SEC''), and the Department of the

    Treasury.

    E. Summary of the Proposed Part 45 Rule

    1. Fundamental Goal

    The fundamental goal of the part 45 Notice of Proposed Rulemaking

    (``NOPR'') was to ensure that complete data concerning all swaps

    subject to the Commission's jurisdiction is maintained in SDRs, where

    it would be available to the Commission and other financial regulators

    for fulfillment of their various regulatory mandates, including

    systemic risk mitigation, market monitoring, and market abuse

    prevention.

    2. Swap Recordkeeping

    The NOPR called for registered entities and swap counterparties to

    keep records relating to swaps throughout the existence of each swap

    and for five years following final termination or expiration of the

    swap. These records would be required to be readily accessible during

    the life of the swap and for two years thereafter, and retrievable from

    storage within three business days during the remaining three years of

    the retention period. The NOPR would require that data in SDRs be

    readily accessible to the Commission throughout the retention period as

    required by the Dodd-Frank Act.\14\

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

    \14\ The proposed rule also cross-referenced the detailed

    recordkeeping requirements specific to DCMs, SEFs, DCOs, SDs, and

    MSPs included in rulemakings specific to those entities and

    counterparties.

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

    3. Swap Data Reporting: Creation Data and Continuation Data

    In order to ensure that complete data concerning swaps is

    maintained in SDRs and available to the Commission and other

    regulators, the NOPR called for reporting of swap data from each of two

    important stages of the existence of a swap: the creation of the swap,

    and the continuation of the swap over its existence until its final

    termination or expiration.

    a. Creation data reporting. To ensure timeliness, accuracy, and

    completeness with respect to data, the NOPR required reporting of two

    types of data relating to the creation of a swap: the primary economic

    terms of the swap verified or matched by the counterparties at or

    shortly after the time of execution; and all of the terms of the swap

    included in the legal confirmation of the swap. To ensure inclusion of

    primary economic terms necessary for regulatory purposes, the rule

    specified minimum data elements that must be reported for swaps in each

    asset class.

    b. Continuation data reporting. The NOPR provided that continuation

    data reporting for credit and equity swaps would follow the life cycle

    approach, and required reporting of all life cycle events affecting the

    terms of a swap. The NOPR directed reporting of continuation data for

    interest rate, currency, and other commodity swaps to follow the state

    or snapshot approach, and required reporting of a daily snapshot of all

    primary economic terms of a swap including any changes to such terms

    occurring since the previous snapshot. For all asset classes, the NOPR

    called for continuation data reporting to include specified valuation

    data.

    4. Unique Identifiers

    The NOPR called for use of three unique identifiers in connection

    with swap data reporting: a unique swap identifier (USI), a unique

    counterparty identifier (UCI), and a unique product identifier (UPI).

    The Commission proposed requiring use of these unique identifiers

    because they would be crucial regulatory tools for linking data

    together and enabling data aggregation by regulators across

    counterparties, transactions, and asset classes, to fulfill the

    systemic risk mitigation, market manipulation prevention, and other

    important purposes of the Dodd-Frank Act. The Commission also noted

    that such identifiers would have great benefits for financial

    transaction processing, internal recordkeeping, compliance, due

    diligence, and risk management by financial entities.

    The NOPR called for the USI to be created at the time a swap is

    executed, shared with all registered entities and counterparties

    involved with the swap, and used to track that particular swap over its

    life. The UCI would identify the legal entity that is a counterparty to

    a swap. Pursuant to the NOPR, the Commission would require use of UCIs

    in all swap data reporting, selecting an internationally-developed

    legal entity identifier system for this purpose if one meeting the

    Commission's requirements is available prior to the compliance date

    when swap data reporting begins, or imposing a system created by the

    Commission if that were needed. Confidential reference data concerning

    the corporate or company affiliations of the legal entity involved

    would allow regulators to monitor swap exposures. The UPI would

    categorize or describe swaps with respect to the underlying products

    referenced in them, allowing regulators to aggregate, analyze, and

    report swap transactions by product type, and also enhancing position

    limit enforcement and real time reporting.

    5. Who Reports

    In general, the NOPR called for reporting by the registered entity

    or counterparty having the easiest, fastest, and cheapest access to the

    data in question, and most likely to have automated systems suitable

    for reporting. Swap execution facilities (``SEFs'') or designated

    contract markets (``DCMs'') would report primary economic terms data

    (``PET data'') for swaps executed on a trading facility, and DCOs would

    report confirmation data for cleared swaps. Counterparty reporting

    would follow the hierarchy outlined in the statute, giving SDs or MSPs

    the duty to report when possible,

    [[Page 2139]]

    and limiting reporting by non-SD/MSP counterparties to situations where

    there is no SD or MSP counterparty. Where both counterparties have the

    same hierarchical status, the proposed rule would require them to agree

    as one term of their swap which of them is to report, in order to avoid

    reporting delays.

    6. Third-Party Facilitation of Reporting

    The NOPR would explicitly permit third-party facilitation of data

    reporting, without removing the reporting responsibility from the

    appropriate registered entity or counterparty.

    7. Reporting a Swap to a Single SDR

    To avoid fragmentation of data for a given swap across multiple

    SDRs, the NOPR would require that all data for a particular swap must

    be reported to the same SDR.

    8. Reporting Swaps in an Asset Class Not Accepted by Any SDR

    As required by the section 729 of the Dodd-Frank Act, the NOPR

    provided that if there were an asset class for which no SDR currently

    accepted data, registered entities or counterparties required to report

    concerning swaps in such an asset class would be required to report the

    same data to the Commission at a time and in a form and manner

    determined by the Commission.

    9. Data Standards

    The NOPR would require SDRs to maintain data and transmit it to the

    Commission in the format required by the Commission. It would permit an

    SDR to allow those reporting data to it to use any data standard

    acceptable to the SDR, so long as the SDR remains able to provide data

    to the Commission in the Commission's required format.

    10. Reporting Errors and Omissions in Previously Reported Data

    Finally, the NOPR provided that registered entities and

    counterparties required to report swap data must also report to the SDR

    any errors or omissions in data previously reported, using the same

    format used in the previous report. Non-reporting counterparties

    discovering an error or omission would be required to notify the

    reporting counterparty, for reporting to the SDR by the reporting

    counterparty.

    F. Overview of Comments Received

    The comment period for the NOPR closed on February 7, 2011, but was

    reopened pursuant to the Commission's Order Reopening and Extension of

    Comment Periods for Rulemakings Implementing the Dodd-Frank Wall Street

    Reform and Consumer Protection Act, dated May 4, 2011. The reopened

    comment period closed on June 3, 2011. Seventy-five comment letters

    submitted to the Commission addressed the proposed part 45 swap data

    recordkeeping and reporting rule.\15\ Comments were provided by a broad

    range of interested persons, including: Existing trade repositories,

    DCMs, and DCOs; providers of various third party services related to

    swaps; financial data and data management services and providers of

    various types of identifiers; both buy side and sell side swap

    counterparties of various types and sizes; trade associations involving

    securities, futures, and foreign exchange markets and firms; banks and

    mortgage lenders; managed funds and investment advisors; swap dealers;

    swap ``end users''; energy producers; and non-profit

    [[Page 2140]]

    associations. Commission staff also held three public roundtables

    relating to swap data reporting, on September 14, 2010, January 28,

    2011, and June 6, 2011, which provided input from a broad cross-section

    of industry and private sector experts concerning the issues addressed

    in the NOPR. While many commenters expressed support for the proposed

    part 45 rules, many also offered suggestions regarding swap data

    recordkeeping and reporting, as well as recommendations for

    clarification or modification of specific provisions of the proposed

    rule. Comments are addressed as appropriate in connection with the

    discussion below of the final rule provision or provisions to which

    they relate. Some comments received by the Commission requested further

    clarification relating to definitions provided in the NOPR, or

    regarding the application of NOPR provisions in various contexts.

    Definitions included in the final rule are provided for clarification

    and do not impose new substantive obligations.

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

    \15\ All comment letters are available on the Commission Web

    site at http://comments.cftc.gov/PublicComments/CommentList.aspx?id=920. Specific comment letters are identified by

    CL and the submitter. Comments addressing the NOPR were received

    from: (1) ACM Capital Management (``ACM'') June 15, 2011 (``CL-

    ACM''); (2) Alice Corporation (``Alice'') June 1, 2011 (``CL-

    Alice''); (3) American Bankers Association and the ABA Securities

    Association (``ABA/ABASA'') June 3, 2011 (``CL-ABA/ABASA''); (4)

    American Benefits Council (``ABC'') February 7, 2011 (``CL-ABC'');

    (5) American Benefits Council (``ABC'') and Committee on Investment

    of Employee Benefit Assets (``CIEBA'') February 7, 2011 (``CL-ABC/

    CIEBA I''); (6) ABC and CIEBA March 25, 2011 (``CL-ABC/CIEBA II'');

    (7) American Gas Association (``AGA'') February 3, 2011 (``CL-AGA

    I''); (8) AGA June 3, 2011 (``CL-AGA II''); (9) Asset Management

    Group (``AMG'') and Securities Industry and Financial Markets

    Association (``SIFMA'') February 7, 2011 (``CL-AMG/SIFMA''); (10)

    Japanese Banking Organizations--Bank of Tokyo-Mitsubishi UFJ, Ltd.

    (``BTMU''), Mizuho Corporate Bank (``MHCB''), and Sumitomo Mitsui

    Banking Corporation (``SMBC'') May 5, 2011 (``CL-Japanese Banks'');

    (11) Better Markets, Inc. (``Better Markets'') February 7, 2011

    (``CL-Better Markets I''); (12) Better Markets June 3, 2011 (``CL-

    Better Markets II''); (13) BlackRock, Inc. (``BlackRock'') June 3,

    2011 (``CL-BlackRock I''); (14) BlackRock June 3, 2011 (``CL-

    BlackRock II''); (15) Bloomberg, LP (``Bloomberg'') June 3, 2011

    (``CL-Bloomberg''); (16) Chatham Financial Corporation (``Chatham

    Financial'') February 7, 2011 (``CL-Chatham Financial''); (17) Chris

    Barnard (``Barnard'') May 17, 2011 (``CL-Barnard''); (18) Citadel,

    LLC (``Citadel'') June 3, 2011 (``CL-Citadel''); (19) CME Group,

    Inc. (``CME'') February 7, 2011 (``CL-CME I''); (20) CME June 3,

    2011 (``CL-CME II''); (21) Coalition of Derivatives End-Users

    (``CDEU'') February 25, 2011 (``CL-CDEU''); (22) Coalition of

    Physical Energy Companies (``COPE'') February 7, 2011 (``CL-COPE

    I''); (23) COPE June 3, 2011 (``CL-COPE II''); (24) Committee on

    Capital Markets Regulation June 13, 2011 (``CL-Committee on Capital

    Markets Regulation I''); (25) Committee on Capital Markets

    Regulation June 24, 2011 (``CL-Committee on Capital Markets

    Regulation II''); (26) Committee on Futures and Derivatives

    Regulation, Bar Association of the City of New York June 13, 2011

    (``CL-Committee on Futures and Derivatives Regulation''); (27)

    Committee on the Investment of Employee Benefit Assets (``CIEBA'')

    June 3, 2011 (``CL-CIEBA''); (28) Commodity Markets Council

    (``CMC'') February 6, 2011 (``CL-CMC I''); (29) Commodity Markets

    Council (``CMC'') February 7, 2011 (``CL-CMC II''); (30) Congressman

    James Renacci (``Renacci'') June 10, 2011 (``CL-Renacci''); (31)

    CUSIP Global Services (``CUSIP'') February 7, 2011 (``CL-CUSIP'');

    (32) Customer Data Management Group (``CDMG'') April 1, 2011 (``CL-

    CDMG''); (33) DC Energy, LLC (``DC Energy'') June 3, 2011 (``CL-DC

    Energy''); (34) Dominion Resources, Inc. (``Dominion Resources'')

    February 7, 2011 (``CL-Dominion Resources''); (35) The Depository

    Trust & Clearing Corporation (``DTCC'') February 7, 2011 (``CL-DTCC

    I''); (36) DTCCC June 3, 2011 (``CL-DTCC II''); (37) Edison Electric

    Institute (``EEI'') June 3, 2011 (``CL-EEI''); (38) Edison Electric

    Institute Electric Power Supply Association (``EPSA'') February 7,

    2011 (``CL-EPSA''); (39) Encana Marketing (USA), Inc. (``Encana'')

    February 7, 2011 (``CL-Encana''); (40) Eris Exchange, LLC (``Eris

    Exchange'') June 3, 2011 (``CL-Eris''); (41) Futures Industry

    Association (``FIA''), The Financial Services Roundtable (``FSR''),

    Institute of International Bankers (``IIB''), Insured Retirement

    Institute (``IRI''), International Swaps and Derivatives Association

    (``ISDA''), Securities Industry and Financial Markets Association

    (``SIFMA''), and U.S. Chamber of Commerce, (``Chamber of Commerce'')

    June 1, 2011 (``CL-Chamber of Commerce''); (42) Foreign Banking

    Organizations--Barclays, BNP Paribas, Deutsche Bank, Royal Bank of

    Canada, The Royal Bank of Scotland Group, Societe Generale, Credit

    Suisse, HSBC, UBS, Nomura Securities International, Inc., Rabobank

    Nederland (``Foreign Banks'') January 11, 2011 (``CL-Foreign Banks

    I''); (43) Foreign Banks February 17, 2011 (``CL-Foreign Banks

    II''); (44) Freddie Mac February 7, 2011 (``CL-Freddie Mac''); (45)

    The Federal Home Loan Banks (``FHLB'') February 7, 2011 (``CL-

    FHLB''); (46) Global Foreign Exchange Division (``Global Forex'')

    February 7, 2011 (``CL-Global Forex''); (47) Green Exchange, LLC

    (``GreenEx'') June 3, 2011 (``CL-GreenEx''); (48) GS1 US (``GS1'')

    February 7, 2011 (``CL-GS1''); (49) Intercontinental Exchange, Inc.

    (``ICE'') February 7, 2011 (``CL-ICE''); (50) International Energy

    Credit Association (``IECA'') February 7, 2011 (``CL-IECA''); (51)

    International Swaps and Derivatives Association, Inc. (``ISDA'')

    June 2, 2011 (``CL-ISDA''); (52) ISDA SIFMA February 7, 2011 (``CL-

    ISDA SIFMA''); (53) Kansas City Board of Trade Clearing Corporation

    (``KCBT'') February 7, 2011 (``CL-KCBT''); (54) Managed Funds

    Association (``MFA'') February 7, 2011 (``CL-MFA''); (55) Markit

    June 3, 2011 (``CL-Markit''); (56) MarkitSERV June 3, 2011 (``CL-

    MarkitSERV I); (57) MarkitSERV June 3, 2011 (``CL-MarkitSERV II'');

    (58) Minneapolis Grain Exchange (``MGEX'') June 3, 2011 (``CL-

    MGEX''); (59) Not-For-Profit Electric End User Coalition consisting

    of the National Rural Electric Cooperative Association, American

    Public Power Association, Large Public Power Council, Edison

    Electric Institute Electric Power Supply Association, (``Electric

    Coalition'') February 7, 2011 (``CL-Electric Coalition I''); (60)

    Electric Coalition June 3, 2011 (``CL-Electric Coalition II''); (61)

    Noble Energy, Inc. (``Noble Energy'') July 7, 2011 (``CL-Noble

    Energy''); (62) Office of the Comptroller of the Currency July 1,

    2011 (``CL-Office of the Comptroller of the Currency''); (63) REGIS-

    TR February 7, 2011 (``CL-REGIS-TR''); (64) Reval.com, Inc.

    (``Reval'') January 24, 2011 (``CL-Reval''); (65) Shell Energy North

    America (US), L.P. (``Shell Energy'') June 3, 2011 (``CL-Shell

    Energy I''); (66) Shell Energy June 21, 2011 (``CL-Shell Energy

    II''); (67) Society for Worldwide Interbank Financial

    Telecommunication SCRL (``SWIFT'') February 14, 2011 (``CL-SWIFT'');

    (68) SunGard Energy & Commodities (``SunGard'') February 7, 2011

    (``CL-Sungard''); (69) Thomson Reuters February 7, 2011 (``CL-

    Thomson Reuters''); (70) TradeWeb Markets, LLC (``TradeWeb'') June

    3, 2011 (``CL-TradeWeb''); (71) TriOptima February 7, 2011 (``CL-

    TriOptima''); (72) Senator Sherrod Brown (``Brown'') June 13, 2011

    (``CL-Brown''); (73) Vanguard February 7, 2011 (``CL-Vanguard'');

    (74) Working Group of Commercial Energy Firms (``WGCEF'') February

    7, 2011 (``CL-WGCEF I''); (75) WGCEF June 3, 2011 (``CL-WGCEF II'').

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

    II. Part 45 of the Commission's Regulations: The Final Rules

    New part 45 contains provisions governing swap data recordkeeping

    and reporting. Definitions are set forth in Sec. 45.1. Section 45.2

    establishes swap recordkeeping requirements for registered entities and

    swap counterparties. Sections 45.3 and 45.4 establish swap data

    reporting requirements. Reporting of required swap creation data (the

    data association with the creation or execution of a swap) is addressed

    in Sec. 45.3, while reporting of required swap continuation data (the

    data associated with the continued existence of a swap until its final

    termination) is addressed in Sec. 45.4. Required use of unique

    identifiers in swap data recordkeeping and reporting is addressed in

    Sec. 45.5, which sets forth requirements regarding unique swap

    identifiers (``USIs''); Sec. 45.6, which sets forth requirements

    regarding legal entity identifiers (``LEIs''); and 45.7, which sets

    forth requirements regarding unique product identifiers (``UPIs'').

    Determination of which counterparty must report swap data for each swap

    is established by Sec. 45.8. Third-party facilitation of swap data

    reporting is addressed by Sec. 45.9. Section 45.11 establishes

    requirements for reporting all data concerning a swap to a single SDR.

    Section 45.11 addresses data reporting for swaps in a swap asset class

    not accepted by any SDR. Section 45.12 sets forth requirements

    concerning voluntary supplemental reporting of swap data to SDRs.

    Section 45.13 establishes required data standards for swap data

    reporting. Finally, Sec. 45.14 sets forth requirements for reporting

    concerning errors and omissions in previously reported swap data.

    A. Recordkeeping Requirements--Sec. 45.2

    1. Proposed Rule

    The NOPR provided that all SEFS, DCMs, DCOs, SDs, and MSPs must

    keep full, complete, and systematic records, together with all

    pertinent data and memoranda, of all activities relating to the

    business of such entities or persons with respect to swaps, including,

    without limitation, records of all data required to be reported in

    connection with any swap. All such records would be required to be kept

    throughout the existence of the swap and for five years following final

    termination of the swap. Records would be required to be readily

    accessible by the registered entity or counterparty in question via

    real time electronic access throughout the life of the swap and for two

    years following the final termination of the swap, and retrievable

    within three business days through the remainder of the required

    retention period.

    The NOPR proposed lesser recordkeeping requirements for non-SD/MSP

    counterparties, calling for them to keep full, complete, and systematic

    records, including all pertinent data and memoranda, with respect to

    each swap in which they are a counterparty (as opposed to all

    activities relating to the business of such entities with respect to

    swaps), in a way that makes the records retrievable by the counterparty

    within three business days during the required retention period.

    The NOPR provided that all records required to be kept by SDRs must

    be kept by the SDR both: (a) throughout the existence of the swap and

    for five years following final termination or expiration of the swap,

    during which time the records must be readily accessible by the SDR and

    available to the Commission via real time electronic access; and (b)

    thereafter, for a period determined by the Commission, in archival

    storage from which they are retrievable by the SDR within three

    business days. This provision was intended to make effective the

    statutory mandate that SDRs must ``provide direct electronic access to

    the Commission (or any designee of the Commission including another

    registered entity).'' \16\

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

    \16\ CEA section 21(c)(4)(A).

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

    As proposed, part 45 would also require that all records required

    to be kept pursuant to the regulations must be open to inspection upon

    request by any representative of the Commission, the Department of

    Justice, or the SEC, or by any representative of a prudential regulator

    as authorized by the Commission.

    2. Comments Received

    The Commission received comments concerning the proposed

    recordkeeping provisions from both market participants who anticipated

    that they could be SDs and MSPs and market participants who anticipated

    that they could be non-SD/MSP counterparties. Many commenters asked

    that non-SD/MSP counterparties be allowed to keep fewer records and to

    keep records in paper form. Commenters suggested that required record

    retention periods should be shortened, and that retrievability

    requirements should be somewhat relaxed. Other commenters suggested

    that recordkeeping requirements for non-SD/MSP counterparties should be

    phased in.

    a. Records required. American Gas Association (``AGA'') and Edison

    Electric Institute (``EEI'') asked the Commission to specify more

    precisely the information that non-SD/MSP counterparties will be

    required to retain, defining in particular the meaning of ``all

    pertinent data and memoranda,'' with examples. Arguing that non-SD/MSP

    counterparties should not be required to keep records of swap terms

    other than the final terms of the swap, EEI suggested that non-SD/MSP

    counterparties be required to retain only ``master or bespoke

    agreements, long or short-form confirmations, amendments and associated

    swap transaction data stored in an end-user's trade capture system.''

    The Committee on the Investment of Employee Benefit Assets (``CIEBA'')

    suggested that a non-SD/MSP counterparty should only be required to

    retain the final confirmation of any swap where the other counterparty

    is an SD or MSP, and (presumably where no SD or MSP is involved) should

    only be required to retain swap creation or continuation data that the

    non-SD/MSP is required to report. The Working Group of Commercial

    Energy Firms (``WGCEF'') asked that non-SD/MSP counterparties to

    physical commodity swaps (or at least energy swaps) be excused from

    recordkeeping requirements altogether, arguing that the final rule

    should recognize ``the unique operational characteristics and abilities

    of different participants in swap markets for physical commodities,''

    since such counterparties may not presently have the necessary

    technology, and the benefits of implementing it would not justify the

    costs imposed. The Not-for-Profit Electric End User Coalition

    (``Electric Coalition'') contended that the

    [[Page 2141]]

    rule should allow non-SD/MSP counterparties to keep records in paper

    form.

    b. Record retention periods. The International Swap Dealers

    Association (``ISDA'') and the Securities Industry and Financial

    Markets Association (``SIFMA'') suggested that the Commission should

    analyze this requirement further before it is implemented. AGA argued

    that record retention for the life of the swap plus five years would

    impose substantial costs on non-SD/MSP counterparties such as gas

    utilities, and asked that the record retention period for non-SD/MSP

    counterparties be reduced to the life of the swap plus three years.

    WGCEF commented that there would be no benefit to record retention

    beyond five years following termination of a swap. Taking an opposite

    view, Chris Barnard recommended that all registered entities and swap

    counterparties should be required to keep records indefinitely.

    c. Record retrievability. ISDA and SIFMA commented that current

    recordkeeping practice for their members would normally mean

    accessibility within a reasonable period of time, such as two working

    days, and argued that instant access is impracticable to achieve.\17\

    The Global Foreign Exchange Division of SIFMA (``Global Forex'')

    suggested that after termination of the swap, real time access should

    only be required for an additional 30 days. With respect to retrieval

    by non-SD/MSP counterparties, AGA argued that the three-business-day

    retrievability requirement is too onerous, and would preclude off-site

    storage of business records, forcing end users to maintain on-site

    record storage. The Electric Coalition suggested that the retrieval

    period for non-SD/MSP counterparties be extended to 20 business days.

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

    \17\ WGCEF asked the Commission to confirm that real time

    accessibility refers to access by the counterparty, not the

    Commission, and asked that the requirement be changed to require

    record retrieval by the close of business the day following a

    request.

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

    d. Phasing in recordkeeping requirements for non-SD/MSP

    counterparties. The Electric Coalition suggested that recordkeeping

    requirements for non-SD/MSP counterparties be phased in. The Electric

    Coalition also suggested that the Commission define two sub-categories

    of non-SD/MSPs, namely financial and non-financial non-SD/MSPs, and

    that it delay the beginning of compliance with recordkeeping

    requirements even further for non-financial non-SD/MSP counterparties.

    Dominion Resources commented that recordkeeping should focus first on

    swaps involving platform execution or clearing, or involving SDs and

    MSPs.

    3. Final Rule: Sec. 45.2

    a. Records required. The Commission believes that the final rule

    should largely maintain the NOPR provisions regarding required records.

    Those provisions call for recordkeeping with respect to swaps that

    parallels the Commission's existing recordkeeping requirements with

    respect to futures and options.\18\ Under those existing requirements,

    all DCMs, DCOs, futures commission merchants (``FCMs''), introducing

    brokers (``IBs''), and members of contract markets are generally

    required to keep full and complete records, together with all pertinent

    data and memoranda, of all activities relating to the business of the

    entity or person that is subject to the Commission's authority. The

    Commission believes that the rationale for requiring futures

    registrants and counterparties subject to its jurisdiction to keep full

    and complete records must also govern recordkeeping with respect to

    swaps. Such records are essential to carrying out the regulatory

    functions of not only the Commission but all other financial

    regulators, and for appropriate risk management by registered entities

    and swap counterparties themselves.\19\

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

    \18\ Recordkeeping requirements relating to futures and options

    are found in CEA sections 5(b) and 5(d); Sec. Sec. 1.31 and 1.35 of

    this chapter; Appendix B to Part 38 of the Commission's Regulations,

    Core Principle 17, Recordkeeping; and Appendix A to Part 39 of the

    Commission's Regulations, Core Principle K, Recordkeeping.

    \19\ The need for such records is also recognized

    internationally. As CPSS has noted: ``it should be clear that the

    data recorded in a TR [trade repository] cannot be a substitute for

    the records of transactions at original counterparties. Therefore,

    it is important that even where TRs have been established and used,

    market participants maintain their own records of the transactions

    that they are a counterparty to and reconcile them with their

    counterparties or TRs on an ongoing basis (including for their own

    risk management purposes).'' Committee on Payment and Settlement

    Systems, Considerations for Trade Repositories in OTC Derivatives

    Markets, May 2010, at 1.

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

    The Commission notes that the NOPR placed narrower recordkeeping

    obligations on non-SD/MSP counterparties subject to the Commission's

    jurisdiction, requiring them to keep full, complete, and systematic

    records, including all pertinent data and memoranda, with respect to

    each swap to which they are a counterparty, rather than with respect to

    their entire business relating to swaps. This narrower requirement was

    designed to effectuate a policy choice made by the Commission to place

    lesser burdens on non-SD/MSP counterparties to swaps, where this can be

    done without damage to the fundamental systemic risk mitigation,

    transparency, standardization, and market integrity purposes of the

    legislation.

    The Commission does not believe that it should further define or

    reduce the records required to be kept. The Commission's existing

    recordkeeping regulations in the futures context call for maintenance

    of ``full and complete records.'' Complete records regarding each swap

    should be required from all counterparties, including non-SD/MSP

    counterparties to physical commodity swaps and other swaps, because

    such records are essential for effective market oversight and

    prosecution of violations by the Commission and other regulators.

    Experience with recordkeeping requirements in the context of futures

    suggests that all market participants are able to retain such records.

    The Commission also does not believe that it should specifically

    delineate the meaning of ``all pertinent data and memoranda.'' This

    phrase is not further defined in the Commission's existing futures

    regulations.

    With respect to paper recordkeeping, the Commission agrees with the

    comment suggesting that non-SD/MSP counterparties should be permitted

    to keep required records in paper form, since this could serve to

    reduce burdens on some such counterparties while still ensuring that

    essential records are available.\20\ The final rule provides that non-

    SD/MSP counterparties may keep records in either electronic or paper

    form, so long as they are retrievable, and information in them is

    reportable, as required by part 45. Because SEFS, DCMs, DCOs, SDs, and

    MSPs are more likely to have automated systems suitable for electronic

    recordkeeping, and because electronic production of records is

    important to the Commission's enforcement functions, the final rule

    will permit such registrants to keep records in paper form only if they

    are originally created and exclusively maintained in paper form.

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

    \20\ Although the final rule requires data reporting in

    electronic form, a non-SD/MSP counterparty could achieve this by

    entering information from paper records into a web interface

    provided by an SDR.

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

    b. Record retention periods. The Commission has determined that the

    final rule should maintain the NOPR provision calling for required

    records to be retained for the life of the swap plus five years. A swap

    can continue to exist for a substantial period of time prior to its

    final termination or expiration. During this time, which in some cases

    can extend for many years, the key economic terms of the swap can

    change. Thus, recordkeeping requirements with

    [[Page 2142]]

    respect to a swap must necessarily cover the entire period of time

    during which the swap exists, as well as an appropriate period

    following final termination or expiration of the swap. A five-year

    retention period following termination of the swap will ensure document

    retention consistent with the information that the Commission and other

    regulators need to carry out their oversight and enforcement

    responsibilities. It will also parallel the Commission's existing five-

    year record retention requirement in the context of futures. Finally,

    this five-year period is consistent with the Commission's final part 49

    rules regarding SDR registration.

    With respect to record retention by SDRs, the Commission has

    determined that SDRs must retain all required records both: (a)

    Throughout the existence of the swap and for five years following final

    termination or expiration of the swap, during which time the records

    must be readily accessible by the SDR and available to the Commission

    via real time electronic access, as provided in the NOPR; and (b)

    thereafter, for an archival storage period of ten additional years,

    during which they must be retrievable by the SDR within three business

    days. The Commission believes that extended retention of SDR records

    will assist regulators in discharging their systemic risk and market

    monitoring responsibilities, and aid market analysis. However, after a

    substantial period of time has passed following final termination of a

    swap, the data storage burden of retaining SDR records concerning the

    swap could outweigh the remaining benefit involved, and accordingly the

    Commission does not agree with the comment suggesting indefinite record

    retention. The Commission may review the ten-year archival storage

    requirement for SDRs at a future time, after experience with its

    operation is available.

    c. Record retrievability. The Commission does not believe that it

    should reduce record retrievability requirements for SEFS, DCMs, DCOs,

    SDs, and MSPs. The requirement that records be readily accessible for

    the life of the swap plus two years parallels the Commission's

    retrievability requirement during the first two years of the five-year

    retention period for futures-related records.\21\ The Commission has

    routinely interpreted ``readily accessible'' to mean retrievable in

    real time or at least on the same day as the records are requested.

    Moreover, Commission Regulation 1.31 requires records maintained

    electronically to be produced immediately upon request. FCMs routinely

    comply with this requirement, and the Commission does not believe that

    SDs and MSPs should be unable to do so as well.

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

    \21\ See Sec. 1.31 of this chapter.

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

    With respect to record retrievability for non-SD/MSP

    counterparties, the Commission accepts the comments suggesting that

    retrieval from off-site storage within three business days could

    possibly involve additional costs or limit off-site storage options for

    some smaller non-SD/MSP counterparties. In order to lessen any burden

    on non-SD/MSP counterparties while maintaining necessary accessibility

    of pertinent records, the final rule will only require retrievability

    of non-SD/MSP counterparty records within five business days throughout

    the record retention period. The Commission believes that this will not

    unduly compromise its ability to conduct investigations and carry out

    its enforcement responsibilities.

    d. Phasing in recordkeeping requirements for non-SD/MSP

    counterparties. The Commission does not believe that it is necessary to

    provide any phasing treatment with respect to recordkeeping

    requirements for non-SD/MSP counterparties beyond the phasing by

    counterparty type provided in the final rule with respect to compliance

    dates. As noted above, the final rule provides less onerous

    recordkeeping requirements and less onerous retrievability requirements

    for non-SD/MSP counterparties, in order to ameliorate recordkeeping

    burdens for them. Excusing non-SD/MSP counterparties from all

    recordkeeping for an extended period could interfere with the ability

    of the Commission and other regulators to carry out their oversight and

    enforcement responsibilities. As previously noted, experience with

    recordkeeping requirements in the context of futures suggests that all

    market participants do retain records and that such recordkeeping is

    essential for effective oversight and prosecution of violations.

    B. Swap Data Reporting: Creation Data--Sec. 45.3

    1. Proposed Rule

    a. What creation data should be reported. In order to ensure

    timeliness, accuracy, and completeness with respect to the swap data

    available to regulators, the proposed rule called for reporting of swap

    data from each of two important stages of the existence of a swap: the

    creation of the swap, and the continuation of the swap over its

    existence until its final termination or expiration. The NOPR required

    reporting of two sets of data generated in connection with the swap's

    creation: primary economic terms data, and confirmation data.

    The NOPR defined primary economic terms as including all of the

    terms of the swap verified or matched by the counterparties at or

    shortly after the execution of the swap. In order to ensure that the

    array of primary economic terms reported to an SDR for a swap is

    sufficient in each case for regulatory purposes and is comparable

    enough to permit data aggregation, the NOPR required that the primary

    economic terms reported for each swap must include, at a minimum, all

    of the data elements listed by the Commission in the asset class-

    specific tables of minimum data elements appended to the NOPR. The

    tables were designed to include data elements reflecting the basic

    nature and essential economic terms of the product involved.

    The NOPR defined confirmation as the full, signed, legal

    confirmation by the counterparties of all of the terms of a swap, and

    defined confirmation data as all of the terms of a swap matched and

    agreed upon by the counterparties in confirming the swap. The NOPR

    required reporting of confirmation data, in addition to the earlier

    reporting of primary economic terms data, in order to help ensure the

    completeness and accuracy of the data maintained in an SDR with respect

    to a swap. Reporting of the terms of the confirmation, which has the

    assent of both counterparties, also provides a means of fulfilling the

    statutory directive that an SDR ``shall confirm with both

    counterparties to the swap the accuracy of the data that was

    submitted.'' \22\

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

    \22\ CEA section 21(c)(2).

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

    b. Who should report creation data. The NOPR's swap data reporting

    provisions were designed to streamline and simplify the data reporting

    approach, by calling for reporting by the registered entity or

    counterparty that the Commission believes has the easiest, fastest, and

    cheapest access to the data in question. As recognized in the NOPR,

    such entities and counterparties are also the most likely to have

    automated systems suitable for reporting.

    Because the Commission anticipated that swap contract certification

    process for swaps listed by SEFs and DCMs would define all or most of

    the primary economic terms of a swap, the NOPR called for SEFs or DCMs

    to report PET data for swaps executed on a trading platform, as soon as

    technologically practicable after execution, with reporting

    counterparties reporting only PET data that for any reason was not

    [[Page 2143]]

    available to the SEF or DCM. For off-facility swaps, where PET data is

    created by the counterparties' verification of the primary economic

    terms of the swap, the NOPR provided for the reporting counterparty (as

    defined) to report the required PET data for the swap. The NOPR called

    for this report to be made promptly, but in no event later than: 15

    minutes after execution of a swap for which execution and verification

    of primary economic terms occur electronically; 30 minutes after

    execution of a swap which is not executed electronically but for which

    verification of primary economic terms occurs electronically; or, in

    the case of a swap for which neither execution nor verification of

    primary economic terms occurs electronically, within a time after

    execution to be determined by the Commission.

    For cleared swaps, where confirmation data will be generated by

    DCOs in the course of the normal clearing process, the NOPR called for

    DCOs to report confirmation data, doing so as soon as technologically

    practicable following clearing. For non-cleared swaps, where

    confirmation will be done by the counterparties, the NOPR required the

    reporting counterparty to report confirmation data, making this report

    promptly following confirmation, but in no event later than: 15 minutes

    after confirmation of a swap for which confirmation occurs

    electronically; or, in the case of a swap for which confirmation was

    done manually rather than electronically, within a time after

    confirmation to be determined by the Commission.

    The NOPR did not explicitly assign the right to select the SDR to

    which a swap is reported, but it effectively determined who will make

    this choice, through the interaction of two key aspects of the rule.

    First, in order to prevent fragmentation of data for a single swap

    across multiple SDRs, which would seriously impair the ability of the

    Commission and other regulators to view or aggregate all of the data

    concerning the swap, the proposed rule provided that, once an initial

    data report concerning a swap is made to an SDR, all data reported for

    that swap thereafter must be reported to that same SDR.\23\ Second, in

    order to ensure that PET data concerning the swap is reported as soon

    as technologically practicable following execution--in part to

    facilitate real time reporting--the proposed rule required the SEF or

    DCM to make the initial PET data report for swap executed on such a

    facility, and required the reporting counterparty (in the majority of

    cases, an SD or MSP) to make the initial report for an off-facility

    swap. Because subsequent reports must go to the SDR that received the

    initial report, in practice this meant that the SEF or DCM would select

    the SDR for platform-executed swaps, and the reporting counterparty

    would choose the SDR for off-facility swaps.

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

    \23\ This requirement received universal approbation in both

    comments and roundtables as appropriate and necessary.

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

    c. Deadlines for creation data reporting. The NOPR established

    reporting deadlines for creation data reporting, including both PET

    data reporting and confirmation data reporting, determined by whether

    the swap is platform-executed and/or cleared, whether verification

    (matching) of primary economic terms by the counterparties occurs

    electronically, and whether the reporting counterparty is an SD or MSP

    on the one hand or a non-SD/MSP counterparty on the other. The

    resulting deadlines were as shown in the following tables.

    Proposed Rule--Reporting Counterparty: SD or MSP

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

    Execution and clearing Report Reporter Reporting time

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

    SEF or DCM, DCO................... PET data............. SEF or DCM........... As soon as technologically

    practicable following

    execution.

    Any PET data not SD or MSP............ After execution:

    reported by SEF or * 15 minutes if execution and

    DCM. verification electronic.

    * 30 minutes if execution non-

    electronic but verification

    electronic.

    * 24 hours if neither

    execution nor verification

    electronic.

    Confirmation data.... DCO.................. As soon as technologically

    practicable following

    clearing.

    SEF, Not cleared.................. PET data............. SEF.................. As soon as technologically

    practicable following

    execution.

    Any PET data not SD or MSP............ After execution:

    reported by SEF. * 15 minutes if execution and

    verification electronic.

    * 30 minutes if execution non-

    electronic but verification

    electronic.

    * 24 hours if neither

    execution nor verification

    electronic.

    Confirmation data.... SD or MSP............ After confirmation:

    * 15 minutes if confirmation

    electronic.

    * 24 hours if confirmation non-

    electronic.

    No platform, DCO.................. PET data............. SD or MSP............ After execution:

    * 30 minutes if verification

    electronic.

    * 24 hours if verification non-

    electronic.

    Confirmation data.... DCO.................. As soon as technologically

    practicable following

    clearing.

    No platform, Not cleared.......... PET data............. SD or MSP............ After execution:

    * 30 minutes if verification

    electronic.

    * 24 hours if verification non-

    electronic.

    Confirmation data.... SD or MSP............ After confirmation:

    * 15 minutes if confirmation

    electronic.

    * 24 hours if confirmation non-

    electronic.

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

    Proposed Rule--Reporting Counterparty: Non-SD/MSP

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

    Execution and clearing Report Reporter Reporting time

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

    SEF or DCM, DCO................... PET data............. SEF or DCM........... As soon as technologically

    practicable following

    execution.

    [[Page 2144]]

    Any PET data not Non-SD/MSP........... After execution:

    reported by SEF or * 15 minutes if execution and

    DCM. verification electronic.

    * 30 minutes if execution non-

    electronic but verification

    electronic.

    * 24 hours if neither

    execution nor verification

    electronic.

    Confirmation data.... DCO.................. As soon as technologically

    practicable following

    clearing.

    SEF, Not cleared.................. PET data............. SEF.................. As soon as technologically

    practicable following

    execution.

    Any PET data not SD or MSP............ After execution:

    reported by SEF. * 15 minutes if execution and

    verification electronic.

    * 30 minutes if execution non-

    electronic but verification

    electronic.

    * 24 hours if neither

    execution nor verification

    electronic.

    Confirmation data.... Non-SD/MSP........... After confirmation:

    * To be determined by the

    Commission prior to final

    rule.

    No platform, DCO.................. PET data............. Non-SD/MSP........... After execution:

    * 30 minutes if verification

    electronic.

    * 24 hours if verification non-

    electronic.

    Confirmation data.... DCO.................. As soon as technologically

    practicable following

    clearing.

    No platform, Not cleared.......... PET data............. Non-SD/MSP........... After execution:

    * 30 minutes if verification

    electronic.

    * 24 hours if verification non-

    electronic.

    Confirmation data.... Non-SD/MSP........... After confirmation:

    * To be determined by the

    Commission prior to final

    rule.

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

    d. Reporting for multi-asset swaps and mixed swaps. As noted in the

    NOPR, a mixed swap is in part a security-based swap subject to SEC

    jurisdiction, and in part a swap subject to CFTC jurisdiction.\24\

    Multi-asset swaps are those that do not have one easily identifiable

    primary underlying asset, but instead involve multiple underlying

    assets belonging to different asset classes that are all within CFTC's

    jurisdiction. One way of stating the distinction between these two

    types of swaps is that SEC and CFTC will each have jurisdiction over

    part of a mixed swap, but only CFTC will have jurisdiction over the

    different parts of a multi-asset swap. The NOPR requested comment on

    how multi-asset and mixed swaps should be reported.

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

    \24\ The Dodd-Frank Act defines ``mixed swap'' as follows: ``The

    term `security-based swap' includes any agreement, contract, or

    transaction that is as described in section 3(a)(68)(A) of the

    Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(68)(A)) and is

    also based on the value of 1 [sic] or more interest or other rates,

    currencies, commodities, instruments of indebtedness, indices,

    quantitative measures, other financial or economic interest or

    property of any kind (other than a single security or a narrow-based

    security index), or the occurrence, non-occurrence, or the extent of

    the occurrence of an event or contingency associated with a

    potential financial, economic, or commercial consequence (other than

    an event described in subparagraph (A)(iii).'' Dodd-Frank Sec.

    721(21), CEA section 1a(47)(D).

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

    2. Comments Received

    The Commission received numerous comments from a variety of

    commenters concerning the proposed rule's provisions addressing

    creation data reporting. The broad themes of these comments addressed

    what should be included in required primary economic terms data, who

    should make the initial creation data report, what deadlines should be

    set for making creation data reports, and how creation data should be

    reported with respect to multi-asset swaps, mixed swaps, and

    international swaps.

    a. What should be included in required PET data. Comments

    concerning various aspects of required minimum PET data are discussed

    below.

    Clarification of the catch-all PET data category. The tables of

    minimum PET data for each asset class appended to the NOPR included a

    field for reporting ``any other primary economic terms of the swap

    matched by the counterparties in verifying the swap.'' ISDA and SIFMA

    commented that the Commission should clarify or provide examples of

    what this requirement means.

    Clarification of particular PET data terms for other commodity

    swaps. Electric energy providers including EEI, the Electric Power

    Supply Association (``EPSA''), the Coalition of Physical Energy

    Companies (``COPE''), and Dominion Resources suggested that the terms

    ``timestamp,'' ``settlement method,'' ``grade,'' and ``total quantity''

    should be clarified or else should not be included in the minimum PET

    data for other commodity swaps. They asserted that timestamps are not

    typically recorded under current energy market practice. They argued

    that the settlement method field implies a swap potentially involving

    physical delivery, whereas they believe that swaps are not agreements

    intended to be physically settled. They also argued that the ``total

    quantity'' of a commodity in a swap is not a term typically captured by

    swap counterparties, who instead typically express the size of a swap

    in terms of the quantity aligned with a settlement period.

    Elimination or clarification of calculation and reporting of

    futures equivalents. The NOPR called for minimum PET data reporting to

    include futures contract equivalents and futures contract equivalent

    units of measure. Better Markets expressed support for required

    reporting of futures equivalents. However, the Depository Trust &

    Clearing Corporation (``DTCC'') commented that OTC derivatives cannot

    be mapped readily to futures contracts, and thus this data will not

    necessarily be able to be aggregated in a meaningful fashion. Global

    Forex asked the Commission to provide guidance on how to report futures

    equivalents for swaps whose tenor sits between two futures contracts

    dates; guidance on the case where multiple futures contracts exist for

    the same underlying product; and guidance on products for which no

    corresponding futures contracts exist.

    Clarification of creation data reporting in the context of

    structured transactions. ISDA and SIFMA commented that ``execution,''

    ``affirmation,'' and ``confirmation'' may have somewhat different

    meanings in different asset classes, and requested clarification of the

    application of these terms with respect to creation data

    [[Page 2145]]

    reporting. More specifically, Global Forex requested clarification of

    creation data in the context of structured transactions, noting that

    the meaning given these terms under prevalent foreign exchange market

    conventions, which frequently involve structured transactions, may

    differ from their application in other contexts.

    Clarifications regarding foreign exchange transactions. Contending

    that cross-currency swaps should be classified as interest rate swaps

    rather than foreign exchange swaps, Global Forex argues that cross-

    currency swaps in fact are interest rate products with multi-payment

    schedules, that they are most often traded by interest rate desks with

    interest rate participants, and that they are captured and managed in

    interest rate systems and infrastructure using interest rate

    conventions. Global Forex notes that foreign exchange swaps are

    products traded by distinct foreign exchange desks with market

    participants and internal and external systems infrastructure that are

    different from the participants and infrastructure involved in cross-

    currency swaps. Existing trade repositories including TriOptima and

    DTCC also suggest that the Commission classify cross-currency swaps as

    interest rate swaps.

    Global Forex notes that foreign exchange swaps consist of a near

    and a far leg, and that the foreign exchange swap market currently

    lacks market conventions that suggest how to select a reporting

    counterparty responsible for reporting both legs, in situations where

    both parties have the same hierarchical level (e.g., two SDs). Global

    Forex also notes that current trade capture systems differ in how they

    handle foreign exchange swaps, and that some may book a foreign

    exchange swap as a single trade, but split it in back-office systems

    into two trades with separate trade identifiers. Global Forex does not

    advocate reporting both legs separately; it simply points out this

    potential issue in light of current, differing market practices.

    Combining all PET data and confirmation data reporting in a single

    report. Several comments suggest consolidating the requirements to

    report both PET data and confirmation data. Dominion Resources and

    Global Forex suggest a single report providing PET data plus

    confirmation status (rather than all terms confirmed). ISDA and SIFMA

    suggest replacing all creation data reporting with end-of-day snapshot

    reporting (including the first-day report). The Kansas City Board of

    Trade (``KCBT'') suggests that for swaps that are platform-executed and

    cleared, the DCO's clearing report should replace confirmation

    reporting. \25\ DTCC suggests creation data reporting for fully-

    electronic trades should be limited to confirmation reporting, in the

    belief that fully electronic trades can be confirmed within 15 minutes.

    Thomson Reuters believes that creation data reporting should be limited

    to confirmation reporting for all swaps whether platform executed or

    voice executed. The Managed Funds Association (``MFA'') suggests

    defining ``time of execution'' to mean 24 hours after manual

    confirmation of the swap, arguing that the benefits of data reporting

    within minutes of execution as presently defined do not outweigh either

    the infrastructure costs or error risks involved.

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

    \25\ KCBT also suggests that DCOs should be allowed to report a

    day's cleared swaps in a single daily data file, rather than

    individually.

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

    Harmonizing the data fields require for real time and regulatory

    reporting. ISDA, SIFMA, WGCEF, and Dominion Resources recommended

    harmonizing the Commission's required PET data fields and real time

    reporting data fields. The Electric Coalition suggested a need to

    coordinate these two types of reporting with respect to reporting

    triggers and the words used to define them (e.g. verification or

    confirmation), and requested clarification concerning the data elements

    required by the real time reporting rule and the swap data reporting

    rule.

    Allowing non-SD/MSP counterparties to report less data. The NOPR

    requires the same minimum PET data fields to be reported for each swap

    in an asset class, regardless of the nature of the reporting entity or

    counterparty. Various energy producers commented concerning potential

    burdens for non-SD/MSP counterparties in this regard. AGA suggested the

    rule should minimize the burdens of reporting for non-SD/MSP

    counterparties, and EEI supported the principle that responsibility for

    reporting should rest with those having the best technology, such as

    SEFs, DCMs, SDs and MSPs.\26\ EEI, EPSA, and COPE suggested limiting

    data reporting for non-SD/MSP counterparties in physical energy to data

    they already maintain under current data capture practices, limiting

    their reporting of confirmation data to the confirmation information

    currently captured in their systems, rather than requiring them to

    report all confirmation terms. The International Energy Credit

    Association (``IECA'') suggested exempting physical energy

    counterparties from reporting requirements entirely, or at least

    imposing ``lesser'' reporting requirements for them. The Electric

    Coalition suggested that non-SD/MSP counterparties be subject only to a

    ``CFTC Lite'' reporting regime.

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

    \26\ The NOPR takes this approach, calling for SEFs and DCMs to

    report all creation data in their possession for on-facility swaps,

    and making SDs and MSPs the reporting counterparties when they are

    involved.

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

    Miscellaneous aspects of PET data. The NOPR specifies minimum PET

    data fields for each asset class. The SEC's proposed data reporting

    rule for swaps under the SEC's jurisdiction, i.e., security-based swaps

    in the credit and equity asset classes, sets out categories of required

    data rather than specific data fields. ISDA and SIFMA suggested that

    the Commission should adopt the SEC's approach, and expressed concern

    that the Commission's approach could negatively affect FpML development

    and result in some products not being adequately described. Eris

    Exchange suggested that the Commission determine where prescriptive

    rules are absolutely necessary to address systemic risk, and the

    Commodity Markets Council suggested that the Commission avoid a

    prescriptive regulatory model which would create detailed reporting

    requirements and thus require different reporting methods.

    SunGard Energy & Commodities (``SunGard'') suggested that for swaps

    executed on SEFs and DCMs, having the SEF or DCM report position

    changes to each account, instead of reporting individual swap

    transactions, would be more efficient and more advantageous for

    monitoring of positions and of risk.\27\

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

    \27\ SunGard suggested that such position reports could be

    accompanied by a reference to the primary economic terms of the

    contract, rather than by data reflecting all primary economic terms.

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

    b. Who makes the initial creation data report and selects the SDR.

    The NOPR did not explicitly assign the right to select the SDR to which

    a swap is reported, but it effectively determined who will make this

    choice, through the interaction of two key aspects of the proposed

    rule. First, in order to prevent fragmentation of data for a single

    swap across multiple SDRs, which would seriously impair regulators'

    ability to view or aggregate all of the data concerning the swap, the

    NOPR provided that, once an initial data report concerning a swap is

    made to an SDR, all data reported for that swap thereafter must be

    reported to that same SDR.\28\ Second, in order to ensure that PET data

    concerning the swap is reported as soon as practicable following

    execution--in part to facilitate real time reporting--the NOPR required

    the SEF or DCM to make the initial PET data report for swap

    [[Page 2146]]

    executed on such a facility, and required the reporting counterparty

    (in the majority of cases, an SD or MSP) to make the initial report for

    an off-facility swap. Because subsequent reports must go to the SDR

    that received the initial report, in practice this meant that the SEF

    or DCM would select the SDR for platform-executed swaps, and the

    reporting counterparty would choose the SDR for off-facility swaps.

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

    \28\ This requirement received universal approbation in both

    comments and roundtables as appropriate and necessary.

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

    The Commission received a number of comments concerning who should

    select the SDR to which a swap is reported. WGCEF, COPE, EEI, and EPSA

    supported the NOPR approach of giving reporting obligations to SEFs,

    DCMs, and DCOs, arguing that this approach simplifies reporting and

    eases burdens on counterparties, which is especially important in the

    case of non-SD/MSP counterparties. EEI and EPSA emphasized that the

    rules should ensure that SDR selection by a SEF, DCM, SD, or MSP does

    not result in costs or burdens for non-SD/MSP counterparties. WGCEF

    also suggested that DCOs should make the initial report for cleared

    swaps executed off-platform, since (in WGCEF's view) execution

    technically will not occur until such a swap is accepted for clearing.

    Global Forex observed that if a platform makes the initial report and

    thus selects the SDR, other entities or counterparties with reporting

    obligations during the life of the swap would need to ensure that they

    can connect to the chosen SDR. ABC and CIEBA suggested that for swaps

    involving a benefit plan as a counterparty, the SDR selection should

    always be made by the plan. ISDA and SIFMA suggested that the reporting

    counterparty should always select the SDR, arguing that this would

    permit the market to determine and follow the most efficient manner of

    reporting. REGIS-TR opposed having reporting obligations assigned based

    on platform execution or clearing.

    DTCC and ICE recommended that the reporting counterparty--an SD or

    MSP in the majority of cases--should always select the SDR, even for

    platform-executed swaps. ICE also suggested that if a SEF or DCM makes

    the first report and thus selects the SDR for a swap that is to be

    cleared, the SEF or DCM should be permitted to select a DCO that is

    also registered as an SDR as both the DCO that will clear the swap and

    the SDR to which the swap is reported. Going further in this direction,

    CME contended that the final rule should require the initial report for

    each cleared swap to be made to a DCO that is also registered as an SDR

    or an SDR chosen by such a DCO. CME argued that the structure and

    wording of the Dodd-Frank Act demonstrate that this was Congress's

    intent, and that limiting reporting for cleared swaps to DCOs that are

    dually registered as SDRs or to SDRs chosen by a DCO would involve the

    lowest cost and least burden. The Commodity Markets Council echoed

    CME's cost-benefit argument, asserting that DCOs are the ``natural

    choice'' to act as SDRs for cleared trades, and that it would be

    costly, inefficient and unnecessary to require industry to establish a

    redundant set of expensive connections with non-DCO SDRs for the

    purpose of making regulatory reports for cleared trades.

    c. Creation data reporting deadlines and deadline phasing.

    Extended creation data reporting deadlines. The Commission received

    a number of comments recommending extended deadlines for both PET data

    reporting and confirmation data reporting. The Electric Coalition

    commented that the NOPR reporting deadlines are far too short if the

    reporting party is a non-financial entity, because such an entity would

    need to manually extract reportable data elements from a customized

    swap.

    Several commenters urged the Commission to extend deadlines for PET

    data reporting, particularly in the case of non-SD/MSP counterparties.

    EEI suggested a PET data report deadline of T+1 (i.e., by the close of

    business on the business day following the day of execution) in the

    case of either electronic or manual verification. CIEBA asked that the

    24-hour deadline for PET data reporting where both execution and

    verification are non-electronic include only business days. COPE

    concurred that the 24-hour deadline where verification is non-

    electronic is too short for non-SD/MSP counterparties, and asked the

    Commission not to set a deadline in the final rule, but to determine

    the deadline through ongoing consultations with industry following

    issuance of the final rule.

    Commenters also urged extension of the deadlines for confirmation

    data reporting. AGA asked that the confirmation data reporting deadline

    for non-SD/MSP counterparties be set at T+1 for swaps electronically

    confirmed, and at T+2 (i.e., by the close of business on the second

    business day following the day of execution) for swaps not

    electronically confirmed. The Federal Home Loan Banks (``FHLB'')

    suggested a deadline of 24 hours following confirmation for reporting

    confirmation of a swap electronically confirmed, and a deadline of five

    business days following confirmation for a swap manually confirmed.

    DTCC suggested that a 15-minute deadline for reporting confirmation of

    an electronically executed swap would require a level of straight-

    through processing not yet available, and that for similar reasons a

    somewhat longer deadline would be needed where the swap was not

    electronically executed but electronically cleared. DTCC recommended

    setting the initial deadline for confirmation data reporting for

    electronically executed swaps at 30 minutes, setting the deadline for

    swaps not electronically executed but electronically cleared at two

    hours, and phasing in confirmation data reporting deadlines. For

    manually confirmed swaps, DTCC advocated a confirmation data reporting

    deadline of five days after execution.

    Streamlined regulatory and real time reporting. The Commission also

    received comments from DTCC and from roundtable participants suggesting

    that it consider minimizing the number of swap creation data reports to

    be required of any given registered entity or swap counterparty, either

    by combining PET data reporting and confirmation data reporting in a

    single report, or by allowing a single PET data report to fulfill both

    regulatory reporting requirements under part 45 and real time reporting

    requirements under part 43.

    Phasing in reporting deadlines. DTCC suggested that the Commission

    consider phasing in creation data reporting deadlines where possible.

    d. Reporting of multi-asset swaps and mixed swaps. As noted in the

    preamble of the NOPR, generally, a mixed swap is in part a security-

    based swap subject to SEC jurisdiction, and in part a swap belonging to

    an asset class subject to CFTC jurisdiction.\29\ Multi-asset swaps are

    those that do not have one easily identifiable primary underlying

    notional item, but instead involve multiple underlying notional items

    belonging to different asset classes that are all within CFTC's

    jurisdiction. One way of stating the distinction between these two

    types of swaps is that SEC and CFTC will each have jurisdiction over

    part of a mixed

    [[Page 2147]]

    swap, but only CFTC will have jurisdiction over the different parts of

    a multi-asset swap. The NOPR requested comment on how multi-asset and

    mixed swaps should be reported, but did not directly address such

    reporting in the text of the proposed rule.

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

    \29\ The Dodd-Frank Act defines ``mixed swap'' as follows: ``The

    term `security-based swap' includes any agreement, contract, or

    transaction that is as described in section 3(a)(68)(A) of the

    Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(68)(A)) and is

    also based on the value of 1 [sic] or more interest or other rates,

    currencies, commodities, instruments of indebtedness, indices,

    quantitative measures, other financial or economic interest or

    property of any kind (other than a single security or a narrow-based

    security index), or the occurrence, non-occurrence, or the extent of

    the occurrence of an event or contingency associated with a

    potential financial, economic, or commercial consequence (other than

    an event described in subparagraph (A)(iii).'' Dodd-Frank Sec.

    721(21), CEA section 1a(47)(D).

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

    Commenters provided differing views concerning reporting of mixed

    swaps and multi-asset swaps. Better Markets suggested that the

    different legs of mixed swaps and multi-asset swaps should be reported

    separately. ISDA and SIFMA suggested that multi-asset swaps should not

    be decomposed into their underlying asset classes but should be

    reported to an SDR that accepts swaps in the most significant asset

    class component of the swap, as determined by the reporting

    counterparty (in practice, usually the asset class of the desk that

    trades the swap). DTCC suggested that swaps in asset classes subject to

    joint SEC-CFTC regulation could be reported to an SDR registered with

    both Commissions (except in cases where no such SDR is available), or

    that a practicable reporting regime for mixed swaps and multi-asset

    swaps may be to have the reporting counterparty for a mixed swap or

    multi-asset swap report the swap to an SDR serving each asset class,

    including the USI assigned in the context of the report to the first

    SDR in the report made to the second SDR.

    i. Reporting of international swaps. As noted above, the Dodd-Frank

    Act directs the Commission to consult and coordinate with foreign

    regulatory authorities regarding establishment of consistent

    international standards for the regulation of swaps and swap entities.

    The Commission is committed to a cooperative international approach to

    swap recordkeeping and swap data reporting, and has consulted

    extensively with various foreign regulatory authorities in the process

    of preparing this final rule. International regulators consulted by the

    Commission have urged the Commission to include provisions in its final

    swap data reporting rules concerning ``international swaps,'' i.e.,

    those swaps that may be required by U.S. law and the law of another

    jurisdiction to be reported both to an SDR registered with the

    Commission and to a different trade repository registered with the

    other jurisdiction.

    3. Final Rule: Sec. 45.3

    a. What should be included in required PET data.

    Clarification of the catch-all PET data category. The Commission's

    purpose in including in the tables of minimum PET data a field for

    reporting ``any other primary economic terms of the swap matched by the

    counterparties in verifying the swap'' is to provide a ``catch all''

    category necessary to (1) ensure reporting of all price-forming terms

    agreed on at the time of swap verification, including any such terms

    not listed in the minimum PET data tables for the asset class in

    question, and (2) keep pace with market innovation and new varieties of

    swaps for which the Commission has not enumerated all relevant data

    fields. To clarify that this field is intended to include all terms

    agreed on at the time of swap verification, the final rule eliminates

    the words ``primary economic'' from the field description, specifies

    reporting of ``any other terms of the swap matched by the

    counterparties in verifying the swap,'' and adds some possible examples

    of such terms. This aligns the field description with the NOPR and

    final rule definition of ``primary economic terms'' as meaning ``all of

    the terms of a swap matched or affirmed by the counterparties in

    verifying the swap.''

    Clarification of particular PET data terms for other commodity

    swaps.

    The Commission disagrees with comments suggesting that execution

    date and time should not be required to be reported for certain types

    of other commodity swaps. The Commission believes that the date and

    time of the execution of a swap constitute a basic primary economic

    term and a fundamental audit trail component for all swaps. This

    information is essential to the ability of the Commission and other

    regulators to fulfill their obligations to supervise swap markets and

    prosecute abuses. For swaps executed on a SEF or DCM, and for off-

    facility swaps executed via an automated system, a timestamp will be

    created automatically by the system involved. For off-facility swaps

    executed manually, counterparties can and must manually record and

    report the date and time of execution. Where current market practice

    does not include recording the date and time of execution of a swap,

    adjustment will be necessary.

    While the Commission notes that the parameters of what constitutes

    a swap will be provided by the final definition of ``swap'' issued

    jointly by the Commission and the SEC, the Commission believes that

    ``settlement method'' should be retained as a PET data field. The

    definition of a swap in CEA section 1a(47) could include options that

    potentially could require physical delivery of a commodity. Thus, while

    certain transactions that require delivery of a commodity, e.g.,

    forward contracts or spot transactions that are excluded from the

    definition of a swap, may not constitute swaps (as commenters argue),

    other derivative transactions involving delivery would be required to

    be reported as swaps.

    The Commission believes that ``grade'' should also be retained as a

    PET data field for other commodity swaps. ``Grade'' would typically be

    applicable as a defining characteristic of the swap for both physically

    delivered and cash settled transactions, in that this term is intended

    to identify the quality and other characteristics of the commodity that

    underlies the swap. For a cash settled swap, the Commission believes

    that separately accounting for grade in the terms reported is also

    necessary as a means of classifying and identifying the quality

    characteristics of the commodity underlying the swap. The Commission

    recognizes that in certain cases--electricity being one example--a

    grade may not exist. The final rule will indicate that where a

    particular PET data field does not apply to a given swap, the reporting

    entity or counterparty should report ``Not applicable'' for that field.

    As noted in the comments, some commodity swap counterparties use

    the convention of identifying the notional amount of a swap by

    specifying the quantity in terms of dollars or units of the commodity,

    whichever is used to calculate settlement period payment obligations.

    However, other counterparties account for the size of a swap by

    referring to the total quantity involved in a swap over its entire

    existence. Because a single convention does not apply in all cases, the

    final minimum PET data tables will retain the terms ``Quantity'' and

    ``Total quantity, '' but will also add the terms ``Quantity units'' and

    ``Notional quantity.'' Notional quantity will be defined as the amount

    of the underlying commodity that is used to calculate periodic

    settlement payments during the life of the swap. Quantity units will be

    defined as the units in which the notional quantity is expressed, e.g.,

    bushels, gallons, barrels, pounds, or tons.

    Elimination or clarification of calculation and reporting of

    futures equivalents. The NOPR provision for reporting of futures

    contract equivalents was intended to assist the Commission in

    monitoring the positions of traders for the purpose of enforcing

    position limits mandated by the Dodd-Frank Act. However, in July 2011,

    subsequent to publication of the NOPR, the Commission adopted new

    reporting requirements for physical commodity swaps and swaptions. Part

    150 of this chapter now requires routine position reports from clearing

    organizations, clearing members and swap dealers, and

    [[Page 2148]]

    also applies to reportable swap trader positions. It also provides

    guidelines on how swaps should be converted into futures equivalents.

    The new regulations were issued in part to cover the period between the

    present, when the date by which SDRs registered with the Commission

    will be operational in all asset classes is not yet certain, and a

    future time when the Commission may be able to obtain swap position

    data by aggregating data across SDRs.\30\ Accordingly, the final part

    45 rule will drop ``futures contract equivalent'' and ``futures

    contract equivalent unit of measure'' from its minimum PET data tables.

    The Commission may revisit possible reporting of futures equivalents at

    a later time, after Commission staff has had an opportunity to evaluate

    the Commission's experience in collecting futures equivalent data under

    the new part 150 regulations.

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

    \30\ An SDR would be able to report position data to the

    Commission only if it were the single SDR for an entire asset class.

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

    Clarification of creation data reporting in the context of

    structured transactions. In response to comments requesting

    clarification of creation data reporting in the context of structured

    transactions, the Commission provides the following explanation.

    As discussed below in the context of who reports creation data, for

    swaps executed on a SEF or DCM, the final rule requires the SEF or DCM

    to report all required swap creation data, as soon as technologically

    practicable after execution, in a single report that includes all

    primary economic terms data and all confirmation data for the swap.

    This will address some of the concerns raised in these comments for

    swaps executed on a SEF or DCM.

    For off-facility swaps, the final rule requires the reporting

    counterparty to report both (1) all primary economic terms data, within

    specified times following execution, and (2) all confirmation data,

    within specified times following confirmation by the

    counterparties.\31\ The final rule requires both a PET data report and

    a confirmation data report in recognition that the elapsed time between

    execution and verification of primary economic terms on the one hand,

    and confirmation of all terms of the swap on the other, may differ for

    a given swap depending on context.

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

    \31\ The final rule will further provide that if an off-facility

    swap is accepted for clearing within the applicable deadline for PET

    data reporting by the reporting counterparty, and before the

    reporting counterparty reports any primary economic terms data, then

    the reporting counterparty will be excused from reporting creation

    data, and the DCO will report all required creation data in a single

    report that includes both confirmation data and PET data. The final

    rule will also define ``confirmation'' as the consummation of

    legally binding documentation memorializing the agreement of the

    parties to all terms of the swap.

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

    The Commission understands that a major concern underlying these

    comments reflects uncertainty as to what reporting the final rule

    requires (a) in situations where give-up arrangements or block trade

    details may not be entirely finalized as of the time the counterparties

    verify primary economic terms, or (b) in the case of structured

    transactions, where the counterparties may negotiate primary economic

    terms in stages over a period of time before reaching agreement on

    their entire deal. The Commission therefore wishes to clarify that for

    off-facility swaps where execution and confirmation are not

    simultaneous, the final rule requires PET data reporting when execution

    has occurred and verification of primary economic terms is completed,

    even though details such as give-ups may still be in process. It also

    wishes to clarify that PET data reporting is to follow agreement on all

    primary economic terms of the complete transaction, and is not required

    or desired after each stage of negotiating a structured transaction or

    after agreement on some but not all of the primary economic terms of

    the swap.

    Clarifications regarding foreign exchange transactions. The

    Commission has considered and agrees with comments suggesting that

    cross-currency swaps should be classified and reported as interest rate

    swaps, in line with prevailing market practice concerning the trading

    of such swaps. The final rule provides for reporting of cross-currency

    swaps as interest rate swaps. The Commission has also considered

    comments noting differences in current foreign exchange market practice

    concerning the booking of the near and far legs of some foreign

    exchange transactions. The Commission understands that a firm's

    financial statements will address both legs of a foreign exchange swap,

    and that confirmation is performed with respect to the whole swap

    rather than separately for each leg. The final rule provides for

    reporting of foreign exchange swaps as a single transaction by a single

    reporting counterparty selected as provided in Sec. 45.8. The

    Commission notes that foreign exchange market conventions may need to

    adjust to this requirement.\32\

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

    \32\ The Commission also notes that the final rule addresses the

    reporting of ``foreign exchange instruments,'' defined as

    instruments that are both defined as a swap in part 1 of this

    chapter and included in the foreign exchange asset class. The

    definition specifies that instruments in the foreign exchange asset

    class include: any currency option, foreign currency option, foreign

    exchange option, or foreign exchange rate option; any foreign

    exchange forward as defined in CEA section 1a(24); any foreign

    exchange swap as defined in CEA section 1a(25); and any non-

    deliverable forward involving foreign exchange. This definition and

    this approach to reporting are required by the fact that the Dodd-

    Frank Act defines the term ``foreign exchange swap,'' and the fact

    that foreign exchange swaps as so defined are only a subset of the

    foreign exchange instruments that will be defined as swaps.

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

    Combining all PET data and confirmation data reporting in a single

    report. The Commission has considered the numerous comments suggesting

    that the final rule should provide for PET data and confirmation data

    reporting to be combined in a single report. The Commission agrees with

    these comments with respect to swaps executed on a SEF or DCM. As noted

    above, the final rule provides that for swaps executed on a SEF or DCM,

    a single report by the SEF or DCM, made as soon as technologically

    practicable after execution, will fulfill all creation data reporting

    that would otherwise be required of reporting counterparties.

    The Commission disagrees with these comments as they apply to off-

    facility swaps. The NOPR requirements for both PET data reporting and

    confirmation data reporting are designed to ensure both (a) timeliness

    of reporting, served by the initial PET data report, and (b) data

    accuracy and completeness, served by confirmation data reporting.\33\

    In addition, as noted above, the NOPR requirement for both a PET data

    report and a confirmation data report recognizes that the elapsed time

    between verification of primary economic terms and confirmation of all

    terms may differ in different contexts, and in some cases may be

    substantial. In a number of cases, delaying the initial data report for

    a swap until confirmation has occurred could prevent regulators from

    seeing a current picture of the entire swap market in the data present

    in SDRs. As provided in the NOPR and the final rule, reporting

    counterparties for off-facility swaps will be free to contract with

    third-party services providers to fulfill either or both of these

    reporting obligations, which could reduce costs associated with making

    these reports. The Commission notes that, for off-facility swaps not

    accepted for clearing within the applicable deadline for the reporting

    counterparty to report PET data, the reporting counterparty can avoid

    the

    [[Page 2149]]

    need for a separate confirmation data reporting by confirming the swap

    within the applicable deadline for PET data reporting, and reporting

    both PET data and confirmation data in a single report.

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

    \33\ The Commission notes that it is working to align the

    timeframes for regulatory swap data reporting pursuant to this part

    and the dissemination delays for real time swap data reporting

    pursuant to part 43, in order to permit a reporting entity or

    counterparty to fulfill both obligations by making a single report,

    should the reporting entity or counterparty choose to do so.

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

    Harmonizing the data fields required for real time and regulatory

    reporting. The Commission agrees in principle with comments suggesting

    harmonization of the data fields required for real time reporting

    pursuant to part 43 and those required for regulatory reporting

    pursuant to this part. While registered entities and reporting

    counterparties subject to the Commission's jurisdiction will remain

    responsible for complying with both part 43 and part 45, the Commission

    is working to substantially align the minimum PET data fields required

    by this part and the real time reporting data fields required by part

    43, in order to reduce reporting burdens to the extent possible.

    Allowing non-SD/MSP counterparties to report less data. The

    Commission disagrees with comments suggesting that it should require

    less data to be reported for a swap with respect to which a non-SD/MSP

    counterparty is the reporting counterparty. The Commission believes

    that fulfilling the purposes of the Dodd-Frank Act requires that

    regulators have access to the same information for all swaps reported

    to SDRs. To address commenters' concerns to the extent possible, the

    final rule will lessen burdens on non-SD/MSP counterparties by phasing

    in their reporting--which will begin as of a compliance date later than

    the compliance dates for other registered entities and counterparties--

    and by providing extended deadlines for their reporting once it begins.

    Miscellaneous aspects of PET data. The Commission disagrees with

    comments suggesting that the final rule should only provide categories

    of data to be reported, rather than minimum PET data fields. The

    Commission believes the approach taken by the NOPR in this respect is

    appropriate. It is designed to ensure uniformity of essential data

    concerning swaps across all of the asset classes over which the

    Commission has jurisdiction, and across different SDRs, and to ensure

    that the Commission has the necessary information to characterize and

    understand the nature of reported swaps. Commission staff have

    consulted with SEC staff regarding data reporting for swaps in the

    credit and equity asset classes where the Commission and the SEC share

    jurisdiction, and the Commission has substantially aligned its data

    requirements in those asset classes with the data sought by the SEC. As

    a result, the Commission does not believe that SDRs and security-based

    SDRs will have difficulty in collecting the data needed by the two

    Commissions. The inclusion in minimum PET data of all terms of the swap

    matched by the counterparties in verifying the swap provides an avenue

    for reporting for newly-developed swap products. The Commission will

    also have the ability to amend its tables of required minimum PET data

    at futures times when this is desirable.

    The Commission disagrees with the comment suggesting that SEFs and

    DCMs should report positions rather than swap transactions. The Dodd-

    Frank Act requires ``each swap'' to be reported to an SDR, and does not

    address position reporting to an SDR. In addition, unlike most current

    futures exchanges, SEFs and DCMs will not necessarily have access to

    all of the transactions of a given counterparty in a particular

    product, and thus would be unable to report positions.

    b. Who makes the initial creation data report and selects the SDR.

    The Commission has considered the various comments received concerning

    who should make the initial creation data report for a swap, and by

    operation of the various parts of the rule thus select the SDR to which

    the swap is reported. The Commission has determined that the final rule

    should maintain the NOPR's approach, calling for initial creation data

    reporting by the registered entity or reporting counterparty that the

    Commission believes has the easiest and fastest access to the data

    required, and requiring that, once an initial data report concerning a

    swap is made to an SDR, all data reported for that swap thereafter must

    be reported to that same SDR. Cumulatively, these provisions prevent

    fragmentation of swap data that would impair the ability of the

    Commission and other regulators to use the swap data in SDRs for the

    purposes of the Dodd-Frank Act. Under this approach, competition may

    lead SEFs and DCMs to establish connections to multiple SDRs, and

    result in lower SDR fees charged, not only to SEFs and DCMs for swaps

    executed on such facilities, but also to reporting counterparties for

    off-facility swaps. The Commission believes that requiring that all

    cleared swaps be reported only to DCOs registered as SDRs or to SDRs

    chosen by a DCO would create a non-level playing field for competition

    between DCO-SDRs and non-DCO SDRs. The Commission also believes that it

    would make DCOs collectively, and could in time make a single DCO-SDR,

    the sole recipient of data reported concerning cleared swaps. On the

    other hand, the Commission believes that giving the choice of the SDR

    to the reporting counterparty in all cases could in practice give an

    SDR substantially owned by SDs a dominant market position with respect

    to swap data reporting within an asset class or even with respect to

    all swaps. The Commission believes that the rule as proposed favors

    market competition, avoids injecting the Commission into a market

    decision, and leaves the choice of SDR to be influenced by market

    forces and possible market innovations. The rule as proposed also

    addresses the major substance of the concerns expressed by non-SD/MSP

    counterparties, since it calls for the initial data report to be made

    by a non-SD/MSP counterparty only in the case of an off-facility swap

    between two non-SD/MSP counterparties.

    c. Creation data reporting deadlines and deadline phasing.

    Extended creation data reporting deadlines. The Commission

    continues to believe, as it stated in the NOPR, that in order to

    fulfill the purposes of the Dodd-Frank Act while minimizing burdens for

    registered entities and swap counterparties, particularly including

    non-SD/MSP counterparties, the final rule should establish a swap data

    reporting regime calling for reporting by the registered entity or

    counterparty that has the easiest, fastest, and cheapest access to the

    set of data in question. The Commission has also considered and

    evaluated the comments it has received regarding ways that reporting

    burdens could be reduced, either by allowing a single report to serve

    different required functions or by extending and phasing in reporting

    deadlines. The Commission has determined that the reporting regime

    established by the final rule should maintain many fundamental aspects

    of the reporting called for in the NOPR, while adjusting other aspects

    of that regime to streamline reporting and minimize reporting burdens

    where possible, while continuing to ensure that swap data for all swaps

    is reported to SDRs in a manner that ensures the ability of the

    Commission and other regulators to fulfill the systemic risk

    mitigation, market transparency, position limit monitoring and market

    surveillance objectives of the Dodd-Frank Act.

    Streamlined regulatory and real time reporting. The Commission

    agrees with comments suggesting that, where possible, the number of

    swap creation data reports should be minimized and streamlined by

    combining PET data reporting and confirmation data reporting in a

    single report.

    [[Page 2150]]

    The Dodd-Frank Act does not specify the timeframes for reporting of

    swap data to SDRs for regulatory purposes. However, to further the

    objectives of the Dodd-Frank Act, the Commission believes it is

    important that swap data be reported to SDRs either immediately

    following execution of the swap or within a short but reasonable time

    following execution. The Commission does not believe that PET data

    reporting can wait until it is possible to report confirmation data in

    all cases, because in an appreciable number of instances confirmation

    of a swap can occur days, weeks, or even months after execution.

    Where execution and confirmation are simultaneous or nearly so,

    however, the Commission agrees with commenters' suggestion that

    reporting both PET data and confirmation data in a single report would

    reduce reporting burdens without impairing regulatory purposes. The

    Commission is working to adopt final rules for SEFs and DCMs, and final

    rules with respect to straight-through processing, providing that

    execution of a swap on a SEF or DCM will constitute confirmation of all

    of the terms of the swap. This final part 45 rule requires that the

    terms of such contracts must include all of the minimum PET data

    required by part 45 for a swap in the asset class in question. The

    final rule therefore provides for a single creation data report,

    including both PET data and confirmation data, in the case of swaps

    executed on or pursuant to the rules of a SEF or DCM. Accordingly, no

    counterparty will be required to report creation data for a swap

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

    The Commission agrees with commenters that a reporting regime that,

    to the extent possible and practicable, permits reporting entities and

    counterparties to comply with the regulatory data reporting

    requirements of part 45 and the real time reporting requirements of

    part 43 by making a single report can reduce reporting burdens while

    still ensuring fulfillment of the purposes for which the Dodd-Frank Act

    requires such reporting. The Commission is working to align the

    reporting deadlines in this final rule with the public dissemination

    delays provided in the final part 43 real time reporting rule, to the

    extent possible and practicable, in order to achieve this goal.

    The Commission's final clearing rules in part 39 of this chapter

    provide that acceptance of the swap for clearing by a DCO constitutes

    confirmation of all of the terms of the swap. This final part 45 rule

    provides that the terms of such contracts must include all of the

    minimum PET data required by part 45 for a swap in the asset class in

    question. Because acceptance for clearing constitutes confirmation, the

    final rule provides that if an off-facility swap is accepted for

    clearing within the reporting deadlines applicable to the reporting

    counterparty, the reporting counterparty shall be excused for creation

    data reporting for the swap, and the DCO shall report all creation data

    report, including both PET data and confirmation data, in a single

    report made as technologically practicable after clearing. In such

    cases, reporting will be further streamlined, and burdens for

    counterparties will be further reduced.

    Phasing in and extending reporting deadlines. As noted above,

    counterparties will not be required to report creation data for swaps

    executed on a SEF or DCM, or for swaps accepted for clearing by a DCO

    within the applicable reporting deadlines. After considering comments

    advocating the extension and phasing in of counterparty reporting

    deadlines, the Commission has decided to extend and phase in such

    deadlines in the final rule with respect to off-facility swaps not

    accepted for clearing within such deadlines.

    PET data reporting deadlines for SD or MSP reporting

    counterparties will be phased in over two years.

    PET data reporting deadlines for non-SD/MSP reporting

    counterparties will be extended and phased in over three years, and

    will exclude weekend days and legal holidays. For example, while the

    NOPR set the non-SD/MSP reporting counterparty PET data reporting

    deadline for an uncleared swap at 24 hours, the final rule calls for

    reporting no later than 48 business hours after execution (during the

    first year of reporting), 36 business hours after execution (during the

    second year of reporting), or 24 business hours after execution

    (thereafter).

    To reduce possible burdens on small non-SD/MSP

    counterparties entering into a swap with an SD or MSP, if the non-

    reporting counterparty is a non-SD/MSP counterparty that is not a

    financial entity, and if primary economic terms are not verified

    electronically, PET data reporting deadlines for the SD or MSP

    reporting counterparty will be further extended and phased in over

    three years, and will exclude weekend days and legal holidays.

    Confirmation data reporting deadlines for SD or MSP

    reporting counterparties where confirmation is non-electronic will be

    extended, and will exclude weekend days and legal holidays.

    Confirmation data reporting deadlines for non-SD/MSP

    reporting counterparties will be extended and phased in over three

    years, and will exclude weekend days and legal holidays. The final rule

    calls for such counterparties to report confirmation data no later than

    48 business hours after confirmation (during the first year of

    reporting), 36 business hours after confirmation (during the second

    year of reporting), or 24 business hours after confirmation

    (thereafter).

    For off-facility, uncleared swaps, during the first six

    months following the applicable compliance date, while PET data will

    have to be reported electronically with data normalized in data fields,

    reporting counterparties for whom reporting confirmation data

    normalized in data fields is not yet technologically practicable may

    report required confirmation data by transmitting an image of all

    documents recording the confirmation. This will allow needed additional

    time for development of schemas for data reporting and implementation

    by non-SD/MSP counterparties. Electronic reporting of all confirmation

    data normalized in data fields will be required after this six month

    period.

    Charts showing the final rule reporting requirements with respect

    to both creation data reporting and continuation data reporting can be

    seen below at pages 70 and71.

    Reporting burden reductions for non-SD/MSP reporting

    counterparties. As a result of the streamlined reporting regime and

    extended, phased-in reporting deadlines noted above, the final rule

    eliminates all reporting obligations for non-SD/MSP reporting

    counterparties in many cases, and phases in or reduces them in

    virtually all other cases. Non-SD/MSP reporting counterparties must

    report data only for the small minority of swaps in which both

    counterparties are non-SD/MSP counterparties. Even within this small

    minority of swaps, a non-SD/MSP reporting counterparty will have no

    reporting obligations for on-facility, cleared swaps, or for off-

    facility swaps accepted for clearing within the applicable deadline for

    PET data reporting. If an off-facility swap is accepted for clearing

    after the PET data reporting deadline, the non-SD/MSP reporting

    counterparty is excused from reporting confirmation data and

    continuation data, which instead will be reported by the DCO. For on-

    facility, uncleared swaps, a non-SD/MSP reporting counterparty's

    reporting obligations are limited to reporting continuation data during

    the existence of the swap. For off-facility, uncleared

    [[Page 2151]]

    swaps, creation data reporting deadlines for a non-SD/MSP reporting

    counterparty have been extended and phased in as noted above, and no

    longer include weekend days or holidays. The deadline for a non-SD/MSP

    reporting counterparty to report changes to primary economic terms over

    the life of the swap has been lengthened from reporting on the day such

    a change occurs to reporting by the end of the second business day

    following the date of such a change; and a non-SD/MSP reporting

    counterparty will be required to report valuation data on only a

    quarterly rather than a daily basis.

    d. Allocations. As set forth more fully below in the discussion of

    USIs, the Commission received and has considered comments and industry

    requests for clarification concerning USI creation and swap creation

    data reporting in the case of swaps involving allocation by an agent to

    its clients who are the actual counterparties on one side of the swap.

    In response to these requests, the final rule will address both USI

    creation and creation data reporting for swaps involving allocation, as

    set forth in the discussion of USIs below.

    e. Reporting of multi-asset swaps and mixed swaps. After

    considering comments concerning how multi-asset swaps and mixed swaps

    should be reported, the Commission has determined that the final rule

    should provide for mixed swaps to be reported to both an SDR registered

    with CFTC and an SDR registered with SEC.\34\ Reporting to a dual-

    registered SDR would satisfy this requirement, but would not be

    required. To ensure regulatory ability to track mixed swaps and

    aggregate data concerning them, the final rule will add a ``mixed

    swap'' checkbox field to the tables of minimum primary economic terms.

    To avoid double-counting of mixed swaps, the final rule requires the

    reporting entity or counterparty to obtain a USI for the swap from the

    first SDR to which the swap is reported, and to include that USI in the

    data concerning the swap reported to the second SDR to which the swap

    is reported.

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

    \34\ Such dual reporting would avoid any need for an SDR

    accepting swaps only in a CFTC-regulated asset class to dual-

    register with the SEC merely because it might receive a report for a

    mixed swap in part subject to SEC jurisdiction.

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

    For multi-asset swaps, the final rule requires reporting to a

    single SDR accepting swaps in the asset class determined by the

    registered entity or counterparty reporting the swap to be the first or

    primary asset class involved in the swap. To ensure regulatory ability

    to track the swap in all asset classes involved, the final rule will

    add two data fields to the tables of minimum primary economic terms,

    one for indication of the first or primary asset class involved in the

    swap (which must be an asset class accepted by the SDR), and the second

    for indication of the other asset class or classes involved in the

    swap.

    f. Reporting of international swaps. The Commission agrees with

    international regulators with whom the Commission has consulted who

    have suggested that it is important for the final rule to include a

    mechanism that enables the Commission and other regulators to identify

    international swaps reported to multiple repositories, so that such

    swaps are not double-counted by regulators. The Commission is mindful

    of the fact that the Dodd-Frank Act directs the Commission to consult

    and coordinate with foreign regulatory authorities regarding

    establishment of consistent international standards for the regulation

    of swaps and swap entities. The Commission also believes that providing

    an accurate picture of the swap market to regulators is one of the

    fundamental purposes of the Dodd-Frank Act. For these reasons, and in

    order to clarify its intent concerning swap data reporting in this

    context, the Commission has determined that the final rule will address

    the reporting of ``international swaps,'' defined for clarity as those

    swaps that may be required by U.S. law and the law of another

    jurisdiction to be reported both to an SDR registered with the

    Commission and to a different trade repository registered with the

    other jurisdiction.\35\ In order to help provide for international

    swaps the consistent international standards sought by the Dodd-Frank

    Act, the final rule provides that for each international swap that is

    reported to both a U.S.-registered SDR and a foreign trade repository,

    the reporting counterparty shall report to the U.S.-registered SDR, as

    soon as practicable, the identity of the foreign trade repository, and

    the swap identifier used by that foreign trade repository to identify

    that swap.\36\ If necessary, the reporting counterparty shall obtain

    this information from the non-reporting counterparty. The Commission

    believes that these provisions are a logical outgrowth of the swap data

    reporting provisions of the NOPR and of the statutory call for

    international consultation and consistent international standards.

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

    \35\ This definition does not add a new requirement for the

    reporting of swaps not otherwise required to be reported.

    \36\ Under the final rule provisions in Sec. 45.6 of this part

    concerning unique swap identifiers, the non-reporting counterparty

    will receive the USI for the swap from the SDR, and thus will be

    able to provide it to the non-U.S. trade repository on request.

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

    C. Swap Data Reporting: Continuation Data--Sec. 45.4

    1. Proposed Rule

    As noted above, in order to ensure timeliness, accuracy, and

    completeness with respect to the swap data available to regulators, the

    proposed rule called for reporting of swap data from each of two

    important stages of the existence of a swap: The creation of the swap,

    and the continuation of the swap over its existence until its final

    termination or expiration. During the continued existence of the swap,

    the NOPR required reporting of three types of continuation data: (a)

    Either life cycle event data or state data (depending on the reporting

    method involved) that reflects all changes to the swap; (b) contract-

    intrinsic data, meaning scheduled, anticipated events that do not

    change the contractual terms of the swap, such as an anticipated rate

    adjustment; and (c) valuation data that reflects the current value of

    the swap, such as the daily mark-to-market.

    As proposed, the rule specified the reporting method to be used in

    each asset class for reporting all changes to the swap. For credit

    swaps and equity swaps, the NOPR called for reporting life-cycle

    events--meaning any event resulting in a change to data previously

    reported in connection with the swap, such as an assignment or

    novation, a partial or full termination of the swap, or a change in the

    cash flows originally reported--on the day that such an event occurs.

    For foreign exchange transactions, interest rate swaps, and other

    commodity swaps, the NOPR called for a daily report of state data--

    meaning all data necessary to provide a daily snapshot view of the

    primary economic terms of the swap, including any changes since the

    last snapshot.

    For cleared swaps, the NOPR required daily valuation data reporting

    by the DCO, daily valuation data reporting by SD or MSP reporting

    counterparties, and valuation data reporting by non-SD/MSP reporting

    counterparties at intervals to be determined prior to issuance of the

    final rule.

    2. Comments Received

    The Commission received several comments from a variety of

    commenters concerning the proposed rule's continuation data reporting

    provisions. These comments addressed reporting with respect to changes

    to the terms of the swap, contract intrinsic events,

    [[Page 2152]]

    valuation, and master agreements and collateral.

    a. Reporting changes to a swap. The broad themes of the comments

    received concerning reporting changes to a swap addressed the reporting

    method--life cycle or snapshot--to be used, the timing and frequency of

    reports, and the choice of who should make the required reports.

    Reporting method. As noted above, the NOPR prescribed the data

    reporting method to be used in each asset class to report changes to

    the primary economic terms of the swap. TriOptima and the Electric

    Coalition agreed that the rule should specify the method used in each

    asset class, and supported the NOPR's choices in that respect. ICE

    recommended adopting the lifecycle method rather than the snapshot

    method for the other commodity asset class. ISDA, SIFMA, REGIS-TR, and

    DTCC recommended having the rule not make the choice between the

    lifecycle and the snapshot reporting method for each asset class, but

    rather allowing SDRs to decide whether to accept data by either or both

    methods. SunGard recommended that the Commission delegate the choice to

    a self-regulatory organization or standards board.

    Timing for reporting changes. Various non-SD/MSPs involved in

    energy markets, including AGA, COPE, EEI, EPSA, and the Electric

    Coalition, argued that daily snapshot reporting would be unduly

    burdensome for non-SD/MSP reporting counterparties. COPE, EEI, and EPSA

    advocated requiring a snapshot only when a change to primary economic

    terms has occurred. AGA suggested reporting a monthly snapshot, while

    the Electric Coalition advocated a quarterly snapshot.

    Change reporting for cleared swaps. ICE, a number of non-SD/MSPs

    involved in energy markets including WGCEF, EEI, EPSA, and Chris

    Barnard recommended having continuation data reporting for cleared

    swaps done solely by DCOs. WGCEF noted that counterparties to swaps

    that are both platform-executed and cleared, the counterparties may not

    know each other's identity, which could make determination of the

    reporting counterparty difficult.

    Reporting of contract-intrinsic events. ISDA and SIFMA suggested

    that the Commission should not require reporting of contract-intrinsic

    events, i.e., events that do not result in any change to the

    contractual terms of the swap. These commenters noted that the SEC's

    proposed data reporting rule for security-based swaps does not include

    such a requirement, and argued that reporting of such events is

    unnecessary if they are in the public domain. At a minimum, ISDA and

    SIFMA suggested limiting reporting of such events to reporting along

    with the next required life cycle event report.

    Reporting corporate events of the non-reporting counterparty. For

    non-cleared swaps, ISDA and SIFMA requested that the final rule allow

    additional time for the reporting counterparty to report corporate

    events of the non-reporting counterparty, arguing that the reporting

    counterparty may not know of such events on the same day that they

    happen.

    b. Valuation data reporting. The themes of the comments received

    regarding valuation data reporting included: Who should report

    valuation data for cleared swaps; valuation data reporting by non-SD/

    MSP reporting counterparties; what valuation data should be reported;

    requiring independent valuations; and acceptable valuation methods.

    Who should report valuation data for cleared swaps. A number of

    commenters, including ICE, WGCEF, EEI, EPSA, and Chris Barnard,

    recommended that all valuation data reporting for cleared swaps should

    be done by the DCO. COPE, EEI, EPSA, and the Electric Coalition

    suggested that non-SD/MSP reporting counterparties should not have to

    report valuation data for either cleared or uncleared swaps.

    Valuation data reporting by non-SD/MSP reporting counterparties.

    The NOPR required non-SD/MSP reporting counterparties to report

    valuation data for both cleared and non-cleared swaps, at intervals to

    be determined by the Commission prior to issuance of the final rule.

    FHLB and a number of commenters in the energy sector suggested that

    valuation reporting requirements for non-SD/MSP counterparties be

    either loosened or eliminated. FHLB recommended weekly valuation

    reporting by non-SD/MSP reporting counterparties, arguing that this

    should be sufficient for regulatory purposes and would avoid forcing

    end users to implement the costly infrastructure needed to generate

    daily valuation reports. AGA suggested monthly valuation reporting by

    non-SDs/MSPs, since daily reporting would be unduly burdensome for

    them. The Electric Coalition recommended quarterly reporting. Chatham

    Financial supported valuation reporting only when swap portfolios are

    reconciled, since (in their view) non-SD/MSP counterparties will lack

    the systems and staff necessary to produce valuations and thus would

    have to pay third-party service providers for them. As noted above,

    COPE, EEI, EPSA, and the Electric Coalition urged that non-SD/MSP

    reporting counterparties should not have to report valuation data at

    all.\37\

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

    \37\ These commenters argued that valuation of swaps between

    non-SD/MSP counterparties did not cause the financial crisis and was

    not the target of the Dodd Frank Act, and contended that the Dodd-

    Frank Act does not authorize requiring non-SD/MSP counterparties

    (especially those that are not financial entities) to report

    valuation data. They also contended that the value of standardized

    swaps is transparent from market data, while the value of illiquid,

    non-standard swaps is merely based on a business judgment.

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

    What valuation data should be reported. ISDA and SIFMA asked the

    Commission to note that valuation data for uncleared swaps will not be

    ``same day,'' but will refer to portfolio valuation on the close of the

    preceding day, since these valuations are typically performed

    overnight. Reval urged required reporting of all data elements

    necessary to determine the market value of the swap, and suggested that

    independent valuation calculations by third parties such as SDRs should

    be required. Reval also suggested requiring that valuation data be

    reported on a portfolio basis rather than a transaction basis. ICE

    suggested that DCO valuation data reports should consist solely of

    daily price marks, and that SDRs should be required to calculate

    valuation amounts for each open trade. SunGard asked the Commission to

    provide guidance on acceptable methods of valuation for uncleared

    swaps, either in the final rule or by industry consensus.

    c. Possible reporting of master agreements or collateral. The NOPR

    required registered entities and swap counterparties to keep full and

    complete records concerning swaps, which would include records of

    master agreements. The NOPR did not require reporting the terms of such

    agreements to SDRs, but requested comment on whether a separate master

    agreement library system should be established as part of an SDR.

    Should a master agreement library system be established? Commenters

    disagreed on whether master agreement reporting should be required.

    Chatham Financial and the Coalition of Derivatives End-Users (``CDEU'')

    recommended that the Commission carefully consider the costs and

    benefits of master agreement reporting prior to instituting such a

    requirement. They noted that if such reporting went beyond submission

    of PDF copies of master agreements, market participants (especially end

    users) would find it labor intensive and tedious to extract legal terms

    from the documents. The Electric Coalition, American Benefits Council

    (``ABC''), and CIEBA also emphasized the need to minimize

    [[Page 2153]]

    burdens involved in any required master agreement reporting. ISDA and

    SIFMA recommended against a master agreement library, stating that a

    centralized effort to capture documentation would need to be much wider

    than master agreements; would be duplicative of existing industry

    investments; would not provide regulators with particularly meaningful

    data given the slow rate of change of these documents; and would not

    provide information above and beyond that which would be readily

    obtained from regulated firms. Reval suggested establishment of a

    separate SDR for master agreements and related credit support

    agreements, in order to enhance regulators' ability to measure systemic

    risk. ABC and CIEBA suggested that master agreements be reported once

    to a separate library at an SDR, with amendments reported to the same

    SDR. The Electric Coalition recommended limiting master agreement-

    related reporting to the reporting of master agreement identifiers

    rather than of agreements themselves, in order to lessen reporting

    burdens.

    Should a collateral warehouse system be established? The NOPR

    required registered entities and swap counterparties to keep full and

    complete records concerning swaps, which would include records

    concerning collateral. It did not require reporting concerning

    collateral, but requested comment on whether a separate collateral

    warehouse system should be established as part of an SDR, to enable

    prudential regulators to monitor collateral management and gross

    exposure on a portfolio level. SunGard, ISDA, SIFMA, DTCC, and

    TriOptima recommended establishing a separate collateral repository,

    noting that collateral information is important for systemic risk

    management, but not possible in transaction-based reporting since

    collateral is dealt with at a portfolio level. They suggested that this

    would also provide a superior form of valuation information. Chatham

    Financial suggested that the benefits of a collateral warehouse and

    reporting concerning collateral may not outweigh the costs involved,

    due to the potential for highly customized terms and the complexity and

    difficulty of representing the terms of relevant agreements

    electronically.

    3. Final Rule: Sec. 45.4

    The Commission has considered and evaluated these comments, and has

    made a number of changes in the final rule. Accordingly, the

    continuation data provisions of the final rule will include the

    following changes from the NOPR.

    a. Reporting changes to a swap.

    Reporting method. The Commission believes the general principle

    applicable to continuation data reporting should be that current

    information concerning all swaps must be available to regulators in

    SDRs in order to fulfill the purposes of the Dodd-Frank Act. Based on

    comments, meetings with market participants, roundtable discussions,

    and consultation with other regulators, the Commission has determined

    that the final rule can serve this principle without mandating one

    particular reporting method, whether life cycle or snapshot, for

    continuation data reporting. Accordingly, the final rule requires

    registered entities and reporting counterparties to report continuation

    data in a manner sufficient to ensure that the information in the SDR

    concerning the swap is current and accurate, and includes all changes

    to any of the primary economic terms of the swap. The final rule will

    leave to the SDR and registered entity and reporting counterparty

    marketplace the choice of the method, whether life cycle or snapshot,

    for reporting continuation data that is sufficient to meet this

    requirement. This approach could also help to address reporting time

    concerns raised by commenters, since reporting counterparties would not

    be required to report on a daily basis if the SDR in question accepts

    life cycle reporting.\38\

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

    \38\ The flexibility of this approach should also ensure

    harmonization of the final rule with SEC rules in this respect: even

    if the SEC rules specify a reporting method for reporting to

    security-based swap data repositories, SDRs that accept mixed swaps

    will be free to accept reporting by any reporting method mandated by

    the SEC.

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

    Timing for reporting changes. Given the regulatory importance of

    ensuring that information in SDRs is current, and, in the Commission's

    view, the availability of automated systems and staff to DCOs, SDs, and

    MSPs, the Commission believes it is necessary to require DCOs and SD or

    MSP reporting counterparties to make continuation data reports, by

    either reporting method, no later than the same day a relevant change

    occurs. The Commission has considered comments suggesting that same-day

    reporting could impose greater burdens on non-SD/MSP reporting

    counterparties than on SDs or MSPs, due to comparative differences in

    automated systems and staff, and the Commission is aware that swaps

    between non-SD/MSP counterparties are likely to constitute only a

    minority of all swaps. Accordingly, the final rule will call for non-

    SD/MSP reporting counterparties to report continuation data no later

    than the end of the second business day following the date of a

    relevant change during the first year of reporting, and no later than

    the end of the first business day following the date of a relevant

    change thereafter. The Commission has determined that this approach

    will lighten burdens on non-SD/MSP reporting counterparties without

    unduly degrading the currency of the information available to

    regulators in SDRs.

    Change reporting for cleared swaps. The Commission has considered,

    and agrees with, commenters' suggestion that continuation data

    reporting will be best done by DCOs. For cleared swaps in all asset

    classes, the final rule will make DCOs the sole reporters of

    continuation data other than valuation data.

    Reporting of contract-intrinsic events. The Commission has

    considered the comments addressing reporting of contract-intrinsic

    events. In light of the fact that contract-intrinsic events do not

    involve changes to the primary economic terms of a swap, and that most

    such events are in the public domain, and in order to reduce reporting

    burdens to the extent this can be done without impairing the purposes

    for which the Dodd-Frank Act requires swap data reporting, the

    Commission has determined that the final rule will not require

    reporting of contract-intrinsic events.

    Reporting corporate events of the non-reporting counterparty. The

    Commission has considered the comments relating to the time when

    corporate events of the non-reporting counterparty must be reported,

    and has made a number of changes in the final rule. As noted above, the

    final rule requires reporting of changes to primary economic terms by

    SDs or MSPs on the day they occur, and (after a one-year phase in

    period) by non-SDs/MSPs by the end of the business day after they

    occur. With respect to reporting corporate events of the non-reporting

    counterparty, the final rule provides that SD and MSP reporting

    counterparties must report their own corporate events on the day they

    occur, and must report corporate events of the non-reporting

    counterparty by the end of the business day following the date when

    they occur. In order to further reduce related burdens for non-SD/MSP

    reporting counterparties, the rule requires non-SD/MSP reporting

    counterparties to report their own corporate events by the end of the

    business day after the date on which they occur, and to report

    corporate events of the non-reporting counterparty by the end of the

    second business day following the date on which they occur. In

    complying with the final rule, reporting counterparties should use due

    [[Page 2154]]

    diligence to ensure that the non-reporting counterparty notifies the

    reporting counterparty promptly of the non-reporting counterparty's

    corporate events affecting any primary economic term of the swap.\39\

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

    \39\ Such due diligence could consist of requiring as one term

    of the swap agreement that the non-reporting counterparty notify the

    reporting counterparty promptly of corporate events of the non-

    reporting counterparty.

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

    b. Valuation data reporting for cleared swaps.

    Who should report valuation data for cleared swaps. After

    considering comments received, the Commission has determined that for

    cleared swaps where the reporting counterparty is a non-SD/MSP, a DCO's

    valuation is sufficient for regulatory purposes. The final rule

    therefore will not require non-SD/MSP reporting counterparties to

    report valuation data for cleared swaps. Because prudential regulators

    have informed the Commission that counterparty valuations are useful

    for systemic risk monitoring even where valuations differ, the final

    rule requires SD and MSP reporting counterparties to report the daily

    mark for each of their swaps, on a daily basis.\40\ The Commission

    notes that SDs and MSPs may choose, though they are not required, to

    provide to SDRs and to counterparties, in addition to the daily mark,

    methodologies and assumptions sufficient to independently validate the

    output from a model generating the daily mark, collectively referred to

    as the ``reference model. Provision of a ``reference model'' does not

    require an SD or MSP to disclose proprietary information.

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

    \40\ The Commission notes that SDs and MSPs may choose, though

    they are not required, to provide to SDRs and to counterparties, in

    addition to the daily mark, methodologies and assumptions suffcient

    to validate the output from a model used to generate the daily mark,

    collectively referred to as the ``reference model.'' Non-SD/MSP

    counterparties may also choose, thought they are not required, to

    provide a ``reference model'' in connection with valuation data

    reporting. Provision of a ``reference model'' does not require an

    SD, MSP, or non-SD/MSP counterparty to disclose proprietary

    information.

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

    Valuation data reporting by non-SD/MSP reporting counterparties.

    The Commission has considered the comments concerning valuation data

    reporting by non-SD/MSP counterparties. As noted above, the final rule

    will lessen valuation data reporting burdens for non-SD/MSP

    counterparties by eliminating the requirement that they report

    valuation data for cleared swaps. With respect to uncleared swaps

    between non-SD/MSP counterparties, the Commission has determined that

    the final rule should lessen valuation data reporting burdens for the

    non-SD/MSP reporting counterparty by requiring such reports less

    frequently than proposed, but should not eliminate such reporting

    entirely. While this category represents a minority of all swaps, the

    Commission believes that some valuation information should be present

    in SDRs for all swaps for regulatory purposes. The final rule requires

    non-SD/MSP reporting counterparties to report valuation data consisting

    of the current daily mark of the transaction as of the last day of each

    fiscal quarter, transmitting this report to the SDR within 30 calendar

    days of the end of each fiscal quarter. The Commission notes that non-

    SD/MSP reporting counterparties may choose, though they are not

    required, to provide to SDRs and to counterparties, in addition to the

    daily mark, methodologies and assumptions sufficient to independently

    validate the output from a model generating the daily mark,

    collectively referred to as the ``reference model. Provision of a

    ``reference model'' does not require a non-SD/MSP reporting

    counterparty to disclose proprietary information. The final rule will

    further provide that if a daily mark of the transaction is not

    available, the reporting counterparty satisfies the valuation data

    reporting requirement by reporting the current valuation of the swap

    recorded on its books in accordance with applicable accounting

    standards. The Commission believes that requiring valuation data

    reporting by non-SD/MSP reporting counterparties on a quarterly basis,

    when applicable law and accounting standards may require them to value

    their swaps for purposes of their own accounting, will minimize

    reporting burdens for such counterparties to the greatest extent

    commensurable with ensuring that valuation data essential for

    regulatory purposes is reported for such swaps.

    What valuation data should be reported. The Commission is aware, as

    comments noted, that valuations of swaps are typically performed

    overnight. Accordingly, the final rule provides that the appropriate

    daily mark to report when a valuation data report is required is the

    most current daily mark available. The Commission disagrees with

    comments suggesting required reporting of all data necessary for an

    independent valuation of each swap and required performance of such

    valuations by SDRs or other third parties, calling for portfolio-level

    valuation data reporting, or suggesting that the final swap data

    reporting rule should determine the acceptable methods for valuing

    uncleared swaps. The Commission believes valuation is fundamentally in

    the purview of the market. Prudential regulators have informed the

    Commission that counterparty valuations are useful for systemic risk

    monitoring even where such valuations represent the view of one party,

    and even where such valuations may differ. The Commission believes that

    daily mark to market, the valuation required by the final rule, is the

    valuation appropriate for reporting on a transaction basis.

    c. Possible reporting of master agreements or collateral.

    Should a master agreement library system be established? After

    considering relevant comments, the Commission has determined that it

    should not require master agreement reporting in its first swap data

    reporting final rule. As noted in the Joint Study on the Feasibility of

    Mandating Algorithmic Descriptions for Derivatives released by the CFTC

    and SEC in April 2011, at present the terms of such agreements are not

    readily reportable in an electronic format, as the industry has not

    developed electronic fields representing terms of a master

    agreement.\41\ The Commission also understands that reporting of master

    agreements could be initiated by the other regulators pursuant to

    separate and different regulatory authority. The Commission may choose

    to revisit this issue at some point in the future, if and when industry

    and SDRs develop ways to represent the terms of such agreements

    electronically.

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

    \41\ Commodity Futures Trading Commission and Securities and

    Exchange Commission, Joint Study on the Feasibility of Mandating

    Algorithmic Descriptions for Derivatives, April 7, 2011, available

    at http://www.sec.gov/news/studies/2011/719b-study.pdf.

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

    Should a collateral warehouse system be established? After

    considering relevant comments, the Commission has determined that it

    should not require establishment of a collateral warehouse or reporting

    concerning collateral in its first swap data reporting final rule. As

    is the case with respect to the terms of master agreements, the

    industry has not yet developed electronic fields suitable for

    representing the terms required to report collateral. The Commission

    also understands that reporting with respect to collateral could be

    initiated by other regulators pursuant to separate and different

    regulatory authority. The Commission may choose to revisit this issue

    at some point in the future, if and when industry and SDRs develop ways

    to represent electronically the terms required for reporting concerning

    collateral.

    [[Page 2155]]

    D. Summary of Creation Data and Continuation Data Reporting--Sec. Sec.

    45.3 and 45.4

    As discussed above, the Commission is responding to comments

    concerning creation data reporting by creating a streamlined reporting

    regime that requires reporting by the registered entities or swap

    counterparties that the Commission believes have the easiest, fastest,

    and cheapest data access and those most likely to have the necessary

    automated systems; that minimizes burdens and costs for counterparties

    to the extent possible; and that provides certainty to the market. The

    final rule provisions regarding creation data reporting obligations and

    deadlines for SD or MSP reporting counterparties, and for non-SD/MSP

    reporting counterparties, are summarized in the charts on the following

    two pages, respectively.

    BILLING CODE 6351-01-P

    [[Page 2156]]

    [GRAPHIC] [TIFF OMITTED] TR13JA12.000

    [[Page 2157]]

    [GRAPHIC] [TIFF OMITTED] TR13JA12.001

    [[Page 2158]]

    BILLING CODE 6351-01-C

    F. Unique Swap Identifiers--Sec. 45.5

    1. Proposed Rule

    The NOPR required that each swap subject to the Commission's

    jurisdiction be identified in all swap recordkeeping and data reporting

    by a unique swap identifier (``USI''). The NOPR provided for a ``first-

    touch'' approach to USI creation, with the USI created by SEFs and DCMs

    for facility-executed swaps, by SDs and MSPs for off-facility swaps in

    which they are the reporting counterparty, and by SDRs for off-facility

    swaps between non-SD/MSP counterparties (who may lack the requisite

    systems for USI creation).

    2. Comments Received

    a. First-touch creation of USIs. Most comments concerning the USI

    received by the Commission via comment letters, roundtables, and

    meetings with industry and other regulators supported use of a USI that

    will enable regulators to track and aggregate all information

    concerning a single swap throughout its existence, and supported the

    NOPR's first-touch approach to USI creation. DTCC supported the first-

    touch approach, while noting that SDRs could also create USIs and

    transmit them to the counterparties to the swap (as the NOPR provides

    for swaps between non-SD/MSP counterparties). WGCEF approved having

    USIs assigned when a swap is executed. Global Forex supported USI

    creation at the time the swap is executed, while pointing out that in

    the foreign exchange context, where some pre-trade allocation occurs

    and some firms book the trade upon receipt of a message that their

    price has been hit, it could be necessary in some cases to append the

    USI to an already-created record in a firm's automated systems.\42\ CME

    suggested that USIs should not be created and issued by a single

    coordinating registry, but should be created by market participants as

    provided in the NOPR, using common standards that can be applied free

    of charge. TriOptima indicated a preference for having SDRs create the

    USI, with reporting entities or counterparties using their own local

    trade identifiers in reporting to the SDR, which can map the local

    identifiers to the USI. ISDA, SIFMA, and CME asked the Commission to

    clarify further the purpose and intended use of USIs. Some roundtable

    participants suggested that one way to ensure the uniqueness of USI

    codes created by different registered entities would be for the

    registered entity creating a USI to use an appropriate random number

    generator.

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

    \42\ Global Forex still preferred USI creation at the time of

    execution over creation at the point of order submission, since the

    latter would create a risk of cancelled and non-sequential USIs in

    the event a trade is cancelled.

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

    b. Impact of allocation on USIs. TriOptima suggested that the

    Commission should clarify the creation and use of USIs in the context

    of allocation, observing that where allocation follows execution, it

    may not be obvious whether or not a new USI should be assigned.

    TriOptima suggested that rules addressing this issue are needed. Other

    market participants also requested clarification concerning USI

    creation and swap creation data reporting in the context of allocation.

    c. Impact of post-execution events on USIs. Thomson Reuters,

    TriOptima, and the WGCEF requested clarification regarding the impact

    on USI codes of events such as compression, assignments, partial

    terminations, changes to counterparty names, purchases, acquisitions,

    or deactivation. Thomson Reuters suggested that when multiple swaps are

    combined during their existence, the unique swap identifier should have

    alternative tracking numbers externally linked to the original USI.

    d. USIs for historical swaps. Although this issue pertains to part

    46 rather than part 45, TriOptima suggested in its part 45 comment that

    USIs should be assigned to historical swaps when they are first

    reported to an SDR. TriOptima noted that giving USIs only to swaps

    entered into after the applicable compliance date would create a long

    transition period during which there are live contracts with and

    without USIs, which TriOptima believed would be technologically

    problematic. TriOptima recognized that introducing USIs for existing

    transactions would be a large undertaking. It suggested that reporting

    entities create USIs for historical swaps using the name-space method

    (combining a code for the assigning entity and a USI code unique within

    that entity).

    3. Final Rule: Sec. 45.5

    a. First-touch creation of USIs. After considering the comments

    received, the Commission has determined that, as provided in the NOPR,

    the final rule requires each swap subject to the Commission's

    jurisdiction to be identified in all recordkeeping and swap data

    reporting pursuant to this part by a USI, created through a first-touch

    approach. The Commission believes that USIs will benefit both

    regulators and counterparties, by facilitating aggregation of all data

    concerning a given swap (including creation data, continuation data,

    and error corrections, reported by execution platforms, clearing

    houses, and counterparties) into a single, accurate data record that

    tracks the swap over its duration. USIs are essential to giving

    regulators the ability to track swap transactions throughout their

    lives. In addition, USIs provide an efficient means of assuring that

    transactions are not double counted when producing summary reports.

    This is particularly important where transactions may be reported to

    multiple SDRs, for example where a counterparty may be required to

    report a transaction to a foreign SDR.

    Having the USI created when the swap is executed, i.e., at the

    earliest possible point, will best ensure that all market participants

    involved with the swap, from counterparties to platforms to

    clearinghouses to SDRS, will have the same USI for the swap, and have

    it as soon as possible. This will avoid confusion and potential

    errors.\43\ It will avoid delays in submitting an executed swap for

    clearing while waiting for receipt of a USI from creation at a later

    time, and will minimize to the extent possible the need to alter pre-

    existing records concerning the swap in various automated systems to

    add the USI. As the sole exception to first-touch USI creation,

    designed to reduce burdens on non-SD/MSP reporting counterparties who

    may lack the technical sophistication or automated systems needed for

    USI creation, the final rule will maintain the NOPR provision calling

    for the USI for each swap between non-SD/MSP counterparties to be

    created by the SDR to which the swap is reported.

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

    \43\ The Commission disagrees with TriOptima's suggestion that

    reporting entities should always use their own identifiers in

    reporting to SDRs during the life of a swap. This would require the

    SDR to match the entity's internal ID with the USI every time data

    is submitted, and is not the more efficient approach.

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

    To ensure the uniqueness of USIs created by registered entities as

    provided in the final rule, the final rule will follow the NOPR in

    prescribing USI creation through what is known as the ``name space''

    method. Under this method, the first characters of each USI will

    consist of a unique code that identifies the registered entity creating

    the USI, given to the registered entity by the Commission during the

    registration process.\44\ The remaining characters of the USI will

    consist of a code created by the registered entity that must be unique

    with respect to all other USIs created by that registered entity. While

    the

    [[Page 2159]]

    Commission will not prescribe the means for ensuring the uniqueness of

    each USI created by a registered entity, Commission staff may work with

    registered entities to identify random number generators sufficiently

    capable for this purpose.

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

    \44\ The registration paperwork established pursuant to the SEF,

    DCM, SD, MSP, and SDR registration rules will include provision of

    such a code to the registrant.

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

    b. Impact of allocation on USIs. The Commission has considered the

    comments and industry requests for clarification it received concerning

    USI creation and swap creation data reporting in the case of swaps

    involving allocation by an agent to its clients who are the actual

    counterparties on one side of the swap. In response to these requests,

    the final rule will address both USI creation and creation data

    reporting for swaps involving allocation.

    The Commission understands that in the allocation context, a firm

    acting as an agent enters into a swap, typically with an SD (or

    possibly an MSP), and then allocates its side of the swap to its

    clients on whose behalf it arranged the swap. The clients of the agent,

    who are the actual counterparties to the SD, must have pre-existing

    ISDA agreements or similar agreements with the SD in order for the

    transaction to take place. At the time of execution, the SD knows that

    the firm acting as agent as only an agent and is not the SD's actual

    counterparty for the swap, and it knows that the agent's clients are

    its actual counterparties; but it does not yet know for this particular

    swap the identity of the agent's clients that are its counterparties.

    The agent firm allocates its side of the swap within a relatively short

    time after execution, and the agent (or a third party service provider

    acting on its behalf) then informs the SD of the identities of its

    counterparties.\45\ Market participants have informed the Commission

    that allocation is not algorithmic, due to particular requirements of

    the agent's clients, and that it typically requires two or more hours

    but is always completed by the end of the business day on which the

    swap was executed. The result of allocation is that a single swap

    transaction created at the moment of execution is replaced by several

    swaps, for each of which the counterparties are the SD and one of the

    agent's clients.\46\

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

    \45\ In the case of cleared swaps, allocation precedes

    submission to the DCO for clearing.

    \46\ This situation is distinct from cases where, for example, a

    hedge fund enters into a swap as a principal, and later enters into

    separate swaps with its own clients (who often are funds) to offset

    its risk from the first swap in which it was a principal.

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

    To provide the clarification requested by commenters as noted

    above, the Commission has determined that the final rule should

    specifically address the creation of USIs and the reporting of required

    swap creation data in the context of allocation.\47\ Because real time

    reporting must occur as soon as technologically practicable after

    execution of a swap, and because it is important for the exposure of

    the reporting counterparty to be available to regulators in an SDR as

    soon as technologically practicable after execution, the Commission

    believes it is necessary for the original transaction between the SD

    and the agent to be reported. However, because the SD's actual

    counterparties are the clients of the agent and not the agent, the

    Commission believes it is also necessary for each individual swap

    between the SD and one of the agent's clients to also be reported. To

    avoid double-counting of swaps in the allocation context, it is

    necessary to be able to map together the original transaction and the

    post-allocation swaps.

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

    \47\ The allocation provisions of the final rule do not create

    reporting requirements additional to those included in the NOPR,

    since the NOPR required, as mandated by CEA section 2(a)(13)(G),

    that all swaps must be reported.

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

    Accordingly, the final rule provides that, in the context of

    allocation, the reporting counterparty must create a USI for the swap

    arranged between it and the agent, and report that swap to an SDR as

    soon as technologically practicable after execution. The PET data for

    such a swap will include an indication that the swap will be allocated,

    and include the LEI (or substitute identifier) of the agent, but not

    the LEIs of the clients who are the non-reporting counterparties, since

    they will not yet be known to the reporting counterparty.

    The final rule will also allow the agent to inform the reporting

    counterparty of the identities of its actual counterparties as soon as

    technologically practicable after execution, but not later than eight

    business hours after execution. The Commission understands that major

    firms acting as agents in the allocation context can allocate in a

    shorter time, but that smaller firms acting as agents typically

    allocate by the end of the business day. The Commission believes that a

    deadline of eight business hours will appropriately take into account

    the needs of such smaller firms.

    Finally, the final rule requires the reporting counterparty to

    create a USI for each of the individual swaps resulting from

    allocation, and to report each such swap as soon as technologically

    practicable after it is informed by the agent of the identities of its

    actual counterparties, the clients of the agent (which must occur as

    soon as technologically practicable after execution or at least within

    eight business hours of execution, as provided above). To prevent

    confusion or errors with respect to the data reported, and to avoid

    double-counting, the final rule requires that the report to the SDR for

    each post-allocation swap must include: An indication that the swap is

    a post-allocation swap; the USI of the original transaction; the USI of

    the post-allocation swap; the LEI of the actual counterparty; and the

    LEI of the agent. The final rule will also require the SDR to which the

    swaps are reported--which must be the same SDR to which the original

    transaction is reported--to map together the USIs of the original swap

    and of each of the post-allocation swaps.

    The Commission is adopting these USI and creation data reporting

    requirements in the context of allocation in response to comments

    seeking clarification on reporting in this context, as noted above, and

    in order to ensure that the Commission and other regulators can track

    the entire history of swaps in the context of allocation.

    c. Impact of post-execution events on USIs. The Commission has

    noted comments requesting that the final address the impact of post-

    execution events on USIs. In response to these comments, the final rule

    provides that USI codes created at the time of execution using the

    first-touch approach will only be replaced where a new swap takes the

    place of an old swap, such as where a compression or full novation has

    occurred. Under the final rule, in such cases a new USI will be

    assigned to the new swap, and the SDR to which the swap has been

    reported will be required to map the new USI back to the USIs of the

    swaps from which the new swap originated, in a manner sufficient to

    allow the Commission and other regulators to follow the entire history

    and audit trail of each affected swap. In the case of events that do

    not result in the creation of a new swap, such as partial terminations

    or changes to counterparty names, the swap in question will retain the

    USI code originally assigned to it.

    d. USIs for historical swaps. The Commission agrees with the

    comment suggesting that it would undesirable and possibly

    technologically problematic to have live swaps both with and without

    USIs recorded in SDRs for an extended period. The Commission believes

    that for historical swaps, SDRs will be the best creators of USIs. The

    Commission will address this issue in its final part 46 rule for

    historical swaps.

    [[Page 2160]]

    G. Legal Entity Identifiers--Sec. 45.6

    1. Proposed Rule

    The NOPR required that each counterparty to any swap subject to the

    Commission's jurisdiction be identified in all swap recordkeeping and

    data reporting by a legal entity identifier (``LEI'') (referred to in

    the NOPR as a unique counterparty identifier or ``UCI'') approved by

    the Commission. The NOPR established principles that an LEI must follow

    for it to be designated by the Commission as the LEI to be used in swap

    data recordkeeping and reporting pursuant to the Commission's

    Regulations.\48\ These principles included:

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

    \48\ In this summary of the principles that were discussed in

    the NOPR preamble concerning Unique Counterparty Identifiers and set

    forth in Sec. 45.4(b) of the NOPR, paragraph headings that have

    come into common use in international discussions of principles for

    the LEI, but that do not change the substance of the principles

    stated in the NOPR, have been added for clarity.

    Uniqueness (one LEI per legal entity, never re-used).

    Neutrality (a single-field identifier format containing

    no embedded intelligence).

    Verifiability (a reliable method of verifying the

    identity of holders of LEIs, avoiding assignment of duplicate

    identifiers, and maintaining accurate reference data).

    Reliability (data protection and system safeguards).

    Open source (an open data standard and format capable

    of broad use, that enables data aggregation by regulators).

    Extensibility (capability of becoming the single

    international standard for unique identification of legal entities

    in the financial sector on a global basis).

    Persistence (each LEI remains permanently in the

    record, regardless of corporate events, while a new entity resulting

    from a corporate event receives a new LEI).

    Development and issuance acceptable to the Commission

    (development via an international voluntary consensus standards body

    such as the International Organisation for Standardisation, and

    issuance through such a body and an associated registration

    authority).

    Governance and funding acceptable to the Commission

    (ensuring LEI availability to all, on a royalty-free or reasonable

    royalty basis, through an LEI issuance system operated on a non-

    profit basis).

    The NOPR also called for establishment of a confidential, non-

    public LEI reference database, to which each swap counterparty

    receiving an LEI would be required to report reference data that would

    be associated with its LEI. Such reference data would include

    information sufficient to verify the identity of the counterparty

    receiving an LEI, both initially and at appropriate intervals

    thereafter (commonly called validation data or level one reference

    data).\49\ It would also include information concerning the corporate

    affiliations of the counterparty, in order to enable the Commission and

    other financial regulators to aggregate data concerning all swap

    transactions within the same ownership group (commonly called hierarchy

    data or level two reference data). As provided in the NOPR, data in the

    reference database would be available only to the Commission, and to

    other regulators via the same data access procedures applicable to data

    in SDRs.

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

    \49\ As noted, the NOPR called for reference data including both

    (1) information sufficient to verify the identity of the

    counterparty receiving an LEI, both initially and on an ongoing

    basis, as set forth in section 45.4(b)(3)(iv) of the NOPR, and (2)

    information concerning the corporate affiliations and ownership

    group of the counterparty, as set forth in section 45.4(b)(2) of the

    NOPR. For clarity, the final rule uses the terms ``level one'' and

    ``level two'' reference data, which have come into common

    international use in discussions of the LEI and LEI reference data,

    to refer to these two types of reference information addressed in

    the NOPR. These terms do not represent new data requirements beyond

    those proposed in the NOPR, but instead provide a succinct way to

    refer to the two types of reference data required in the NOPR.

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

    The NOPR stated the Commission's belief that optimum effectiveness

    of LEIs for achieving the systemic risk protection and transparency

    goals of the Dodd-Frank Act--goals shared by financial regulators

    world-wide, and repeatedly endorsed by the G-20 Leaders--would come

    from a global LEI created on an international basis through an

    international voluntary-consensus standards body such as ISO. The NOPR

    also announced the Commission's intention to have the final part 45

    rule prescribe use of such an international LEI in complying with the

    final rule, if an LEI meeting the principles established in the NOPR is

    available sufficiently prior to the compliance date on which swap data

    reporting will first begin pursuant to the final rule.

    Accordingly, the NOPR provided that the Commission would determine,

    prior to the initial compliance date, whether such an LEI is available.

    If it were, the NOPR called for the Commission to designate that LEI as

    the LEI approved by the Commission for use in complying with the final

    rule, and to publish notice of that designation to inform registered

    entities and swap counterparties where they can obtain LEIs for use

    pursuant to the final rule.\50\

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

    \50\ The NOPR called for the Commission to make this

    determination at least 100 days prior to the initial compliance

    date, and to publish notice no later than 90 days prior to the

    initial compliance date, in order to give registered entities and

    swap counterparties subject to the final rule reasonable time in

    which to obtain LEIs for use as prescribed by the final rule.

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

    In the event that the Commission were to find when it makes this

    determination that an LEI meeting the criteria set forth in the NOPR is

    not then available, the NOPR provided that until such time as the

    Commission determines that such an LEI is available, registered

    entities and swap counterparties should comply with the final rule by

    using a unique counterparty identifier created and assigned by an SDR

    as described in the NOPR.

    2. Comments Received

    a. Endorsement of the LEI. The great majority of comments

    concerning the LEI received by the Commission via comment letters,

    roundtables, and meetings with both industry and other regulators

    strongly supported establishing an LEI to identify derivatives

    transaction counterparties and other financial firms involved in the

    world financial sector. Commenters supporting the LEI in comment

    letters included ISDA, SIFMA, Global Forex, GS1, Thomson Reuters, CME,

    ABC, Customer Data Management Group, CIEBA, and the Committee on

    Capital Markets Regulation.

    The Commission also received input from both U.S. and international

    financial regulators, international regulatory organizations, and world

    leaders endorsing creation of the LEI addressed in the NOPR. The CPSS-

    IOSCO Report on OTC Derivatives Data Reporting and Aggregation

    Requirements recommends expeditious development of a global LEI,

    stating that:

    [A] standard system of LEIs is an essential tool for aggregation

    of OTC derivatives data. An LEI would contribute to the ability of

    authorities to fulfill the systemic risk mitigation, transparency,

    and market abuse protection goals established by the G20 commitments

    related to OTC derivatives, and would benefit efficiency and

    transparency in many other areas. As a universally available system

    for uniquely identifying legal entities in multiple financial data

    applications, LEIs would constitute a global public good. The Task

    Force recommends the expeditious development and implementation of a

    standard LEI that is capable of achieving the data aggregation

    purposes discussed in this report, suitable for aggregation of OTC

    derivatives data in and across TRs [trade repositories] on a global

    basis, and capable of eventual extension to identification of legal

    entities involved in various other aspects of the financial system

    across the world financial sector.\51\

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

    \51\ Committee on Payment and Settlement Systems and Technical

    Committee of the International Organization of Securities

    Commissions, Report on OTC Derivatives Data Reporting and

    Aggregation Requirements. Issuance of this report by CPSS and IOSCO

    is anticipated during December 2012.

    [[Page 2161]]

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

    The LEI technical principles recommended in the Report, and the

    Report's statements concerning governance and funding for the LEI

    issuance system, closely parallel the LEI principles set forth in the

    NOPR, as do the principles set forth by the OFR in its Statement of

    Policy concerning the LEI,\52\ and those discussed in the SEC's

    proposed rule on data reporting for security-based swaps.\53\ Both the

    FSB Plenary and the G-20 Finance Ministers and Central Bank Governors

    have endorsed and supported creation and implementation of a global

    LEI.\54\ At the conclusion of their November 2011 meeting in Cannes,

    France, the G20 Leaders announced their strong support for the LEI,

    stating in the Cannes Summit Final Declaration that: ``We support the

    creation of a global legal entity identifier (LEI) which uniquely

    identifies parties to financial transactions.'' \55\ Following the

    meeting, the White House underscored President Obama's support for the

    LEI, stating that:

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

    \52\ Department of the Treasury, Office of Financial Research,

    Statement on Legal Entity Identification for Financial Contracts,

    November 23, 2010, available at http://www.treasury.gov/initiatives/Documents/OFR_LEI_Policy_Statement-FINAL.PDF.

    \53\ See Securities and Exchange Commission, Proposed Regulation

    SBSR--Reporting and Dissemination of Security-Based Swap

    Information, 17 CFT part 240 (November 19, 2010).

    \54\ At its July 2011 meeting, the FSB Plenary ``welcomed the

    progress of financial regulators and industry to establish a single

    global system for uniquely identifying parties to financial

    transactions.'' FSB Press Release, July 18, 2011, available at

    https://www.financialstabilityboard.org/press/pr_110718.pdf. In

    their Communiqu[eacute] at the conclusion of their October 2011

    meeting, the Finance Ministers and Central Bank Governors of the G-

    20 said, ``We underscored our support for a global legal entity

    identifier system which uniquely identifies parties to financial

    transactions with an appropriate governance structure representing

    public interest.'' Communiqu[eacute] of Finance Ministers and

    Central Bank Governors of the G-20, Paris, France, October 14-15,

    2011, available at http://www.g20.org/Documents2011/10/G20%20communiqu[eacute]%2014-15%20October%202011-EN.pdf.

    \55\ Cannes Summit Final Declaration, November 4, 2011, at 7,

    paragraph 31, available at http://www.g20.org/Documents2011/11/Cannes%20Declaration%204%20November%202011.pdf.

    The Legal Entity Identifier (LEI) initiative will support better

    understanding of true exposures and interconnectedness among and

    across financial institutions. We need such understanding to assess

    and reduce risks to the financial system.\56\

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

    \56\ The White House, G-20: Fact Sheet on U.S. Financial Reform

    and the G-20 Leaders' Agenda, November 4, 2011, available at http://www.whitehouse.gov/the-press-office/2011/11/04/g-20-fact-sheet-us-financial-reform-and-g-20-leaders-agenda.

    b. LEI suggestions. Several comment letters received by the

    Commission also made specific suggestions and requests for

    clarification relating to the LEI. ISDA and SIFMA, Thomson Reuters, and

    AMG suggested that the unique counterparty identifier required by the

    final rule should be the same identifier as the legal entity identifier

    being developed under principles stated in the OFR policy statement

    concerning LEIs. Roundtable participants also suggested referring to

    the identifier as the LEI rather than the UCI, to avoid confusion. CME,

    Thomson Reuters, and most roundtable participants supported the NOPR

    principle calling for a neutral LEI with no embedded intelligence.

    WGCEF and TriOptima asked for guidance on how the LEI would relate to

    corporate events such as mergers and acquisitions. The Asset Management

    Group advocated assigning LEIs at the individual fund or account level

    rather than the legal entity level. ISDA, SIFMA and CME suggested that

    the LEI should be administered by a not-for-profit industry utility,

    and that an international directory of LEI holders should be available

    at no cost. CUSIP and GS1 suggested that they might be potential

    providers of a future LEI.

    c. LEI reference data. With respect to level two or hierarchical

    reference data for the LEI, CME suggested clarifying whether the LEI is

    intended to simply identify a specific counterparty or to establish a

    counterparty's relationship with other entities. Global Forex noted

    that data confidentiality law in different jurisdictions could raise

    issues regarding access to level two reference data. The Asset

    Management Group recommended that the definition of control for

    purposes of reporting level two reference data should require at least

    majority ownership. DTCC recommended that SDRs should have access to

    the non-public LEI reference database for use in the construction of

    reports to regulators, such as reports based on net or aggregated

    positions.

    d. Progress toward a global LEI. Since the Commission issued the

    proposed rule requiring use of LEIs in swap data reporting under CFTC

    jurisdiction, both international financial regulators and industry have

    made significant progress toward creation of the global LEI called for

    in the NOPR.

    Voluntary consensus body standard. In response to the Commission's

    preference, set forth in the NOPR as noted above, to have swap

    counterparties identified by a universally-available LEI created on an

    international basis through an international ``voluntary consensus

    standards body,'' the International Organisation for Standardisation

    has developed a new international technical standard for the LEI, ISO

    17442 Legal Entity Identifier (LEI). ISO is the world's principal

    voluntary consensus standards body, which includes 162 member

    countries. Through its Technical Committee 68 (``TC 68''), the expert

    committee for standardization in the field of banking, securities, and

    other financial services, ISO has published 48 key standards for the

    financial sector, ranging the international securities identification

    numbering (``ISIN'') code for securities, and the business

    identification code (``BIC'') for banking telecommunication messages to

    the codes for exchange and market identification (``MIC''), and for

    classification of financial instruments (``CFI'').\57\ The ISO 17442

    LEI standard received unanimous approval from TC 68 in June 2011, and

    it received unanimous support in the second round of voting by member

    countries in the ISO approval process that concluded on December 14,

    2011.\58\

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

    \57\ During the process of developing ISO 17442, ISO determined

    that existing codes for other financial sector purposes, such as BIC

    codes and ISIN codes, were not suited by design to provide unique

    identification of legal entities across the world financial sector,

    and that a new standard was needed for this purpose.

    \58\ TC 68 will address comments received during the approval

    process in January 2012.

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

    Industry recommendations. Also in response to the NOPR's call for

    an international, universally-adopted LEI, in January 2011 a global

    coalition of financial sector trade associations and organizations came

    together to develop an industry consensus on requirements and standards

    for the LEI, and make a recommendation concerning formation of an LEI

    utility to issue LEIs and validate the identity of their holders.\59\

    [[Page 2162]]

    After extended discussions involving a broad cross-section of financial

    trade associations and both buy-side and sell-side firms from a wide

    range of countries, during the spring and summer of 2011 the global

    coalition issued a comprehensive set of requirements for a viable,

    international LEI; initiated a Solicitation of Interest process to

    identify one or more solution providers able to build, manage, and run

    an LEI utility to issue LEIs; evaluated formal responses from more than

    10 potential providers; and issued three recommendations concerning

    implementation of the global LEI system. First, the global coalition

    recommended that the international technical standard for the LEI code

    itself be the new international standard developed by ISO, ISO 17442

    Legal Entity Identifier (LEI). Second, the coalition recommended that

    the LEI utility that conducts LEI reference data collection and

    maintenance, LEI assignment, and quality assurance be operated as a

    joint venture including SWIFT (the Registration Authority selected by

    ISO for the ISO 17442 standard) and DTCC and its subsidiary AVOX

    Limited (to be the facilities manager for the LEI utility). Finally,

    the coalition recommended that the Association of National Numbering

    Agencies (``ANNA''), through its global network of national numbering

    agencies, be a partner in federated LEI issuance in the home countries

    of legal entities receiving LEIs. At the FSB LEI Workshop (discussed

    below) and elsewhere, the global coalition has stated its willingness

    to have the structure of the joint venture created to serve as the LEI

    utility include a governing board controlled by international financial

    regulators including the Commission, with authority over the operations

    of the joint venture sufficient to ensure that the LEI utility

    maintains compliance with the principles established for the LEI by

    international financial regulators, including the principles

    established by the Commission.

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

    \59\ The global coalition included twelve trade association who

    endorsed the industry's Requirements for a Global Legal Entity

    Identifier (LEI) Solution, available at http://www.sifma.org/LEI-Industry-Requirements/. The included trade associations were the

    Association for Financial Markets in Europe, Asia Securities

    Industry and Financial Markets Association, British Bankers

    Association, Customer Data Management Group, The Clearing House

    Association L.L.C., Enterprise Data Management Council, Financial

    Services Roundtable, Futures Industry Association, Global Regulatory

    Identifier Steering Group, International Swaps and Derivatives

    Association, Investment Company Institute, and Securities Industry

    and Financial Markets Association. In addition, the following firms

    were party to the discussions leading to creation of Requirements

    for a Global Legal Entity Identifier (LEI) Solution:

    AllianceBernstein, Bank of America Merrill Lynch, Bank of New York

    Mellon-Pershing, Barclays Capital, Branch Banking & Trust Company,

    BlackRock, BNP Paribas, CIBC Wholesale Banking, Citi, Credit Suisse,

    Deutsche Bank, E*Trade Financial, Edward Jones, Federated

    Investments, Fidelity, GE Asset Management, GE Capital, Goldman

    Sachs, HSBC, Janney Montgomery Scott LLC, Jefferies, JP Morgan

    Chase, JWG, KeyBank, Loomis Sayles, Morgan Stanley, New York Life,

    Nomura, Northern Trust, Prudential, Royal Bank of Canada, Royal Bank

    of Scotland, R-Cube, Renaissance Technologies, Soci[eacute]t[eacute]

    G[eacute]n[eacute]rale, State Street, T Rowe Price, Tradeweb, UBS,

    and Wells Fargo.

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

    The Commission understands that, in order to ensure as far as

    possible that LEIs can in fact be issued to swap counterparties subject

    to the Commission's jurisdiction prior to the initial compliance date

    for swap data reporting pursuant to this final rule, SWIFT, DTCC, AVOX,

    and ANNA are moving forward to cleanse already-available data

    sufficient to validate the identity of legal entities to receive an

    LEI; to collect and cleanse such validation data for other swap

    counterparties; and to issue temporary identifiers readily convertible

    into LEIs if their joint venture is designated by the Commission as the

    provider of LEIs to be used pursuant to this rule. They have also

    informed Commission staff that they anticipate being able to provide

    LEIs to swap counterparties by the summer of 2012 if they are so

    designated.

    International developments. In September 2011, the FSB convened an

    international LEI Workshop including over 50 private sector experts and

    over 60 representatives from the international financial regulatory

    community, including the Commission, to further educate participants

    and elicit their input concerning the LEI, and to guide preparation of

    a roadmap leading to recommendations concerning implementation of a

    global LEI system. Workshop participants discussed possible technical

    and governance principles for the LEI drawn from the CPSS-IOSCO Report

    on OTC Derivatives Data Reporting and Aggregation Requirements, which

    as noted above closely parallel those included in the NOPR. The

    Workshop revealed strong support for the LEI initiative from both

    private sector and official sector participants. Industry

    representatives emphasized the vital importance of support and

    leadership from the global regulatory community, and the many potential

    benefits of a global LEI that would only be realized if regulators

    support the LEI initiative. Presenters at the Workshop also supported

    the timely phasing of LEI implementation, likely to begin with use of

    the LEI in reporting OTC derivatives data to trade repositories.

    When the G-20 Leaders endorsed the LEI initiative following the

    Workshop, they stated that:

    We call on the FSB to take the lead in helping coordinate work

    among the regulatory community to prepare recommendations for the

    appropriate governance framework, representing the public interest,

    for such a global LEI by our next Summit.\60\

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

    \60\ Cannes Summit Final Declaration, November 4, 2011, at 7,

    paragraph 31, available at http://www.g20.org/Documents2011/11/Cannes%20Declaration%204%20November%202011.pdf.

    Following the request from the G20, the FSB decided in December to

    create a time-limited, ad-hoc expert group of authorities, including

    the Commission, to carry forward work on key outstanding issues

    relevant to implementation of a global LEI, in order to fulfill the G-

    20 mandate. The group held its first meeting on December 13 and 14,

    2011. The issues to be addressed by the expert group include: (1) The

    governance framework for the global LEI; (2) the operational model for

    the LEI system; (3) the scope of LEI reference data; (4) reference data

    access and confidentiality; (5) the funding model for the LEI system;

    and (6) global implementation and phasing of the LEI. It is anticipated

    that the expert group will deliver clear recommendations with respect

    to implementation of a global LEI system to the FSB Plenary for

    endorsement in April or May 2012. This process is designed to allow

    first-phase implementation of the LEI in OTC derivatives data reporting

    to trade repositories, including swap data reporting to SDRs pursuant

    to this final rule, to proceed, if possible, on the basis of globally

    agreed principles concerning governance, funding, and access to

    reference data.

    3. Final Rule: Sec. 45.6

    a. Important factors in the Commission's decision. The Commission

    has considered and evaluated the comments and international input it

    has received concerning the LEI and the principles which should govern

    the LEI system, and has taken such comments and input into account in

    the LEI provisions of the final rule. It has also considered the

    progress made by the international financial regulatory community and

    industry toward creation of a global LEI, created on an international

    basis through an international voluntary consensus standards body, that

    meets the requirements provided in the NOPR, and is suitable for

    designation by the Commission for use in recordkeeping and swap data

    reporting pursuant to this final rule as set forth in the NOPR.

    Broad endorsement of the LEI. The Commission agrees with the

    recommendation of commenters, roundtable participants, industry, U.S.

    and international financial regulators, international regulatory

    organizations, and world leaders calling for creation of a global LEI.

    It also believes, as recommended by roundtable participants, the CPSS-

    IOSCO Report on OTC Derivatives Data Reporting and Aggregation

    Requirements, and many FSB LEI Workshop participants, that the LEI

    should first be used for identification of swap counterparties in data

    reported to SDRs.

    LEI suggestions by commenters. The Commission accepts the

    suggestion of various commenters and roundtable participants that the

    unique

    [[Page 2163]]

    counterparty identifier required by the final rule should be the same

    identifier as the legal entity identifier (``LEI'') being developed by

    industry and international regulators as described above, and should be

    referred to as the LEI (rather than the UCI as in the NOPR) in order to

    avoid confusion. The Commission agrees with commenters that the

    neutrality principle set forth in the NOPR and elsewhere, calling for a

    neutral LEI with no embedded intelligence should be maintained. The

    persistence principle in the final rule addresses commenters' requests

    for guidance on how the LEI will relate to corporate events such as

    mergers and acquisitions.\61\ The Commission disagrees with the

    suggestion of one commenter that LEIs should be assigned at the

    individual fund or account level rather than the legal entity level,

    since LEIs by nature are legal entity identifiers. The Commission

    agrees with comments calling for the LEI to be administered by a not-

    for-profit industry utility, and for an international directory of LEI

    holders to publicly available free of charge. The criteria for the

    Commission's designation of the LEI utility that will provide LEIs to

    be used in compliance with the rule are discussed below.

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

    \61\ In determining whether a new entity requiring a new LEI has

    resulted from a corporate event, the LEI utility may consider

    whether the primary regulator (if any) of the entity or entities

    involved in the corporate event considers the result to be a new

    entity; whether market data vendors consider the result to be a new

    entity; or whether ownership has changed as a result of the

    corporate event.

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

    LEI reference data considerations. The Commission believes that

    level one LEI reference data is essential to the ability of the issuer

    of LEIs to validate the identity of a legal entity receiving an LEI. As

    recognized by the participants in the FSB LEI Workshop, the Commission

    understands that such data by its nature is public, and presents no

    confidentiality or access issues. The Commission also believes, as also

    recognized by participants in the Workshop and in the CPSS-IOSCO Report

    on OTC Derivatives Data Reporting and Aggregation Requirements, that

    level two LEI reference data concerning the hierarchical relationships

    or company affiliations of legal entities is needed by regulators for

    use of the LEI as a tool to aggregate the data in trade repositories in

    order to enhance systemic risk mitigation and market supervision. The

    Commission understands, as recognized by Workshop participants, that

    some level two reference data is public and does not pose

    confidentiality concerns. However, the Commission is also aware, as

    pointed out by commenters and Workshop participants, that financial

    data confidentiality law in different jurisdictions could raise issues

    regarding access by regulators outside those jurisdictions, or by the

    public, to some level two reference data.\62\

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

    \62\ The Commission has considered comments concerning the

    definition of control it should employ in connection with level two

    reference data, and concerning SDR access to level two reference

    data for the purpose of constructing reports for regulators.

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

    LEI standard. The Commission recognizes that ISO, the international

    voluntary consensus standards body cited in the NOPR, has developed an

    international standard for a global LEI, ISO 17442 Legal Entity

    Identifier (LEI).

    Industry recommendations. The Commission also recognizes that a

    global coalition of financial sector trade associations and

    organizations has developed a broad-based industry consensus on

    requirements and standards for the LEI, and has recommended that (1)

    the international standard for the LEI code itself should be ISO

    standard 17442; and (2) the LEI utility for LEI issuance, reference

    data collection and maintenance, and quality assurance should be

    operated as a joint venture including SWIFT, DTCC, AVOX, and ANNA. The

    Commission notes that the coalition has publicly stated its willingness

    for this joint venture to include a governing board controlled by

    international financial regulators including the Commission, with power

    to ensure that the LEI utility maintains compliance with the principles

    established for the LEI by international financial regulators,

    including the principles established by the Commission in this final

    rule.

    Timely availability of LEIs. The Commission understands that the

    recommended joint venture partners are moving forward to obtain and

    process the reference data necessary to validate the identity of legal

    entities to be identified by LEIs, so that if the joint venture is

    designated by the Commission as the issuer of LEIs to be used in swap

    data reporting, it can in fact be able to issue LEIs to swap

    counterparties subject to the Commission's jurisdiction prior to the

    commencement of swap data reporting pursuant to this final rule. At

    this time, the Commission is not aware of any other candidate to be the

    LEI utility designated to provide LEIs for use in compliance with this

    final rule that would in fact be able to provide the required LEIs on a

    timely basis.

    The Commission is aware that the ability of any LEI utility

    designated by the Commission to provide the LEIs to be used in

    compliance with this final rule to provide such LEIs when swap data

    reporting commences pursuant to this rule will depend in part on the

    Commission making such a designation, as called for in the NOPR,

    sufficiently prior to the commencement of swap data reporting to enable

    the LEI utility to issue the LEIs needed for compliance with this rule

    on a timely basis.

    Need for an internationally-established LEI. As stated in the NOPR,

    the Commission recognizes that optimum effectiveness of LEIs as a tool

    for achieving the systemic risk mitigation, transparency, and market

    protection goals of the Dodd-Frank Act--goals shared by financial

    regulators world-wide--would come from creation of a global LEI, on an

    international basis, that is capable of becoming the single

    international standard for unique identification of legal entities

    across the world financial sector. The Commission has participated in

    all of the work of the global financial regulatory community to date

    concerning implementation of a global LEI, and has carefully considered

    the results of this work. One reason the Commission has done so is that

    it recognizes the importance of having first-phase implementation of a

    global LEI follow principles that are forward-compatible with later

    phases of LEI implementation.\63\ The Commission welcomes, and is

    participating in, the work of the FSB-coordinated, ad-hoc expert group

    of authorities working to deliver clear recommendations on

    implementation of a global LEI system to the FSB Plenary for

    endorsement in April or May 2012. The Commission understands that an

    important purpose of FSB endorsement of these recommendations would be

    to allow first-phase implementation of the LEI, including its use in

    swap data reporting to SDRs pursuant to this final rule, to proceed, if

    possible, on the basis of globally agreed principles concerning

    governance and funding of the LEI and access to LEI reference data.

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

    \63\ This is particularly true in light of the fact that, once

    industry builds or adapts automated systems for use in swap data

    reporting to include the LEI, it could be inadvisable to require

    registered entities and swap counterparties to incur the additional

    burden and cost that could come from changing the LEI system in ways

    that were not compatible with first-phase implementation of the LEI.

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

    b. Final rule LEI provisions. In light of these considerations, the

    Commission has determined that Sec. 45.6 will include the following

    provisions.

    Standard for the LEI code. The LEI to be used in all recordkeeping

    and all swap data reporting required by this part, once the Commission

    has

    [[Page 2164]]

    designated the LEI utility that will provide the LEI to be used in

    complying with this part, as set forth below, must be issued under, and

    conform to, ISO Standard 17442, Legal Entity Identifier (LEI). This

    standard is the sole existing LEI standard created by a voluntary

    consensus standards body, and is the standard created by ISO, the

    voluntary consensus standards body cited in the NOPR as the optimum

    source for the LEI standard.

    LEI principles. The final rule includes both technical and

    governance principles that must be followed by the LEI used for

    compliance with the rule. These principles are based on those set forth

    in the NOPR, as complemented by the closely-parallel principles and

    governance considerations recommended in the CPSS-IOSCO Report on OTC

    Derivatives Data Reporting and Aggregation Requirements and the

    principles discussed at the FSB LEI Workshop.\64\ The final rule

    principles, set forth in detail in the text of section 45.6, are

    summarized below.

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

    \64\ As noted above, all of these principles closely parallel

    those set forth by the OFR in its Statement of Policy concerning the

    LEI, see footnote 52 above, and those discussed in the SEC's

    proposed rule on data reporting for security-based swaps, see

    footnote 53 above.

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

    Technical Principles

    Uniqueness (one LEI per legal entity, never re-used).

    Neutrality (a single-field identifier format containing

    no embedded intelligence).

    Reliability (a reliable method of verifying the

    identity of holders of LEIs, based on reference data necessary for

    this purpose; as well as robust quality assurance practices and

    system safeguards, including the system safeguards applicable to

    SDRs under part 49 of this chapter).

    Open source (an open data standard and format capable

    of broad use, that enables data aggregation by regulators).

    Extensibility (capability of becoming the single

    international standard for unique identification of legal entities

    in the financial sector on a global basis).

    Persistence (each LEI remains permanently in the

    record, regardless of corporate events, while a new entity resulting

    from a corporate event receives a new LEI).

    Governance Principles

    International governance (for operations, a governance

    structure for the LEI utility giving the Commission and other

    financial regulators requiring use of the LEI power to ensure that

    the LEI system adheres to these principles) (for compliance with ISO

    17442, governance by ISO).

    Reference data access (access to LEI reference data

    must enable use of the LEI as a public good, while respecting

    applicable law regarding data confidentiality).

    Non-profit operation and funding (funding and operation

    on a non-profit, reasonable cost-recovery basis, subject to

    international governance).

    Unbundling and non-restricted use (LEI issuance not

    tied to other services; no restrictions on use of the LEI;

    intellectual property consistent with open source principles).

    Commercial advantage prohibition (no commercial use by

    the utility of LEI reference data that is not available to the

    public free of charge).

    Designation of the LEI utility. As called for in the NOPR, the

    final rule provides for the Commission to designate the LEI utility

    that will provide the LEI to be used in complying with this rule, once

    the Commission determines that an LEI system satisfying the

    requirements of the rule is available, making this designation in a

    Commission order. In determining whether an LEI system satisfying the

    Commission's requirements is available, the Commission will consider,

    without limitation, the following factors:

    Whether the LEI provided by the utility is issued

    under, and conforms to, ISO Standard 17442, Legal Entity Identifier

    (LEI).

    Whether the LEI provided by the utility complies with

    all of the technical principles set forth in this rule.

    Whether the LEI utility complies with all of the

    governance principles set forth in this rule.

    Whether the LEI utility has demonstrated that it in

    fact can provide LEIs for identification of swap counterparties in

    swap data reporting commencing as of the compliance dates set forth

    in this rule.

    The acceptability of the LEI utility to industry

    participants required to use the LEI in complying with the rule.

    In making its determination, the Commission will consider all

    candidates meeting these criteria, but it will not consider any

    candidate that does not demonstrate that it in fact can provide LEIs

    for identification of swap counterparties in swap data reporting

    pursuant to this rule as of the compliance dates set forth in this

    rule.

    The Commission will make this determination and designate the LEI

    utility at a time sufficiently prior to the commencement of swap data

    reporting to enable the designated utility to issue LEIs far enough in

    advance of the compliance dates set forth in the rule to enable

    compliance with the rule.

    Reference data reporting. When an LEI utility has been designated

    by the Commission, the final rule requires reporting of both level one

    and level two reference data concerning the legal entity identified by

    an LEI. Level one reference data means the minimum information needed

    to identify, on a verifiable basis, the legal entity to which an LEI is

    assigned. Level two reference data means information concerning the

    corporate affiliations or company hierarchy relationships of the legal

    entity receiving an LEI. As provided in the NOPR, the final rule

    requires reporting of both types of reference data for each

    counterparty to any swap subject to the Commission's jurisdiction.

    The rule provides that level one reference data must be reported

    into a publicly-available level one reference database maintained by

    the issuer of the LEI designated by the Commission, at a time

    sufficient to ensure that the counterparty's legal entity identifier is

    available for inclusion in recordkeeping and swap data reporting as

    required by the rule. Such reference data is essential to verifying the

    identity of the legal entity receiving an LEI. Level one reference data

    can be reported into the database by the entity itself (self-

    registration), or by another entity or organization such as a swap

    dealer reporting on behalf of its counterparties or a national number

    agency or data service provider reporting on behalf of its clients

    (third-party registration). Subsequent changes and corrections to level

    one reference data must also be reported.

    While the NOPR required reporting of level two reference data

    concerning all of a counterparty's corporate or company affiliation

    relationships, the Commission has determined that the final rule will

    reduce this requirement, and call for reporting of only a single piece

    of level two reference data, the identity of the counterparty's

    ``ultimate parent'' as defined in the final rule. In making this

    determination, the Commission has taken into account comments

    suggesting that the Commission should coordinate with the SEC and

    international regulators to ensure where possible against material,

    substantive difference in reporting requirements, as well as comments

    suggesting that it should establish an ownership threshold for

    affiliations required to be reported, in order to reduce burdens for

    counterparties. The definitions of ``control,'' ``parent,'' and

    ``ultimate parent'' adopted in the final rule are closely aligned with

    the SEC's definitions, including a 25% ownership threshold.\65\ These

    definitions are provided both to reduce burdens for counterparties, in

    relation to the full affiliation reporting proposed in the NOPR, and to

    provide clarity as to the

    [[Page 2165]]

    single affiliation required to be reported. The Commission believes

    that reporting of level two reference data consisting of the identity

    of a counterparty's ultimate parent is essential to the ability of the

    Commission and other regulators to aggregate swap data in order to

    fulfill the purposes of the Dodd-Frank Act. The Commission may revisit

    the issue of what additional level two reference data should be

    reported at a later time, when an international consensus concerning

    the reporting of additional level two reference data has had time to be

    developed.

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

    \65\ The Commission disagrees with the 50% ownership threshold

    suggested by one commenter. The Commission believes that a 50%

    threshold would result in no ultimate parent being reported in a

    notable number of cases, and believes that the 25% threshold used by

    the SEC is more appropriate.

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

    Accordingly, the final rule also requires reporting of level two

    reference data, consisting of the identity of the counterparty's

    ultimate parent. Level two reference data must be reported to a level

    two reference database. All non-public level two reference data

    reported to the level two reference database will be available only to

    the Commission and other financial regulators in any jurisdiction

    requiring LEI use. Where applicable law forbids such reporting, the

    rule requires reporting that fact, and the citation of the law in

    question, in place of the data to which such law applies. The rule

    provides that the location of the level two database will be determined

    at a future time by a Commission order, and that the obligation to

    report level two reference data will not apply until that order is

    issued. The rule also provides that, once the order is issued, level

    two reference data must be reported at a time sufficient to ensure that

    it is included in the database when the counterparty's LEI is included

    in recordkeeping and swap data reporting as required by the rule. Level

    two reference data may also be reported via either self-registration or

    third-party registration. Changes and corrections must also be

    reported.

    Use of the LEI by registered entities and swap counterparties. The

    final rule provides that, when an LEI utility has been designated by

    the Commission, each registered entity and swap counterparty subject to

    the Commission's jurisdiction must use the LEI provided by the

    designated LEI utility in all recordkeeping and swap data reporting

    pursuant to this part.\66\

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

    \66\ The final rule provides a grace period until October 15,

    2012, for reporting counterparties whose systems are not yet

    prepared to include LEIs.

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

    Swap counterparty identification prior to LEI availability.

    Finally, the final rule provides that, before the LEI utility has been

    designated by the Commission, registered entities and swap

    counterparties subject to the Commission's jurisdiction shall use a

    substitute counterparty identifier created and assigned by an SDR, as

    provided in the final rule.

    c. Incorporation of international principles and recommendations.

    Because this final rule is being issued prior to completion of the work

    of the FSB-coordinated, ad-hoc expert group of authorities that will

    make recommendations to the FSB Plenary in April 2012 concerning LEI

    governance, funding, and reference data, it has been written, of

    necessity, to provide the principles and requirements that will apply

    to the LEI, when its use pursuant to this rule begins, in the absence

    of globally agreed principles for these aspects of the LEI system. As

    noted above, the Commission shares the goal of a global LEI capable of

    becoming the single international standard for unique identification of

    legal entities across the world financial sector. Therefore, if LEI

    principles that the Commission determines are forward-compatible with

    the principles set forth in this rule, or recommendations concerning

    LEI governance and funding and access to LEI reference data that are

    acceptable to the Commission, are endorsed by the FSB in April or May

    2012, the Commission may issue an interim final rule addressing LEI

    governance, funding, and reference data, that includes such principles

    and recommendations. Such an interim final rule, if issued, would

    replace affected provisions of this final rule, pending notice and

    comment and possible later adoption of the interim final rule by the

    Commission as a final rule.\67\

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

    \67\ The Commission believes that the provisions of such an

    interim final rule must not impair the availability of LEIs for use

    in swap data reporting when such reporting commences pursuant to

    this rule. Accordingly, the Commission does not intend that such an

    interim final rule would alter the requirement for the LEI to be

    issued pursuant to ISO Standard 17442, or would alter the

    Commission's designation of the LEI utility once that designation

    has been made.

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

    H. Unique Product Identifiers--Sec. 45.7

    1. Proposed Rule

    The NOPR required that each swap subject to CFTC jurisdiction be

    identified in all swap recordkeeping and data reporting by a unique

    product identifier (``UPI'') and a product classification system, as

    determined by the Commission, for the purpose of categorizing swaps

    with respect to the underlying products referenced in them. The NOPR

    called for the UPI and product classification system to identify both

    the swap asset class and the subtype within that asset class to which

    the swap belongs, with sufficient specificity and distinctiveness (as

    determined separately for each asset class) to enable regulators to

    fulfill their regulatory responsibilities and to enhance real time

    reporting. As provided in the NOPR, UPIs would be assigned to swaps at

    a particular, asset class-specific level of the robust swap taxonomy

    used by the product classification system, and the use of UPIs and the

    classification system would enable regulators to aggregate and report

    swap activity at a variety of product type levels, and to prepare

    reports required by the Dodd-Frank Act regarding swap market activity.

    2. Comments Received

    The majority of comments concerning the UPI received via comment

    letters, roundtables, and meetings with both industry and other

    regulators supported creation of a product classification system that

    provides a universally-accepted means of describing all swaps, whether

    standardized or bespoke, and permits creation of UPIs for sufficiently

    standardized swaps. As noted in the CPSS-IOSCO Report on OTC

    Derivatives Data Reporting and Aggregation Requirements, development of

    a standard product classification system is needed as a first step

    toward both a system of product identifiers for standardized

    derivatives products and an internationally-accepted semantic for

    describing non-standardized instruments. DTCC and Thomson Reuters

    pointed out that creation of a product taxonomy is a significant

    undertaking, and Thomson Reuters suggested that a pilot program for

    developing UPIs could be useful.

    An industry initiative to create a product classification system is

    being led by the creators of FpML, in cooperation with experts in FIX.

    The data subcommittee of the CFTC Technology Advisory Committee

    (``TAC'') has taken up this subject as well. Industry experts involved

    in the industry initiative and the TAC data subcommittee anticipate

    that it may be possible, once a product classification system is

    developed, to assign a UPI to approximately 80 to 95 percent of swaps

    (depending on the asset class involved), while approximately 5 to 20

    percent of swaps may be sufficiently bespoke that they can only be

    described rather than identified by a UPI. The CPSS-IOSCO Report on OTC

    Derivatives Data Reporting and Aggregation Requirements recommends

    CPSS-IOSCO and FSB support for timely development of a standard product

    classification system that can be used as a common basis for

    classifying and describing OTC derivatives products, and recommends

    that the FSB direct further international consultation and

    [[Page 2166]]

    coordination by financial and data experts from both regulators and

    industry concerning this work.

    3. Final Rule: Sec. 45.7

    After considering the comments and input received concerning the

    UPI and product classification system, the Commission has determined

    that, as called for in the NOPR, the final rule provides that each swap

    subject to the Commission's jurisdiction must be identified in

    recordkeeping and swap data reporting pursuant to this part by means of

    a unique product identifier and product classification system

    acceptable to the Commission, when such an identifier and

    classification system are designated by the Commission for this

    purpose. The unique product identifier and product classification

    system will be required to identify and describe the swap asset class

    and the sub-type within that asset class to which the swap belongs, and

    the underlying product for the swap, with sufficient distinctiveness

    and specificity to enable the Commission and other financial regulators

    to fulfill their regulatory responsibilities.

    The final rule provides that the Commission will determine when a

    unique product identifier and product classification acceptable to the

    Commission and satisfying these requirements is available, and when it

    so determines will designate the unique product identifier and product

    classification system for use in compliance with this part, making this

    designation in a Commission order. The final rule requires registered

    entities and swap counterparties subject to the Commission's

    jurisdiction to use the unique product identifier and product

    classification system in compliance with this part when this

    designation is made. Prior to this designation, each registered entity

    and swap counterparty must use the internal product identifier or

    product description used by the SDR in all recordkeeping and swap data

    reporting pursuant to this part.

    I. Determination of Which Counterparty Must Report--Sec. 45.8

    1. Proposed Rule

    The NOPR followed the reporting counterparty hierarchy outlined in

    Sec. 4r(a)(3) of the CEA, which provides that where only one

    counterparty is an SD or MSP, the SD or MSP is the reporting

    counterparty, and where one counterparty is an SD and the other is an

    MSP, the SD is the reporting counterparty.\68\ The effect of this

    provision is to establish a hierarchy of counterparty types for

    reporting obligation purposes, in which SDs outrank MSPs, who outrank

    non-SD/MSP counterparties. Where both counterparties are at the same

    hierarchical level, the NOPR followed the statute in calling for them

    to select the counterparty obligated to report. In order to prevent

    confusion and delay concerning this choice, the NOPR provided a

    mechanism for counterparties to use in making this selection, by

    requiring counterparties at the same hierarchical level to agree as one

    term of their swap which counterparty will fulfill reporting

    obligations for that swap. In cases where only one counterparty is a

    U.S. person, the NOPR requires the U.S. person to be the reporting

    counterparty, in order to ensure compliance with reporting obligations

    in such situations.

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

    \68\ As stated in the NOPR, the Commission believes that, while

    CEA section 4r(a) applies explicitly to swaps not accepted for

    clearing by a DCO, the duty to report should be borne by the same

    counterparty regardless of whether the swap is cleared or uncleared,

    for the sake of uniformity and ease of applicability. This approach

    also effectuates a policy choice made by Congress in the Dodd-Frank

    Act to place lesser burdens on non-SD/MSP counterparties to swaps,

    where this can be done without damage to the fundamental systemic

    risk mitigation, transparency, standardization, and market integrity

    purposes of the legislation. The Commission believes it is

    appropriate for SDs and MSPs to have the responsibility of reporting

    with respect to the majority of swaps, because they are more likely

    than non-SD/MSP counterparties to have automated systems in place

    that can facilitate reporting. The Commission notes that the SEC

    followed the same approach in its proposed regulations for security-

    based swap data reporting.

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

    2. Comments Received

    The Commission received several comments concerning determination

    of the reporting counterparty. The two themes addressed in these

    comments were the need for a selection mechanism or deciding factor for

    cases where both counterparties are at the same hierarchical level, and

    who should be the reporting counterparty when only one counterparty is

    a U.S. person.

    a. Deciding factor between two counterparties at the same

    hierarchical level. Commenters asked the Commission to provide in the

    final rule a mechanism for determining which counterparty is the

    reporting counterparty in cases where both counterparties are at the

    same hierarchical level, and suggested various deciding factors for use

    in such cases. The Electric Coalition recommended that for swaps

    between two non-SD/MSP counterparties where only one counterparty is a

    ``financial entity,'' the final rule should make the financial entity

    the reporting counterparty. AGA suggested that, between counterparties

    at the same hierarchical level, the entity that is the ``calculation

    agent'' under the applicable ISDA documentation should be the reporting

    counterparty, unless the parties agree otherwise. ICE suggested that

    the seller of the swap should be the reporting counterparty in such

    situations, arguing that there is too much uncertainty when parties are

    required to select the reporting counterparty, particularly for

    platform-executed swaps where counterparties are unknown to each other

    at the time of execution. WGCEF raised the issue of whether entities

    designated as SDs or MSPs for some but not all swaps should be treated

    as non-SDs/MSPs with respect to reporting counterparty determinations

    regarding swaps for which they are not designated as SDs or MSPs. WGCEF

    suggested that a ``limited'' SD or ``limited'' MSP should only be

    required to be the reporting counterparty for swaps within the

    particular asset class for which it is designated an SD or MSP. FHLB

    recommended that when an SD is transacting with a limited SD, the SD

    should be designated the reporting counterparty, because it would be

    burdensome for a limited SD to comply with requirements meant for

    entities for which swap dealing is a primary business. Where a limited

    SD is the reporting counterparty, FHLB asked that it be treated as a

    non-SD/MSP with respect to reporting deadlines.

    b. Non-U.S. counterparties. The Commission received a number of

    comments on which counterparty should be the reporting counterparty

    when only one counterparty is a U.S. person. The Foreign Banks, ISDA,

    SIFMA, DTCC, MarkitServ, Freddie Mac, Vanguard, EEI, Chatham Financial,

    ABC, CIEBA, and the Electric Coalition recommended requiring non-U.S.

    SDs or MSPs to be the reporting counterparty for swaps with U.S. non-

    SD/MSP counterparties.\69\ The commenters pointed to the superior

    technology and technical expertise of SDs and MSPs, the benefits of a

    consistent approach to reporting, and concerns regarding whether U.S.

    non-SD/MSP counterparties would be discouraged from transacting with

    foreign SDs and MSPs if they were required to bear the burden of

    reporting. EEI and Vanguard suggested allowing the counterparties in

    this situation to agree on which of them will be the reporting

    counterparty, and MarkitServ suggested allowing non-SD/MSP

    counterparties to delegate the

    [[Page 2167]]

    reporting obligation to the non-U.S. SD counterparty.

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

    \69\ ABC and CIEBA argued that making a U.S. non-SD/MSP

    counterparty the reporting counterparty where the other counterparty

    is a foreign SD or MSP is contrary to Sec. 729 of the Dodd-Frank

    Act.

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

    3. Final Rule: Sec. 45.8

    a. Deciding factor between two counterparties at the same

    hierarchical level. The Commission has considered comments calling for

    the final rule to provide a mechanism for determining which

    counterparty is the reporting counterparty in cases where both

    counterparties are at the same hierarchical level, and agrees that this

    would be beneficial where a deciding factor can be applicable for all

    swaps. The Commission has determined that the final rule provides that

    for swaps between non-SD/MSP counterparties where only one counterparty

    is a ``financial entity'' as defined in CEA section 2(h)(7)(C), the

    financial entity shall be the reporting counterparty. The Commission

    believes it is appropriate for financial entities, as defined by the

    Dodd-Frank Act, to have the responsibility of reporting in such cases,

    because, in the Commission's view, they are more likely than non-SD/MSP

    counterparties who are not financial entities to have automated systems

    in place that can facilitate reporting. The Commission has not found

    any other factor usable for automatic choice of the reporting

    counterparty between two counterparties at the same hierarchical level

    that applies across all markets and all asset classes.

    For off-platform swaps, the final rule retains the NOPR requirement

    that counterparties at the same hierarchical level agree, as one term

    of the swap, which of them is the reporting counterparty.

    For swaps executed on a SEF or DCM, determination of the reporting

    counterparty is necessary for purposes of continuation data reporting,

    despite the fact that the SEF or DCM will report all creation data for

    the swap under the streamlined reporting schema adopted in the final

    rule as discussed above. For on-facility swaps where counterparties at

    the same hierarchical level know the identity of the other

    counterparty, the final rule adopts the NOPR requirement that the

    counterparties agree as one term of the swap which of them is the

    reporting counterparty. For on-facility swaps where counterparties at

    the same hierarchical level do not know the identity of the other

    counterparty, the final rule provides that: (a) the SEF or DCM must

    transmit to each counterparty the LEI (or substitute identifier as

    provided in Sec. 45.6) of the other counterparty that is at the same

    hierarchical level;\70\ (b) the counterparties must agree which

    counterparty will be the reporting counterparty, after receiving such

    notice from the SEF or the DCM and before the end of the next business

    day following the date of execution of the swap; and (c) the reporting

    counterparty must report to the SDR to which the SEF or DCM has

    reported the swap that it is the reporting counterparty.

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

    \70\ The SEF or DCM will know that both counterparties are at

    the same hierarchical level because the final rule requires the

    terms of the contract on the SEF or DCM to include all minimum PET

    data, and the tables of minimum PET data include an indication of

    whether a counterparty is an SD, an MSP, or a non-SD/MSP

    counterparty.

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

    b. Non-U.S. counterparties. The Commission has considered the large

    number of comments recommending that a non-U.S. SD or MSP in a swap

    with a U.S. counterparty at a lower hierarchical level should be the

    reporting counterparty despite its status as a non-U.S. person. The

    Commission has determined that, because non-U.S. SDs and MSPs will be

    required to register with the Commission in this connection, the

    Commission will have sufficient oversight and enforcement authority

    with respect to such counterparties. The Commission understands that

    the SEC has made a similar determination in the context of security-

    based swap data reporting. Accordingly, the final rule provides that,

    with a single exception, the determination of the reporting

    counterparty in situations where only one counterparty is a U.S. person

    must be made by applying the normal counterparty determination

    procedure set forth in Sec. 45.8. The Commission believes this is

    appropriate because it places the burden of reporting on the

    counterparty that in the Commission's view is more likely to have

    automated systems suitable for reporting. In cases where both

    counterparties are non-SD/MSP counterparties and only one counterparty

    is a U.S. person, the final rule will adopt the NOPR provision

    requiring the U.S. person to be the reporting counterparty. This is

    necessary in such situations because the non-U.S. non-SD/MSP

    counterparty will not be required to register with the Commission.

    Where neither counterparty to a swap executed on a SEF or DCM,

    otherwise executed in the U.S., or cleared on a DCO is a U.S. person,

    the final rule applies the same hierarchical selection criteria as for

    other swaps.

    c. Reporting counterparty determination after a change of

    counterparty. In light of the various comments calling for clear

    direction from the Commission regarding determination of the reporting

    counterparty, and calling for the statutory preference for SD or MSP

    reporting counterparties where this is possible, the Commission has

    determined that the final rule provides for determination of the

    reporting counterparty in cases where, during the life of a swap, the

    reporting counterparty ceases to be a counterparty due to an assignment

    or novation. In such cases, the final rule provides for the reporting

    counterparty to be selected from the two current counterparties to the

    swap, as follows: If only one counterparty is an SD, the SD is the

    reporting counterparty; if neither counterparty is an SD and only one

    is an MSP, the MSP is the reporting counterparty; if both

    counterparties are non-SD/MSP counterparties and only one is a U.S.

    person, the U.S. person is the reporting counterparty; and in all other

    cases, the counterparty replacing the previous reporting counterparty

    is the reporting counterparty, unless otherwise agreed by the

    counterparties.

    J. Third-Party Facilitation of Swap Data Reporting--Sec. 45.9

    1. Proposed Rule. The NOPR provided that registered entities and

    counterparties required to report pursuant to this part may contract

    with third-party service providers to facilitate reporting, but,

    nonetheless, remain fully responsible for reporting as required.

    2. Comments Received. Roundtable participants generally endorsed

    the NOPR provision permitting third-party facilitation of swap data

    reporting, and no comment letters suggested any changes to this

    provision.

    3. Final Rule: Sec. 45.9. The Commission recognizes, as stated in

    the NOPR, that while the various reporting obligations established in

    the final rule fall explicitly on registered entities and swap

    counterparties, efficiencies and decreased cost may in some

    circumstances be gained by engaging third parties to facilitate the

    actual reporting of information. The Commission believes that the use

    of such third-party facilitators, however, should not allow the

    registered entity or counterparty with the obligation to report to

    avoid its responsibility to report swap data in a timely and accurate

    manner. Accordingly, the Commission has adopted the regulation on

    third-party facilitation of swap data reporting as proposed.

    [[Page 2168]]

    K. Reporting to a Single Swap Data Repository--Sec. 45.10

    1. Proposed Rule. The NOPR required that all swap data for a given

    swap must be reported to a single SDR, which must be the SDR to which

    required primary economic terms data for that swap is first reported.

    2. Comments Received. Roundtable participants generally endorsed

    the NOPR provision requiring that all swap data for a given swap must

    be reported to a single SDR, and no comment letters suggested changing

    this requirement. Comments addressing who should make the first swap

    data report for a swap, and thus in effect choose the SDR, are

    discussed above in the section concerning creation data reporting.

    3. Final Rule: Sec. 45.10. The Commission believes that important

    regulatory purposes of the Dodd-Frank Act would be frustrated, and that

    regulators' ability to see necessary information concerning swaps could

    be impeded, if data concerning a given swap was spread over multiple

    SDRs. Accordingly, the final rule adopts the NOPR provision requiring

    that all swap data for a given swap must be reported to a single SDR,

    which shall be the SDR to which creation data for that swap is first

    reported.

    As discussed above, the Commission is responding to comments

    concerning creation data reporting by adopting in the final rule a

    streamlined reporting regime that requires reporting by the registered

    entities or swap counterparties with the easiest, fastest, and cheapest

    data access and those most likely to have the necessary automated

    systems; that minimizes burdens and costs for counterparties to the

    extent possible; and that provides certainty to the market. To

    effectuate this streamlined reporting regime, Sec. 45.3 and Sec.

    45.10 of the final rule provides that the initial report of creation

    data for a swap will be made as follows:

    For swaps executed on a SEF or DCM, the SEF or DCM

    reports all creation data to a single SDR, as soon as

    technologically practicable after execution.

    For off-facility swaps, the reporting counterparty

    reports all PET data to a single SDR, within the deadlines provided

    in the final rule.

    For off-facility swaps, if the reporting counterparty

    is excused from reporting, as provided in the final rule, because

    the swap is accepted for clearing before the reporting deadline and

    before any report made by the reporting counterparty, the DCO

    reports all creation data to a single SDR, as soon as

    technologically practicable after execution.

    L. Data Reporting for Swaps in a Swap Asset Class Not Accepted by Any

    Swap Data Repository--Sec. 45.11

    1. Proposed Rule. As noted in the NOPR, CEA section 4r(a)(1)(B)

    recognizes that in some circumstances there may be no SDR that will

    accept swap data for certain swap transactions. This category of swaps

    should be limited, since the Commission's final part 49 regulations

    require an SDR that accepts swap data for any swap in an asset class to

    accept data for all swaps in that asset class. However, situations

    could arise where a novel product does not fit into any existing asset

    class, or where no SDR yet accepts swap data for any swap in an

    existing asset class. The NOPR provided that in such cases, the

    reporting counterparty must report to the Commission all swap data

    concerning that swap required by this part to be reported to an SDR,

    making this report at a time and in a form determined by the

    Commission.

    2. Comments Received. The Commission received no comments

    concerning this provision.

    3. Final Rule: Sec. 45.11. The Commission has determined to adopt

    the NOPR provision requiring that, should there be a swap asset class

    for which no SDR currently accepts swap data, each registered entity or

    swap counterparty required to report swap data for such a swap must

    report to the Commission all swap data required by this part to be

    reported to an SDR, making this report at times announced by the

    Commission and in an electronic file in a format acceptable to the

    Commission. The Commission has recently reorganized its divisional

    structure to facilitate discharge of its responsibilities under the

    Dodd Frank Act, and as part of that reorganization, the Commission's

    Chief Information Officer is responsible for all matters concerning

    data received by the Commission. Accordingly, the Commission has

    determined that the final rule will delegate to the Chief Information

    Officer the authority to determine the format, data standards, and

    electronic transmission standards and procedures acceptable to the

    Commission for such reporting, and the dates and times at which data

    for such swaps shall be reported to the Commission. The determinations

    made by the Commission through the Chief Information Officer in these

    respects will be published in the Federal Register and on the

    Commission's Web site.

    M. Voluntary Supplemental Reporting--Sec. 45.12

    1. Proposed Rule. As discussed above, the Dodd-Frank Act provides

    for designation of one counterparty to a swap as the reporting

    counterparty for that swap. Neither the Dodd-Frank act nor the NOPR

    addresses additional, voluntary reporting of swap data to an SDR by the

    other counterparty to the swap. Nothing in the Dodd-Frank Act prohibits

    such additional, voluntary reporting.

    2. Comments Received. The Commission received several comments

    recommending that the final rule should confirm that voluntary data

    reporting by market participants not required to report is permitted,

    and should provide for such voluntary supplemental reporting. WGCEF

    asked the Commission to clarify that a market participant has the

    option to report any and all transaction data even where it is not

    required to report by Commission rules. REGIS-TR recommended that both

    counterparties be allowed to report a swap and confirm their PET data

    and confirmation data, via SDR systems that allow regulators to see

    which counterparty entered the information, and argued this would lower

    overall compliance costs. DTCC stated that voluntary reporting by

    participants not required to report is technologically feasible and

    would ensure greater data accuracy. ISDA and SIFMA observed that

    reporting by both counterparties is not essential to the accuracy of

    data in SDRs, since confirmations require the consent of both

    counterparties and the NOPR required confirmation data reporting.

    TriOptima suggested that both parties should be required to report some

    types of transaction data, such as that relating to systemic risk

    monitoring, arguing that one-party reporting can raise risks of

    inaccurate data. Most of the international regulators consulted by the

    Commission concerning the final rule have informed the Commission that

    they believe reporting by both counterparties is desirable, and that

    reporting regimes outside the U.S. are likely to require such dual

    reporting. Roundtable participants noted that some counterparties may

    prefer to report whether or not they are the reporting counterparty, in

    order to simplify their business processes, and have data concerning

    all their swaps present in a single SDR.

    3. Final Rule: Sec. 45.12. The Commission has considered these

    comments, and agrees that voluntary supplemental reporting by

    counterparties not designated as the reporting counterparty is

    [[Page 2169]]

    technologically feasible and may have benefits for both data accuracy

    and counterparty business processes. While the Dodd-Frank Act requires

    swap data reporting by only one counterparty and establishes a

    hierarchy for choosing the reporting counterparty, it does not prohibit

    voluntary swap data reporting to an SDR that supplements required

    reporting. The Commission also notes that its final part 49 rules

    permit counterparties to access to information in SDRs concerning their

    own swaps, and notes that nothing forbids swap counterparties to use an

    SDR as a provider of third-party services going beyond acceptance of

    required swap data reports for regulatory purposes. For these reasons,

    the Commission has determined that the final rule provides for

    voluntary supplemental reporting to any SDR by either counterparty of

    swap data that this part does not require that counterparty to report.

    The Commission has also determined that, to avoid double-counting

    of the same swap due to voluntary supplemental reports, and to ensure

    that data reported via a voluntary supplemental report (``VSR'') to the

    same SDR to which required data is reported is integrated into that

    SDR's record for the swap, each VSR must include minimum VSR

    information that ensures achievement of these purposes. This required

    VSR information includes: an indication that the report is a VSR; the

    USI for the swap that has been created as required by this part; the

    identity of the SDR to which all required creation data and

    continuation data is reported for the swap, if the VSR is made to a

    different SDR; the LEI (or substitute identifier) of the counterparty

    making the VSR; and if applicable, an indication that the VSR is made

    pursuant to the law of a jurisdiction outside the U.S. To avoid

    confusion and double-counting, and to ensure that each VSR includes the

    USI for the swap, the rule will also provide that a VSR may not be made

    until after the USI for the swap has been created as provided in Sec.

    45.5 and transmitted to the counterparty making the VSR.

    N. Required Data Standards--Sec. 45.13

    1. Proposed Rule. CEA section 21(b)(2) directs the Commission to

    prescribe data collection and data maintenance standards for swap data

    repositories. The CEA also provides that SDRs shall maintain swap data

    reported to them ``in such form, in such manner, and for such period as

    may be required by the Commission,'' and directs SDRs to ``provide

    direct electronic access to the Commission.'' \71\ These requirements

    are designed to effectuate the fundamental purpose for the

    legislation's swap data reporting requirements: making swap data

    available to the Commission and other financial regulators so as to

    enable them to better fulfill their market oversight and other

    regulatory functions, increase market transparency, and mitigate

    systemic risk. Pursuant to these provisions, the NOPR required SDRs to

    be able to transmit data to the Commission using the data standards and

    formats required by Commission. The NOPR did not mandate use of a

    specific data standard for reporting to SDRs, but left SDRs free to

    make their own business decisions in this regard, so long as they

    remain able to transmit data to the Commission as required.

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

    \71\ CEA section 21(c)(3) and (4).

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

    2. Comments Received. DTCC and WGCEF both suggested that using

    existing standards and formats would facilitate implementation of Dodd-

    Frank. DTCC also noted that SDRs will need to adapt to a changing

    marketplace, and therefore will need the flexibility to specify

    acceptable data formats, connectivity, and protocols for reporting to

    them. DTCC recommended that SDRs make their data formats publicly

    available, and develop application programming interfaces (``APIs'') to

    enable direct submission of data by participants. WGCEF argued that

    SDRs should be required to develop and use a common standard for data

    reporting, suggesting that this will reduce costs and opportunities for

    inaccuracy.

    3. Final Rule: Sec. 45.13. The Commission considered whether it

    would be preferable, as suggested by one commenter, to require that all

    swap data reporting to SDRs use a uniform reporting format or single

    data standard, but has decided not to impose such a requirement. Doing

    so would be likely to require changes to the existing automated systems

    of some entities and counterparties, which in some cases could impose

    additional burdens and costs. The Commission agrees with the comment

    suggesting that SDRs will need flexibility with respect to data

    standards used by them in receiving data. The Commission has been

    advised by existing trade repositories that they are able to accept

    data in multiple formats or data standards from different

    counterparties, and to map the data they receive into a common data

    standard within the repository, without undue difficulty, delay, or

    cost. The Commission notes that automated systems and data standards

    evolve over time, and that it may be desirable for regulations

    concerning data standards to avoid locking reporting entities,

    reporting counterparties, and SDRs into particular data standards that

    could become less appropriate in the future.\72\ In addition, the

    Commission anticipates that the degree of flexibility offered by SDRs

    concerning data standards for swap data reporting could become an

    element of marketplace competition with respect to SDRs. Accordingly,

    the final rule gives SDRs flexibility to use a variety of data

    standards to receive data reported to them, provided that they are able

    to transmit data to the Commission in a manner that meets the

    Commission's needs. This flexibility is designed to allow the most

    cost-effective application of both existing and evolving data

    standards.

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

    \72\ CEA section 21(f)(4)(B) explicitly permits the Commission

    to ``take into consideration any evolving standard of the United

    States or the international community.''

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

    The Commission also agrees with the comment suggesting that it

    would be beneficial for the data formats used by SDRs to be publicly

    available. The Commission encourages SDRs to make public the

    documentation of their data formats and any APIs or service interfaces

    they develop for reporting data.

    For the reasons discussed above, the Commission has determined to

    adopt the NOPR provisions regarding data standards in the final rule.

    The final rule requires an SDR to maintain all swap data reported to it

    in a format acceptable to the Commission, and to transmit all swap data

    requested by the Commission to the Commission in an electronic file in

    a format acceptable to the Commission. It requires reporting entities

    and counterparties to use the facilities, methods, or data standards

    provided or required by an SDR to which they report data, but also

    allows an SDR to permit reporting via various facilities, methods, or

    data standards, provided that its requirements in this regard enable it

    to maintain swap data and transmit it to the Commission as the

    Commission requires.

    As noted above, the Commission has recently reorganized its

    divisional structure to facilitate discharge of its responsibilities

    under the Dodd-Frank Act, and as part of that reorganization, the

    Commission's Chief Information Officer is responsible for all matters

    concerning data received by the Commission. Accordingly, the Commission

    has determined that the final rule will delegate to the Chief

    Information Officer (a) the authority to determine the format, data

    standards,

    [[Page 2170]]

    and electronic transmission standards and procedures acceptable to the

    Commission for provision of data to the Commission by SDRs; and (b) the

    authority to determine whether the Commission may permit or require use

    of one or more particular data standards by SDRs or reporting entities

    and counterparties in order to ensure that SDRs can provide data to the

    Commission as required. The determinations made by the Commission

    through the Chief Information Officer in these respects will be

    published in the Federal Register and on the Commission's Web site.

    O. Reporting of Errors and Omissions in Previously Reported Data--Sec.

    45.14

    1. Proposed Rule

    The NOPR directed all entities and counterparties required to

    report data to SDRs to report any errors and omissions in the data so

    reported, as soon as technologically practicable after discovery of any

    such error or omission. It also required non-reporting counterparties

    discovering a data error or omission to notify the reporting

    counterparty promptly, and required the reporting counterparty to then

    report it. The NOPR required reports of errors and omissions to be made

    using the same format used to report the erroneous or omitted data.

    2. Comments Received

    a. Error reporting. WGCEF and MFA suggested that the final rule

    should permit (but not require) non-reporting counterparties to report

    errors they discover to the SDR. MFA argued this is needed in the event

    of a dispute between the reporting and non-reporting counterparties.

    ISDA and SIFMA recommended the reasons for an error correction should

    not be reported, on the basis that recording the reason for an

    adjustment is not current market practice. Encana requested

    clarification of the interaction of error reporting under this section

    and the part 49 provisions requiring an SDR to confirm with the

    counterparties the accuracy of the data submitted.

    b. Liability for errors. WGCEF, AGA, ISDA, and SIFMA suggested that

    safe harbors should be created for good-faith mistakes made by either

    counterparty in reporting swap data, and for errors of which the

    counterparties are not aware. AGA asked the Commission to state

    explicitly that it will not penalize parties for inadvertent errors in

    reporting, and that good faith efforts to comply with new requirements

    will not result in exposure to enforcement actions. ISDA and SIFMA

    asked the Commission to clarify that a party has no obligation to

    correct errors of which it is not aware, and suggested having the final

    rule provide that reporting parties are not responsible for data errors

    that occur after submission to an SDR.

    3. Final Rule: Sec. 45.14

    The Commission has considered the above comments, and has

    determined to adopt the NOPR provisions concerning error reporting

    substantially as proposed. Accurate swap data is essential to effective

    fulfillment of the various regulatory functions of financial

    regulators, and the final rule provisions are designed to ensure data

    accuracy to the extent possible.

    a. Error reporting. As noted above, the Commission agrees that

    voluntary supplemental reporting may have benefits for data accuracy,

    and has added Sec. 45.12 to the final rule expressly permitting

    voluntary supplemental reporting, which is not limited in scope and can

    include error reporting. The Commission believes that it is a business

    decision of an SDR whether it should require reporting the reasons for

    an error correction, and has decided not to address that issue by rule.

    Records required to be kept pursuant to this part should provide

    sufficient information when necessary regarding the reasons for an

    error correction.\73\ The Commission intends Sec. 45.14 to work

    together in a complementary fashion with the provisions of part 49

    directing SDRs to obtain acknowledgment from counterparties of the

    accuracy of reported data within a short time after it is submitted.

    Both provisions are intended to protect the integrity and accuracy of

    the data in SDRs.

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

    \73\ The Commission does not believe it is necessary or

    appropriate for the final rule to further address potential disputes

    between reporting and non-reporting counterparties, which could

    involve legal disputes between counterparties affecting the validity

    or terms of a swap.

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

    To help ensure data accuracy, the final rule requires registered

    entities and swap counterparties that report swap data to an SDR or to

    any other registered entity or swap counterparty to report any errors

    or omissions in the data they report, as soon as technologically

    practicable after discovery of any error or omission.\74\ The final

    rule requires a non-reporting swap counterparty that discovers any

    error or omission with respect to any swap data reported to an SDR for

    its swaps to notify the reporting counterparty promptly of each such

    error or omission, and requires the reporting counterparty, upon

    receiving such notice, to report a correction of each such error or

    omission to the SDR, as soon as technologically practicable after

    receiving notice of it from the non-reporting counterparty. The

    Commission believes that this provision is an appropriate measure to

    ensure data accuracy.

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

    \74\ Because daily snapshot reports of state data by reporting

    counterparties by their nature can correct errors or omissions in

    previous snapshot reports, the final rule provides that for swaps

    reported via the snapshot reporting method, reporting counterparties

    fulfill the requirement to report errors or omissions in state data

    previously reported by making corrections in their next daily report

    of state data.

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

    To ensure consistency of data within an SDR with respect to error

    corrections, the final rule requires an entity or counterparty

    correcting an error or omission to do so in the same data format it

    used in making the erroneous report. To similarly ensure consistency of

    data transmitted to the Commission with respect to error corrections,

    the final rule imposes the same requirement on SDRs with respect to

    transmission of error corrections.

    b. Liability for errors. The Commission has determined that the

    final rule should not provide a safe harbor for good-faith mistakes

    made in reporting data. It is the reporting party's responsibility to

    report data accurately and develop processes to achieve this goal. The

    Commission will continue to carry out its oversight and enforcement

    responsibilities in a reasonable and appropriate manner. The final rule

    does not require swap counterparties to monitor data in an SDR, but

    does require them to report all data errors of which they become aware.

    As noted above, the Commission believes this is an appropriate measure

    to ensure data accuracy.

    III. Related Matters

    A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA''), 5 U.S.C. 601 et seq.,

    requires that agencies consider the impact of their rules on ``small

    entities.'' As provided in the NOPR, this part will have a direct

    effect on SDRs, DCOs, SEFs, DCMs, SDs, MSPs, and non-SD/MSP

    counterparties who are counterparties to one or more swaps and subject

    to the Commission's jurisdiction.

    As stated in the NOPR, the Commission has previously established

    that DCMs are not small entities for purposes of the RFA. The

    Commission also proposed that certain entities for which the Commission

    had not previously made a determination for RFA purposes--namely SDRs,

    DCOs, SEFs, SDs, and MSPs--should not be considered to be small

    entities, for reasons set forth in the NOPR.

    [[Page 2171]]

    As noted in the NOPR, this part requires swap data reporting by a

    non-SD/MSP counterparty only with respect to swaps in which neither

    counterparty is an SD or MSP. With respect to such swaps, which

    represent a minority of swap transactions, only one of the swap non-SD/

    MSP counterparties will be required to report--the counterparty

    designated as the reporting counterparty. In addition, the Commission

    has determined that the final rule provides that for swaps between non-

    SD/MSP counterparties where only one counterparty is a ``financial

    entity'' as defined in CEA section 2(h)(7)(C), the financial entity

    shall be the reporting counterparty. The Commission believes these

    provisions of the final rule reduce the economic impact on any non-SD/

    MSP counterparties that may be considered to be small entities under

    the RFA.

    Due to the operation of certain provisions of the CEA and the final

    rule, non-SD/MSP counterparties who may be considered small entities

    for RFA purposes are never required to report any swap creation data.

    Under the CEA, a non-SD/MSP counterparty is required to transact on a

    SEF or DCM unless that non-SD/MSP is an Eligible Contract Participant

    (``ECP'').\75\ The Commission has previously determined that ECPs are

    not ``small entities'' for RFA purposes.\76\ For all swaps executed on

    a SEF or DCM, the final rule requires the SEF or DCM to report all

    required swap creation data. Therefore, no ``small entities'' for RFA

    purposes are required to report any swap creation data under the final

    rule.

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

    \75\ CEA section 2(e) provides 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 [SEF or DCM].'' Congress created the ECP category in the

    Commodity Futures Modernization Act in 2000, to include 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. See, e.g., ``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''). 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. Compare CEA section 1a(12), 7 U.S.C.

    1a(12) (2009), with Sec. Sec. 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.

    \76\ 66 FR 20740, 20743, Apr. 25, 2001.

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

    With respect to reporting of swap continuation data, the Commission

    has attempted to minimize the burden on non-SD/MSP counterparties who

    may be considered small entities for purposes of the RFA. As noted

    above, in the final rule the Commission is responding to comments

    concerning swap data reporting by creating a streamlined reporting

    regime that requires reporting by the registered entities or swap

    counterparties that the Commission believes will have the easiest,

    fastest, and cheapest data access and will be most likely to have the

    necessary automated systems, in order to minimize burdens and costs, to

    the extent possible, for swap counterparties and particularly for non-

    SD/MSP counterparties. Under the final rule reporting regime, non-SD/

    MSP reporting counterparties will not have to report either creation

    data or continuation data for any swap executed on a SEF or DCM and

    cleared on a DCO. In addition, non-SD/MSP counterparties will not have

    to report either creation data or continuation data for any off-

    facility swap accepted by a DCO for clearing within the deadline for

    the initial data report for the swap, as the DCO is then required to

    report all swap data for the swap. The Commission believes that these

    provisions of the final rule further reduce the economic impact on any

    non-SD/MSP counterparties that may be considered to be small entities

    under the RFA.

    In the NOPR, 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. Nonetheless, the Commission

    specifically requested comment on the impact these proposed rules may

    have on small entities. The Commission received one comment on its RFA

    statement, from the Electric Coalition, stating that the vast majority

    of members of the National Rural Electric Cooperative Association and

    the American Public Power Association are considered small entities for

    purposes of the RFA. The Electric Coalition suggested that the

    Commission should consider the overall impact of its Dodd-Frank Act

    rules on nonfinancial entities, including small entities, and conduct a

    comprehensive analysis under the RFA.

    In response to this comment, and to other comments by non-SD/MSP

    counterparties, the Commission has adjusted the final reporting regime

    to reduce burdens and costs for non-SD/MSP counterparties in a variety

    of ways, as set forth in detail in the discussion above concerning

    Sec. Sec. 45.3 and 45.4 of the final rule. The Commission notes that

    the commenter did not dispute the reasons for the Commission's

    conclusion that this part does not have a significant impact on a

    substantial number of small entities. For these reasons, and for the

    reasons stated above and in the NOPR, the Commission continues to

    believe that this part 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 this part as finally adopted will not have a significant

    economic impact on a substantial number of small entities.

    B. Paperwork Reduction Act

    1. Introduction

    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''). Provisions of Commission Regulations 45.2, 45.3,

    45.4, 45.5, 45.6, 45.7, and 45.14 result in information collection

    requirements within the meaning of the Paperwork Reduction Act

    (``PRA'').\77\ The Commission submitted the NOPR and supporting

    documentation to OMB for review in accordance with 44 U.S.C. 3507(d)

    and 5 CFR 1320.11. The Commission requested that OMB approve, and

    assign a new control number for, the collections of information covered

    by the NOPR.

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

    \77\ 44 U.S.C. 3301 et seq.

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

    The title for the proposed collection of information under part 45

    is ``Swap Data Recordkeeping and Reporting Requirements.'' To the

    extent that the recordkeeping and reporting requirements in this

    rulemaking overlap with the requirements of other rulemakings for which

    the Commission prepared and submitted an information collection request

    to OMB, the burdens associated with the requirements are not being

    accounted for in the information collection request for this

    rulemaking, to avoid unnecessary duplication of information collection

    burdens.

    2. Proposed Information Collection

    In its proposed rulemaking, the Commission provided burden

    estimates for the new collections of information contained in proposed

    Sec. Sec. 45.2, 45.3, and 45.4.

    In the NOPR, it was estimated that 30,384 SDRs, SEFs, DCMs, DCOs,

    SDs, MSPs, and non-SD/MSP counterparties \78\ would be required to

    [[Page 2172]]

    keep records of all activities relating to swaps. Specifically, the

    NOPR required SDRs, SEFs, DCMs, DCOs, SDs, and MSPs to keep complete

    records of all activities relating to their business with respect to

    swaps. The NOPR required non-SD/MSP counterparties to keep complete

    records with respect to each swap in which they would be a

    counterparty. For SDs and MSPs, the Commission determined that the

    proposed recordkeeping requirements would not impose any new

    recordkeeping or information collection requirements, or other

    collections of information, as requirements for maintaining and

    recording swap transaction data by SDs and MSPs would be addressed in

    related rulemakings associated with business conduct standards for SDs

    and MSPs. For SDRs, SEFs, DCMs, DCOs (an estimated 84 entities or

    persons), which were anticipated to have higher levels of swap

    recording activity \79\ than non-SD/MSP counterparties, the Commission

    estimates that there may be approximately 40 annual burden hours per

    entity, excluding customary and usual business practices. And for non-

    SD/MSP reporting counterparties (an estimated 30,000 entities or

    persons), who were anticipated to have lower levels of swap recording

    activity, the Commission estimated that there would be approximately 10

    annual burden hours per entity, excluding customary and usual business

    practices. Accordingly, 303,360 estimated aggregate annual burden hours

    were estimated.

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

    \78\ Because SDRs, MSPs, SDs, DCOs, and SEFs are new entities,

    the following estimates were made in the NOPR: 15 SDRs, 50 MSPs, 250

    SDs, 12 DCOs, and 40 SEFs. The number of DCMs was estimated to be 17

    DCMs based on the current (as of October 18, 2010) number of

    designated DCMs. Additionally, for purposes of the Paperwork

    Reduction Act, the Commission estimated that there would be 30,000

    non-SD/MSP counterparties who would be subject annually to the

    recordkeeping requirements of proposed Regulation 45.1.

    \79\ The Commission estimated that ``high activity'' entities or

    persons would be those persons who would process or enter into

    hundreds or thousands of swaps per week that would be subject to the

    jurisdiction of the Commission. Low activity users were estimated to

    be those who would process or enter into substantially fewer than

    the high activity users.

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

    Under the NOPR's swap data reporting provisions, SEFs, DCMs, DCOs,

    MSPs, SDs, and non-SD/MSP counterparties were required to provide

    reports to SDRs regarding swap transactions. SEFs and DCMs were

    required to report certain information once at the time of swap

    execution. DCOs, SDs, MSPs, and non-SD/MSP counterparties were required

    to report certain information once, as well as other information on a

    daily basis. With respect to proposed reporting by SDs, MSPs, and non-

    SD/MSP counterparties, only one counterparty was required to report,

    typically an SD or an MSP. The Commission anticipated that the

    reporting would to a significant extent be automatically completed by

    electronic computer systems, and calculated burden hours based on the

    annual burden hours necessary to oversee and maintain the reporting

    functionality.\80\ SEFs, DCMs, DCOs, MSPs, and SDs (an estimated 369

    entities or persons) were anticipated to have high levels of reporting

    activity, with the Commission estimating that the average annual burden

    would be approximately 2,080 hours.\81\ Non-SD/MSP counterparties

    required to report under the proposed rules--estimated at 1,500

    entities \82\--were anticipated to have lower levels of activity with

    respect to reporting. For such entities, the Commission estimated that

    the annual burden would be approximately 75 hours. In sum, the

    Commission estimated 880,020 aggregate annual burden hours for proposed

    regulation 45.3.

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

    \80\ Estimated burden hours were obtained through consultation

    with the Commission's information technology staff.

    \81\ The Commission estimated 2,080 hours by assuming that a

    significant number of SEFs, DCMs, DCOs, MSPs, and SDs would dedicate

    the equivalent of at least one full-time employee to ensuring

    compliance with the reporting obligations of Regulation 45.3 (2,080

    hours = 52 weeks x 5 days x 8 hours). The Commission believed that

    this was a reasonable assumption due to the volume of swap

    transactions that would be processed by these entities, the varied

    nature of the information required to be reported by Regulation

    45.3, and the frequency (daily) with which some reports would be

    required to be made.

    \82\ This is the estimated number of non-SD/MSP counterparties

    who would be required to report in a given year. Only one

    counterparty to a swap would be required to report, most frequently

    anticipated to be an SD or a MSP.

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

    Under the NOPR's unique identifier provisions, SDRs, SEFs, DCMs,

    SDs, and MSPs were required to report a unique swap identifier to other

    registered entities and swap participants. SEFs and DCMs were expected

    to have higher levels of activity than SDRs, SDs, and MSPs with respect

    to unique swap identifier reporting. The Commission anticipated that

    the reporting of the unique swap identifier would be automatically

    completed by electronic computer systems. Accordingly, the burden hours

    estimates in the proposal were based on the estimated burden hours

    necessary to oversee and maintain the electronic functionality of

    unique swap ID reporting.\83\ In accord, the Commission estimated that

    SEFs and DCMs (an estimated 57 entities or persons) would expend

    approximately 22 annual burden hours per entity. The Commission

    estimated that SDRs, SDs, and MSPs (an estimated 315 entities or

    persons) would expend approximately 6 annual burden hours per entity.

    Therefore, 3,144 estimated aggregated annual burden hours were

    estimated.

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

    \83\ Estimated burden hours were obtained through consultation

    with the Commission's information technology staff.

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

    The NOPR's unique identifier provisions also required SDs, MSPs,

    and non-SD/MSP counterparties (an estimated 30,300 entities and

    persons) to report into a confidential database their ownership and

    affiliations information (as well as changes to ownership and

    affiliations). The report would be made once at the time of the first

    swap reported to an SDR, and would be made anytime thereafter that the

    entity's legal affiliations change. The burden hours per report were

    estimated to be approximately two hours per entity, excluding customary

    and usual business practices. The number of reports required to be made

    per year was estimated to vary between zero and four, depending on the

    number of changes an entity would have in its legal affiliations in

    that year. The estimated annual burden per entity therefore was

    estimated to vary between zero and eight burden hours, with aggregate

    annual burden hours estimated to be between 0 and 242,400 hours.

    3. Comments on Proposed Information Collection

    Swap data reporting is required by the CEA as amended by Title VII

    of the Dodd-Frank Act. The Commission received numerous comments

    supporting the overall goals of swap data reporting, including systemic

    risk protection, market integrity, and transparency goals. The

    Commission also received general comments and suggestions regarding the

    information collections set forth in the NOPR. The comments concerned,

    among other things, the type of information that should be collected;

    the entity or entities that should be responsible for reporting the

    information; the manner in which the data should be required to be

    reported (snapshot or lifecycle method of reporting); and the timeframe

    in which such data should be required to be reported. The comments

    received by the Commission are set forth in detail above in the

    discussions of each section of the final rule as well as the discussion

    below on the consideration of the costs and benefits of the final rule.

    In response, the Commission amended the information collection

    requirements set forth in the NOPR in a variety of ways in order to

    address concerns of the commenters and reduce the burden of the

    information collections on registered entities and counterparties. The

    Commission amended the information collection

    [[Page 2173]]

    requirements of the NOPR by, among other things, reducing the types of

    information to be collected (e.g., the final rule does not require

    reporting of contract intrinsic data, master agreements, certain

    collateral information, or certain valuation information); streamlining

    the entity or entities responsible for reporting the information in

    order to assign reporting responsibilities to the entity or entities

    with the easiest, fastest, and cheapest access to the data in question

    (e.g., the final rule does not require non-SD/MSP counterparties to

    report any additional swap data for swaps that are both executed on a

    platform and cleared, as the SEF/DCM reports all creation data and the

    DCO reports all continuation data); providing greater flexibility in

    the manner in which information is to be reported (the final rule

    permits either the snapshot or lifecycle method of reporting may be

    used for any asset class); and modifying the timeframe in which

    information is to be collected (e.g., the final rule requires non-SD/

    MSP counterparties to report valuation data for uncleared swaps only on

    a quarterly basis, and provides phasing to all SDs, MSPs, and non-SD/

    MSP counterparties with respect to the timeframe in which information

    must be reported).

    The Commission is also clarifying in the final rule that non-SD/MSP

    counterparties are permitted to fulfill their part 45 recordkeeping

    responsibilities by keeping records in paper, rather than electronic,

    form. The final rule also provides that other counterparties and

    registered entities are also permitted to keep paper, rather than

    electronic, records, if such records were originally created and

    exclusively maintained in paper form. These provisions concerning the

    recordkeeping information collection provisions are intended to address

    concerns raised by several commenters

    4. Revised Information Collection Estimates

    Under the final rules, reporting entities and persons will provide

    information under sections 45.2, 45.3, 45.4, 45.5, 45.6, 45.7, and

    45.14 of this part. The information provided under each regulation is

    set forth below, together with burden estimates that were calculated,

    through research and through consultation with the Commission's

    technology staff, using wage rate estimates based on salary information

    for the securities industry compiled by the Securities Industry and

    Financial Markets Association (``SIFMA'').\84\

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

    \84\ 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:

    (1) [(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.

    (2) [(Estimated 2010 total annual compensation)/(1,800 annual

    work hours)] = Hourly wage per professional type.]

    (3) [Hourly wage) * (Adjustment factor for overhead and other

    benefits, which the Commission has estimated to be 1.3)] = Adjusted

    hourly wage per professional type.]

    (4) [(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 the final rule

    represents the total cost for each counterparty, reporting

    counterparty, SD, MSP, SEF, DCM, or SDR, as applicable to that

    element of the final rule.

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

    a. Section 45.2. Under Sec. 45.2, SDRs, SEFs, DCMs, DCOs, SDs,

    MSPs, and non-SD/MSP counterparties--which presently would include an

    estimated 30,210 entities or persons \85\--are required to keep records

    of all activities relating to swaps. Specifically, Sec. 45.2 requires

    SDRs, SEFs, DCMs, DCOs, SDs, and MSPs to keep complete records of all

    activities relating to their business with respect to swaps. The rule

    requires non-SD/MSP counterparties to keep complete records with

    respect to each swap in which they are a counterparty.

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

    \85\ Because SDRs, MSPs, SDs, DCOs, and SEFs are new entities,

    estimates were made by the Commission: 15 SDRs, 50 MSPs, 250 SDs, 12

    DCOs, and 40 SEFs. The number of DCMs was estimated to be 17 DCMs

    based on the current (as of October 18, 2010) number of designated

    DCMs. Additionally, for purposes of the Paperwork Reduction Act, the

    Commission estimates that there would be 30,000 non-SD/MSP

    counterparties who would annually be subject to the recordkeeping

    requirements of proposed Regulation 45.1. The Commission is revising

    its estimate of SDs and MSPs from a total of 300 in the proposed

    rule to 125 for this final rule, and is revising its DCM estimate

    from 17 to 18 to account for the designation of a new DCM.

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

    With respect to SDs and MSPs, the Commission has determined that

    Sec. 45.2 will not impose any new recordkeeping or information

    collection requirements, or other collections of information that

    require approval of the Office of Management and Budget under the

    Paperwork Reduction Act. The burden associated with the requirements

    for maintaining and recording swap transaction data by SDs and MSPs are

    also contained in separate rulemakings proposed by the Commission

    concerning business conduct standards for SDs and MSPs, for which the

    Commission has prepared an information collection request for review

    and approval by OMB.

    The Commission believes that some percentage of the estimated

    30,000 non-SD/MSP counterparties who would be subject to the

    recordkeeping requirements of section 45.2 would contract with third-

    party service providers to fulfill these requirements, and would

    therefore pay some fee to such providers in lieu of incurring the

    Commission's estimated costs of reporting. The identity of such third

    parties, the composition of the marketplace for third party services,

    and the costs to third parties to provide recordkeeping services given

    the economies of scale and scope they may realize in providing those

    services are all presently unknowable. Therefore, the Commission does

    not believe it is feasible to quantify the fees charged by third

    parties to non-SD/MSPs at the present time, but believes that they will

    likely vary with the volume of records to be retained. The remaining

    non-SD/MSP counterparties would elect to perform these functions

    themselves and incur the costs enumerated below. The Commission notes

    that this final rule allows non-SD/MSP counterparties to retain records

    in either an electronic or paper form, which could facilitate

    recordkeeping for less technologically resourced counterparties, and

    thus encourage a greater percentage of non-SD/MSP counterparties to

    retain records themselves.

    For purposes of calculating recordkeeping burdens with respect to

    the PRA, the Commission is assuming that all 30,000 non-SD/MSP

    counterparties required to keep records will incur the cost of doing so

    themselves. The Commission estimates that this requirement would impose

    an initial non-recurring burden of 480 hours per reporting counterparty

    at a cost of $32,820, and investments in technological infrastructure

    of $50,000, and a recurring annual burden of 165 hours per reporting

    counterparty at a cost of $12,125 and a technological infrastructure

    maintenance cost of $25,000. This would present an aggregate non-

    recurring burden of $2,484,600,000 for all non-SD/MSP counterparties,

    and an aggregate recurring annual burden of $1,113,750,000 for all non-

    SD/MSP counterparties.

    [[Page 2174]]

    With respect to SEFs, DCMs, DCOs, SDs, and MSPs (an estimated 195

    entities or persons), which will have higher levels of swap recording

    activity \86\ than non-SD/MSP counterparties, the Commission estimates

    that this requirement would impose an initial non-recurring burden of

    1,560 hours per SEF, DCO, or DCM at a cost of $111,917, and investments

    in technological infrastructure of $100,000, and a recurring annual

    burden of 700 hours per SEF, DCO, DCM, SD, or MSP at a cost of $49,798,

    and a technological infrastructure maintenance cost of $50,000.

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

    \86\ For purposes of this Paperwork Reduction Act analysis, the

    Commission estimates that ``high activity'' entities or persons are

    those who process or enter into hundreds or thousands of swaps per

    week that are subject to the jurisdiction of the Commission. Low

    activity users would be those who process or enter into

    substantially fewer than the high activity users.

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

    The Commission also estimates that Sec. 45.2 will result in

    retrieval costs for registered entities and swap counterparties that do

    not currently have the ability to retrieve records within the required

    timeframe. The Commission expects that this requirement will present

    costs to registered entities and swap counterparties in the form of

    non-recurring investments in technological systems and personnel

    associated with establishing data retrieval processes, and recurring

    expenses associated with the actual retrieval of swap data records.

    With respect to non-SD/MSP reporting counterparties that do not

    contract with a third party, the Commission estimates that this

    requirement would impose an initial non-recurring burden of 310 hours

    per reporting counterparty at a cost of $25,534 and a recurring annual

    burden of 115 hours per reporting counterparty at a cost of $9,510.

    With respect to SEFs, DCOs, DCMs, SDs, and MSPs, the Commission

    estimates that this requirement would impose an initial non-recurring

    burden of 350 hours per SEF, DCO, DCM, SD, or MSP at a cost of $28,745,

    and a recurring annual burden of 175 hours per SEF, DCO, DCM, SD, or

    MSP at a cost of $14,373.

    b. Sections 45.3 and 45.4. Pursuant to Sec. Sec. 45.3 and 45.4,

    SEFs, DCMs, DCOs, MSPs, SDs, and non-SD/MSP counterparties are required

    to provide reports to SDRs regarding swap transactions. SEFs and DCMs

    are required to report certain information (swap creation data) once at

    the time of swap execution. DCOs, SDs, MSPs, and non-SD/MSP

    counterparties are required to report certain information (swap

    creation data) once, as well as other information (swap continuation

    data) throughout the life of a swap--whenever a reportable event or a

    reportable change occurs. With respect to reporting by SDs, MSPs, and

    non-SD/MSP counterparties, only one counterparty to a swap is required

    to report information concerning that swap, typically an SD or an MSP,

    as determined by Sec. 45.8.

    The Commission anticipates that the reporting required by

    Sec. Sec. 45.3 and 45.4 will to a significant extent be automatically

    completed by electronic computer systems; the following burden hours

    are calculated based on the annual burden hours necessary to oversee,

    maintain, and utilize the reporting functionality. SEFs, DCMs, DCOs,

    MSPs, and SDs (an estimated 195 entities or persons) are anticipated to

    have high levels of reporting activity; the Commission estimates that

    their average annual burden may be approximately 2,080 hours per SEF,

    DCO, DCM, MSP, or SD.\87\ The Commission estimated 2,080 hours by

    assuming that a significant number of SEFs, DCMs, DCOs, MSPs, and SDs

    will dedicate the equivalent of least one full-time employee to

    ensuring compliance with the reporting obligations of Sec. Sec. 45.3

    and 45.4 (2,080 hours = 52 weeks x 5 days x 8 hours). The Commission

    believes that this is a reasonable assumption due to the volume of swap

    transactions that will be processed or entered into by these entities,

    the varied nature of the information required to be reported, and the

    frequency with which information may be required to be reported.\88\

    The Commission notes, however, that these burdens should not be

    considered additional to the costs of compliance with Part 43, because

    the basic data reporting technology, processes, and personnel hours and

    expertise necessary to fulfill the requirements of Part 43 encompass

    both the data stream necessary for real-time public reporting and the

    creation data stream necessary for regulatory reporting.\89\

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

    \87\ The Commission obtained this estimate in consultation with

    the Commission's information technology staff.

    \88\ The estimated burden hours were obtained in consultation

    with the Commission's information technology staff.

    \89\ The Commission notes that DCOs are not dicussed in Part 43.

    The costs to DCOs for compliance with this final rule are thus

    unique to this rule, but identical to the costs addressed in Part

    43.

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

    Non-SD/MSP counterparties who would be required to report--which

    presently would include an estimated 1,000 entities \90\--are

    anticipated to have lower levels of activity with respect to reporting.

    Of those 1,000 non-SD/MSPs, the Commission believes that a majority,

    estimated now at 75%, or 750 entities, will contract with third parties

    to satisfy their reporting obligations. The identity of such third

    parties, the composition of the marketplace for third party services,

    and the costs to third parties to provide reporting services given the

    economies of scale and scope they may realize in providing those

    services are all presently unknowable. Therefore, the Commission does

    not believe it is feasibly to quantify the fees charged by third

    parties to non-SD/MSPs at the present time, but believes that they will

    likely vary with the volume of reports to be made. 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-SD/MSP counterparties will incur a recurring burden for

    reporting errors and omissions should errors or omissions be noticed by

    the counterparty or the SDR; however, the Commission has already

    considered these burdens in Part 43, and thus has not reapplied them to

    this rule. The costs of reporting to the remaining 250 non-SD/MSP

    counterparties that do not contract with a third party are addressed

    below.

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

    \90\ This is the estimated number of non-SD/MSP counterparties

    who will be required to report in a given year. Only one

    counterparty to a swap is required to report, typically an SD or a

    MSP as determined by Sec. 45.8. Therefore, a non-SD/MSP

    counterparty that is in a swap with an SD or MSP counterparty will

    not be subject to the reporting obligations of Sec. Sec. 45.3 and

    45.4.

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

    The Commission estimates that costs applicable to reporting

    counterparties will include maintenance of an internal order management

    system (``OMS'') and the personnel hours needed to maintain a

    compliance program in support of that system. With respect to all

    reporting counterparties, including SEFs, DCOs, DCMs, SDs, MSPs, and

    non-SD/MSP counterparties that do not contract with a third party for

    reporting, the Commission estimates that the additional implementation

    of the OMS and the associated compliance and support program for the

    reporting of swap continuation data would impose an initial non-

    recurring burden of 350 hours per reporting counterparty at a cost of

    $28,745, and a recurring annual burden of 175 hours per reporting

    counterparty at a cost of $14,373.

    In addition to the burden estimates presented here, reporting

    counterparties will incur costs associates with establishing and

    maintaining connectivity to an SDR for the purposes of effecting

    reporting. Connectivity costs have been accounted for in the

    [[Page 2175]]

    information collection prepared by the Commission with respect to its

    proposed part 43 rules, in which the information collection costs

    applicable to SDRs also have been estimated.\91\ To avoid creating

    duplicative PRA estimates, the Commission is not accounting again for

    those costs with respect to this rulemaking. And in the event that

    there is a swap asset class for which no SDR accepts swap data, swap

    data for a swap in that class must be reported to the Commission. With

    respect to all reporting counterparties, including SEFs, DCOs, DCMs,

    SDs, MSPs, and non-SD/MSP reporting counterparties that do not contract

    with a third party for reporting, the Commission estimates that the

    annual cost to maintain connectivity to the Commission would be

    approximately $100,000 for each reporting counterparty or registered

    entity that transacts in swap asset classes that are not accepted by

    any registered SDR.\92\

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

    \91\ The Commission estimated the annual recurring technology-

    related burden of maintaining connectivity to an SDR at

    approximately $100,000 per reporting entity. The Commission also

    estimated the non-recurring personnel hour burden of establishing

    connectivity to an SDR from the perspective of a non-financial end-

    user counterparty with no initial infrastructure or personnel

    training to leverage to be approximately 172 burden hours at a cost

    of approximately $12,824 for each non-financial end-user. This

    estimate represents the costs of developing information capture and

    transmission systems, correspondence testing and operational

    support. The Commission notes that with respect to both part 43 and

    part 45, the cost to a non-financial end-user with no initial

    infrastructure or personnel training represents a high-end estimate,

    and that the costs of establishing and maintaining connectivity to

    an SDR will likely be considerably lower for SEFs, DCMs, SDs, and

    MSPs that likely have greater levels of technological sophistication

    and existing personnel training to leverage.

    \92\ This estimate is calculated as follows: [($100,000 in

    hardware- and software-related expenses, including necessary back-up

    and redundancy, per SDR connection) x (1 SDR connections per

    reporting counterparty)] = $100,000 per non-financial end-user. The

    Commission notes that there are circumstances under which a non-

    financial end-user serving as a reporting counterparty would be

    required to incur additional costs to maintain connectivity to both

    the Commission and one or more SDRs. Specifically, if a reporting

    counterparty engages in swap transactions in multiple asset classes,

    and an SDR exists that accepts data for at least one of those asset

    classes, but no SDR exists that accepts data for one or more of

    these asset classes, the reporting counterparty would then incur the

    costs of establishing and maintaining connectivity to both an SDR

    and the Commission. The Commission believes that the costs of

    establishing and maintaining connectivity to a second data

    repository would be some percentage of, but not equal to, the costs

    of establishing and maintaining connectivity to the first data

    repository, because the reporting counterparty would likely be able

    to leverage existing technology and expertise in the process. The

    Commission does not believe that the percentage of the initial costs

    that this additional cost represents is readily quantifiable,

    because it will likely vary with the volume of swaps, and thus the

    volume of data to be reported, that the reporting counterparty

    transacts in the secondary asset classes.

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

    c. Section 45.5. Pursuant to Sec. 45.5, SDRs, SEFs, DCMs, SDs, and

    MSPs will be required to report a unique swap identifier to other

    registered entities and swap participants. SEFs and DCMs are

    anticipated to have higher levels of activity than SDRs, SDs, and MSPs

    with respect to unique swap identifier reporting. The Commission

    anticipates that the reporting of the unique swap identifier will be

    automatically completed by electronic computer systems. The following

    burden hours are based on the estimated burden hours necessary to

    oversee, maintain, and utilize the electronic functionality of unique

    swap ID reporting.\93\

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

    \93\ The estimated burden hours were obtained in consultation

    with the Commission's information technology staff.

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

    The Commission estimates that USI-related costs will be highest for

    SEFs, DCOs, and DCMs, because they will have to create the greatest

    number of USIs. The Commission estimates the requirement for SEFs,

    DCOs, and DCMs to create and transmit USIs to counterparties and other

    registered entities to present a total marginal non-recurring burden of

    1,000 personnel hours at a total cost of $81,869 per entity, and a

    recurring annual burden of 470 personnel hours at a total cost of

    $37,741 per entity.

    For off-facility swaps with an SD or MSP reporting counterparty,

    the Commission estimates the requirement for SDs and MSPs to create and

    transmit USIs to counterparties and other registered entities to

    present a total marginal non-recurring burden of 750 personnel hours at

    a cost of $61,402 per entity, and a recurring annual burden of 353

    hours of annual personnel hours at a total cost of $28,386 per entity.

    For off-facility swaps between non-SD/MSP counterparties, the

    Commission estimates the requirement for SDRs to create and transmit

    USIs to counterparties and other registered entities to present a total

    marginal non-recurring burden of 500 annual personnel hours at a cost

    of $40,935 per entity, and a recurring annual burden of 235 annual

    personnel hours for a total cost of $18,871 per entity.

    d. Section 45.6. Pursuant to Sec. 45.6, each SD, MSP, and non-SD/

    MSP counterparty (an estimated 30,125 entities and persons), will be

    required to report both level one and level two reference data

    concerning itself to a public level one reference database and a

    confidential level two reference database, respectively. The report

    will be made once at the time of the first swap data report to an SDR

    involving the SD, MSP, or non-SD/MSP counterparty. A similar report

    will be required whenever an update or correction to the previously

    reported reference data is required. For any such report, the estimated

    number of burden hours is approximately two hours per entity, excluding

    customary and usual business practices. The number of reports required

    to be made per year is estimated to vary between zero and four,

    depending on when the SD, MSP or non-SD/MSP counterparty is required to

    make either the initial report or a report of an update or

    correction.\94\ Thus, the estimated annual burden per entity varies

    between zero and eight burden hours. Therefore, there are between 0 and

    241,000 estimated aggregate annual burden hours.

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

    \94\ The estimated burden hours and the estimated number of

    reports were obtained in consultation with the Commission's

    information technology staff.

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

    Additionally, the Commission anticipates that an LEI meeting the

    requirement of the final rule will be available before the commencement

    of swap data reporting. However, the Commission has also considered the

    potential burden that will be imposed on SDRs for creating, assigning

    and transmitting substitute identifiers if they should be required. The

    Commission estimates the cost to SDRs to create, assign and transmit

    substitute identifiers to counterparties and other registered entities

    to present a total marginal non-recurring burden of 500 annual

    personnel hours at a cost of $40,935 and a recurring annual burden of

    235 annual personnel hours for a total cost of $18,871.

    e. Section 45.7. Pursuant to Sec. 45.7, each swap subject to the

    Commission's jurisdiction will need to be identified in all

    recordkeeping and swap data reporting by means of a unique product

    identifier and product classification system, which shall be designated

    at a later date by the Commission. The Commission expects that this

    will result in a one-time retrieval burden for each SEF and DCM for

    each swap product traded on its platform, either at the time the

    Commission designates the system for currently listed products or at

    the time a product is listed for trading. SDs, MSPs, and non-SD/MSP

    reporting counterparties also will be subject to a one-time retrieval

    burden for each swap product that they are required to report to an SDR

    or the Commission. As with unique swap identifiers, the Commission

    anticipates that the reporting of the unique swap identifier will be

    automatically completed by

    [[Page 2176]]

    electronic computer systems. Until such time as a system is designated,

    however, the Commission cannot estimate the aggregate annual burden

    hours associated with the retrieval necessary to populate the records

    and reports. The Commission therefore will establish a burden estimate

    associated with the collection of information resulting from Sec. 45.7

    on the designation of a system.

    f. Sec. 45.14. Pursuant to Sec. 45.14, a registered SDR is

    required to develop protocols regarding the reporting and correction of

    erroneous information. The Commission anticipates that this requirement

    will result in costs to SDRs associated with the reporting of both

    creation and continuation data in the form of non-recurring investments

    in technological systems and personnel during the development of the

    formatting procedure, and recurring expenses associated with data

    processing, systems maintenance, and personnel hours to format new

    data. However, the burden associated with Sec. 45.14 are contained in

    the real time public reporting rules proposed by the Commission, for

    which the Commission has prepared an information collection request for

    review and approval by OMB. To avoid duplication of PRA burdens, those

    costs are not being accounted for in the information collection request

    associated with this rulemaking.

    C. Consideration of Costs and Benefits

    1. Introduction

    The swap 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 swap markets can pose significant risk to this system.\95\ The

    Dodd-Frank Act seeks in part 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 oversee the swap markets and to develop and

    promulgate regulations to increase swap market transparency and thereby

    reduce the potential for counterparty and systemic risk.\96\

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

    \95\ 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.

    \96\ See Mark Jickling and Kathleen Ann Ruane, Cong. Research

    Serv., The Dodd-Frank Wall Street Reform and Consumer Protection

    Act: Title VII, Derivatives 1 (2010); Financial Regulatory Reform--A

    New Foundation: Rebuilding Financial Supervision and Regulation,

    U.S. Department of the Treasury, at 47-48 (June 17, 2009).

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

    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

    swap market in particular. Specifically, the Dodd-Frank Act requires

    that ``each swap (whether cleared or uncleared) * * * be reported to a

    registered swap data repository.'' \97\ The Dodd-Frank Act also

    requires SDRs to collect and maintain swap transaction data as

    prescribed by the Commission, and to make such data electronically

    available to regulators.\98\

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

    \97\ CEA section 2(a)(13)(G).

    \98\ Regulations governing core principles, registration

    requirements, and duties of SDRs are contained in part 49 of this

    chapter.

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

    CEA section 21(b)(1)(A), added by section 728 of the Dodd-Frank

    Act, addresses the content of the swap transaction data that registered

    entities and reporting counterparties must report to a registered SDR

    and directs the Commission to ``prescribe standards that specify the

    data elements for each swap that shall be collected and maintained by

    each registered swap data repository.'' In fulfilling this statutory

    mandate, CEA section 21(b)(1)(B) also directs the Commission to

    ``prescribe consistent data element standards applicable to registered

    entities and reporting counterparties.'' In promulgating this part 45,

    the Commission implements Congress's mandate that swap transaction and

    pricing data is reported to registered SDRs. Part 45 achieves the

    statutory objectives of transparency by, inter alia, requiring that

    market participants report swap transaction data to an SDR, possibly

    through intermediaries.\99\

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

    \99\ CEA section 4r(a)(1)(B), added by section 729 of the Dodd-

    Frank Act, requires that each swap not accepted for clearing by any

    DCO must be reported to a registered SDR or, in the case in which

    there is no SDR that would accept the swap, to the Commission.

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

    As discussed in more detail below, the Commission anticipates that

    the requirements of part 45 will generate several overarching, if

    presently unquantifiable, benefits to swap market participants and the

    general public. These include (a) Increased transparency; (b) improved

    regulatory understanding of concentrations of risk within the market;

    (c) more effective monitoring of risk profiles by regulators and by

    regulated entities themselves through the use of unique identifiers;

    (d) improved regulatory oversight, and (e) more robust data management

    systems.

    The Commission believes these benefits, made possible by the timely

    reporting of comprehensive swap transaction data, consistent data

    standards for recordkeeping, and identification of products, entities

    and transactions through unique identifiers, will accrue to market

    participants in a number of ways:

    Increased transparency of derivatives markets.

    Improved risk management: a transfer of the costs

    associated with systemic risk from the public to private entities,

    particularly to those that are better positioned to realize

    economies of scale and scope in assuming those costs.

    More robust risk monitoring and management capabilities

    for market participants as a result of the systems required under

    part 45. This will improve the monitoring of the participant's

    current swap market position.

    New tools to process transactions at a lower expense

    per transaction given the systems required under part 45. These

    tools will enable participants to handle the same or an increased

    volume of swaps at a lower marginal expense.

    More robust standards for the financial services

    industry, such as utilizing UTC and unique identifiers.

    Swap transaction reporting under the final rules

    provides a means for the Commission to gain a better understanding

    of the swap markets--including aggregate positions both in specific

    swap instruments and positions taken by individual entities or

    groups--by requiring transaction data for currently opaque markets,

    and then aggregating that data in useful ways. For example, having

    such data would help Commission staff monitor and analyze the swap

    market in a more comprehensive manner. In this way, the final rule

    would support Congress' mandate that the Commission supervise the

    swap markets; in addition, transaction reporting aids the Commission

    in the development of the mandated semiannual reports on swap

    trading activity.

    In the NOPR, the Commission requested comment on whether a phase-in

    approach should be used for the time of reporting of confirmation by

    non-SD/MSP counterparties. The Commission also requested comment on

    whether

    [[Page 2177]]

    there was sufficient infrastructure to support lifecycle or alternative

    approaches for data reporting. The Commission received a number of

    comments on the implementation of the proposed rules that included

    cost-benefit considerations.

    Global Forex commented that the phase-in period should take into

    account the work needed for FX market participants to establish

    connectivity to the SDR and for the SDR to develop unique identifiers

    and become established. Similarly, CME added that the compliance date

    must take into account the scope of implementation, which could take in

    its view several years. The Electric Coalition recommended that the

    Commission clarify its regulatory needs before setting forth specific

    reporting rules. Thomson Reuters recommended that the Commission

    implement rules consistent with proposals by the European Commission in

    their Markets in Financial Instruments Directive (MiFID). DTCC

    recommended a nearly year-long phase-in with products with the greatest

    automation being required first. ISDA recommended that legal entity

    identifiers and unique product identifiers be implemented prior to

    reporting.

    The Electric Coalition presented a detailed three-step

    implementation proposal that it stated would reduce burdens for

    commercial energy firms. The Electric Coalition recommended that

    reporting be implemented in three phases: first for on-facility,

    cleared swaps; second for standardized but off-facility and uncleared

    swaps; and third for bespoke off-facility and uncleared swaps.

    Similarly, Chatham Financial presented a detailed implementation

    schedule in four stages by counterparty. Under Chatham Financial's

    approach, DCMs, SEFs and DCOs would be required to report in the first

    stage; financial SDs would begin reporting in the second stage; non-

    financial SDs and MSPs would commence reporting in the third stage; and

    non-SD/MSP reporting counterparties would begin reporting in the fourth

    stage. CDEU agreed with Chatham Financial's approach. Dominion

    Resources recommended a phase-in approach for non-SD/MSP

    counterparties.

    As discussed above, the Commission agrees with comments

    recommending phasing in reporting by asset class and by counterparty

    type, and has determined that the final rule provides for such a phase-

    in approach. The Commission anticipates that this approach will result

    in cost reductions for reporting counterparties relative to an

    immediate implementation of all of the reporting provisions of the

    rule. In particular, as discussed above, the phase-in approach adopted

    in the final rule will reduce costs for non-SD/MSP reporting

    counterparties by giving them six additional months to prepare for

    reporting. In response to comments, the Commission has also set forth a

    mechanism for voluntary supplemental reporting in Sec. 45.12. As

    discussed in more detail above, the Commission believes Sec. 45.12 may

    have benefits for both data accuracy and business processes.

    In the sections that follow, the Commission considers the costs and

    benefits of part 45 as required by CEA section 15(a).

    a. Background

    Pursuant to CEA section 15(a), before promulgating a regulation

    under the CEA the Commission generally must consider the costs and

    benefits of its actions in the context of five broad areas of market

    and public concern: (1) Protection of market participants and the

    public; (2) efficiency, competitiveness, and financial integrity of

    markets; (3) price discovery; (4) sound risk management practices; and

    (5) other public interest considerations. The Commission, in its

    discretion, may give greater weight to any one of the five enumerated

    factors and may determine that, notwithstanding costs, a particular

    rule protects the public interest.\100\

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

    \100\ See, e.g., Fisherman's Doc Co-op., Inc. v. Brown, 75 F.3d

    164 (4th Cir. 1996); Center for Auto Safety v. Peck, 751 F.2d 1336

    (DC Cir. 1985) (noting that an agency has discretion to weigh

    factors in undertaking cost-benefit analysis).

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

    In the NOPR, the Commission stated that the proposed reporting and

    recordkeeping requirements could impose significant compliance costs on

    some SDRs, SEFs, DCMs, DCOs, SDs, MSPs, and non-SD/MSP counterparties.

    In particular, the Commission noted that the proposed recordkeeping and

    reporting requirements could require capital expenditures for some such

    entities that could affect their ability to compete in the global

    marketplace because of reductions in available resources. The

    Commission solicited comment on its consideration of costs and benefits

    and specifically invited commenters to submit any data or other

    information that they may have quantifying or qualifying the costs and

    benefits of the proposed requirements. The Commission also requested

    comments on the overall costs and benefits of the proposed rules

    implementing the Dodd-Frank Act.

    In considering the costs and benefits of this final rule as well as

    its other final rules implementing the Dodd-Frank Act, the Commission

    has, wherever feasible, endeavored to estimate or quantify the costs

    and benefits of the final rules. Where this is not feasible, the

    Commission provides a qualitative assessment of such costs and

    benefits. In this respect, the Commission notes that public comment

    letters did not provide quantitative data regarding the costs and

    benefits associated with the Proposed Rules.

    In the following discussion, the Commission addresses the costs and

    benefits of the final rule, considers comments regarding the costs and

    benefits of the final rule, and subsequently considers the five broad

    areas of market and public concern as required by section 15(a) of the

    CEA. Moreover, as this rulemaking contains numerous reporting and

    recordkeeping requirements, 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 for

    the collections of information in this rulemaking, as well as the

    consideration of comments thereto, are discussed in the PRA section of

    this rulemaking and the information collection request 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).

    In this final rulemaking, the Commission is adopting regulations

    mandated by section 21(b) to specify ``consistent data element

    standards'' for reporting swaps to registered SDRs.

    b. Cost-Estimation Methodology

    The Commission has chosen to use as the reference point for its

    cost estimates a non-SD/MSP counterparty that is not a financial entity

    as defined in CEA section (2)(h)(7)(C), and does not have the technical

    capability and other infrastructure to comply with the part 45

    requirements--in other words, a new market entrant with no prior swap

    market participation or infrastructure.

    However, the Commission expects that the actual costs to

    established market participants will often be lower than this reference

    point--perhaps significantly so, depending on the type,

    [[Page 2178]]

    flexibility, and scalability of systems already in place.\101\

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

    \101\ ``The submission of information to trade repositories is

    an activity that takes place in many OTC markets today and will not

    unduly burden those who must comply with the requirement.'' CL-WMBAA

    at 6. In contrast, as commenters highlighted, the costs of complying

    with part 43 can be expected to be higher for non-financial end-

    users and others currently lacking the resources and systems of

    large financial institutions that transact swaps more frequently.

    See, e.g., CL-COPE. ``Swap Dealers have books of business that

    typically are much larger because they encompass a much broader

    universe of types of swaps and because it is the core of their

    regular business * * * of necessity, swap dealers have and will

    continue to develop sophisticated and highly complex computer

    systems powered by highly customized software to enable them to keep

    track of and manage their books of business. * * * End-users simply

    do not have these systems and capabilities.'' CL-Coalition of Energy

    End-Users at 4.

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

    The Commission recognizes that the costs of complying with part 45

    are largely attributable to the reporting and recordkeeping

    requirements of this rule. As discussed above, the Commission has

    determined that the final rule will adopt a streamlined reporting

    regime that requires reporting by the registered entities or swap

    counterparties with the easiest, fastest, and cheapest data access and

    those most likely to have the necessary automated systems. Under this

    reporting regime, reporting obligations for non-SD/MSP counterparties

    are entirely eliminated in many cases, and are phased in or reduced in

    all other cases.

    Non-SD/MSP counterparties can be required to report data only for

    the small minority of swaps in which both counterparties are non-SD/MSP

    counterparties.

    Even within this small minority of swaps, the non-SD/MSP reporting

    counterparty will have no reporting obligations for swaps executed on a

    SEF or DCM and cleared by a DCO, or for off-facility swaps accepted for

    clearing by a DCO within the extended deadline for PET data reporting

    by the non-SD/MSP reporting counterparty.\102\

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

    \102\ If an off-facility swap is accepted for clearing after the

    deadline for PET data reporting by the non-SD/MSP reporting

    counterparty, the non-SD/MSP counterparty is excused from reporting

    confirmation data, which will instead be reported by the DCO.

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

    For swaps executed on a SEF or DCM but not cleared, the non-SD/MSP

    reporting counterparty's reporting obligations are limited to reporting

    required swap continuation data during the existence of the swap. Here

    the final rule provides reporting deadlines for non-SD/MSP reporting

    counterparties that are extended and phased in: a change to the primary

    economic terms of the swap must be reported by the end of the second

    business day following the date of the change during the first year of

    reporting, and by the end of the first business day following the date

    of the change thereafter; and valuation data is only required to be

    reported on a quarterly basis.

    A non-SD/MSP counterparty will be required to report both swap

    creation data and swap continuation data only for off-facility,

    uncleared swaps between non-SD/MSP counterparties; and this obligation

    can apply only if the non-SD/MSP counterparty is an ECP, since CEA

    section 2(e) restricts swap trading by non-ECP counterparties to on-

    facility swaps. For the small number of off-facility, uncleared swaps

    for which a non-SD/MSP that is an ECP is the reporting counterparty,

    the final rule also provides reporting deadlines that are extended and

    phased in.\103\

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

    \103\ In such cases, PET data must be reported within 48 hours

    after execution during the first year of reporting, within 36

    business hours after execution during the second year of reporting,

    and within 24 business hours after execution thereafter.

    Confirmation data must be reported within 48 hours after

    confirmation during the first year of reporting, within 36 business

    hours after confirmation during the second year of reporting, and

    within 24 business hours after confirmation thereafter. During the

    existence of the swap, changes to primary economic terms must be

    reported by the end of the second business day following the date of

    the change during the first year of reporting, and by the end of the

    first business day following the date of the change thereafter; and

    valuation data is only required to be reported on a quarterly basis.

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

    Furthermore, costs for non-SD/MSP counterparties that are not a

    ``financial entity'' as defined in CEA section 2(h)(7)(C) will be

    further reduced by the fact that the final rule provides that for swaps

    between non-SD/MSP counterparties where only one counterparty is a

    financial entity, the financial entity will be the reporting

    counterparty. Because financial non-SD/MSP counterparties are more

    likely than non-SD/MSP counterparties that are not financial entities

    to have in place some or all of the personnel and technological

    infrastructure necessary to serve as the reporting counterparty, and to

    be able to realize economies of scale with respect to reporting,

    placing the burden of reporting in this context on the counterparty

    that is a financial entity is likely to provide a more cost-effective

    overall reporting process.

    These provisions of the final rule either eliminate or

    substantially reduce the cost and burden of reporting for non-SD/MSP

    counterparties.

    To address costs specific to SDRs, the Commission has estimated the

    incremental costs SDRs would incur to comply with the reporting and

    recordkeeping requirements of this rulemaking above the base operating

    costs for SDRs reflected in a separate rulemaking.\104\ These

    incremental costs include the creation and transmission of unique

    identifiers.

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

    \104\ See Commission, Swap Data Repositories: Registration

    Standards, Duties and Core Principles: Final Rule. 76 FR 54538 (Sep.

    1, 2011) at 54572 (SDR Final Rule).

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

    2. General Cost-Benefit Comments Received

    This rulemaking has generated an extensive record, which is

    discussed at length throughout this notice as it relates to the

    substantive provisions in the final rules. A number of commenters

    suggested that implementing and complying with the proposed rules would

    incur significant costs. Because of its concern about the potential

    level of costs, the Minneapolis Grain Exchange (``MGEX'') requested an

    extensive and realistic cost-benefit analysis of each regulation before

    adoption. The Commission also received general comments from Chatham

    Financial, Vanguard, ABC, EEI, WGCEF, Dominion Resources, FHLB, DTCC,

    the Electric Coalition, and CDEU, recommending that the Commission

    consider the costs and burdens of the proposed rules on non-registered,

    small entities. The Foreign Banks, Global Forex, CME, ISDA and SIFMA

    requested that the Commission consider the cost implications of the

    proposed regulations on all applicable entities and in some instances,

    recommended alternative approaches. The Commission has carefully

    considered alternatives suggested by commenters, and in a number of

    instances, has adopted alternatives or modifications to the proposed

    rules where, in the Commission's judgment, the alternative or modified

    standard accomplishes the same regulatory objective in a more cost-

    effective manner.

    In response to the Commission's invitation in the NOPR for comments

    on the overall costs and benefits of the proposed rules, Better Markets

    stated that the Commission's cost-benefit analyses in the notices of

    proposed rulemaking may have understated the benefits of the proposed

    rules. Better Markets argued that adequate assessment of the costs and

    benefits of any single proposed rule or element of such a rule would be

    difficult or impossible without considering the integrated regulatory

    system of the Dodd-Frank Act as a whole. According to Better Markets:

    It is undeniable that the Proposed Rules are intended and

    designed to work as a system. Costing-out individual components of

    the Proposed Rules inevitably double counts

    [[Page 2179]]

    costs which are applicable to multiple individual rules. It also

    prevents the consideration of the full range of benefits that arise

    from the system as a whole that provides for greater stability,

    reduces systemic risk and protects taxpayers and the public treasury

    from future bailouts.\105\

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

    \105\ CL-Better Markets II, at 3.

    Better Markets also stated that an accurate cost benefit assessment

    must include the avoided risk of a new financial crisis. One measure of

    this is the still accumulating cost of the 2008 financial crisis. The

    comment letter cited a statement by Andrew G. Haldane, Executive

    Director for Financial Stability at the Bank of England, who estimated

    the worldwide cost of the crisis in terms of lost output at between $60

    trillion and $200 trillion, depending primarily on the long term

    persistence of the effects.

    Notwithstanding that it must (and does) conduct a cost-benefit

    analysis with respect to this rulemaking, the Commission agrees with

    Better Markets that the proposed rules should operate in a coordinated

    manner to improve and protect financial markets. In that regard, the

    costs and benefits associated with this final rule are in some

    instances not readily separable from the costs and benefits associated

    with other Commission rulemakings implementing the Dodd-Frank Act, most

    notably those governing real-time public reporting of swap transaction

    and pricing data (part 43) and registration and regulation of swap data

    repositories (part 49). Swap data recordkeeping and reporting, will,

    for instance, provide information to enable regulatory agencies to more

    fully understand the mechanisms and risks of the swap market. Access to

    previously unavailable data will allow these agencies to better model

    and analyze swap markets to mitigate systemic risk, detect potential

    market manipulation, and expand their capabilities in efficient market

    oversight. Acknowledging this, the Commission must conduct a cost-

    benefit analysis with respect to specific rulemaking.

    In a broad sense, the costs presented to market participants by the

    requirements of this rule represent the internalization by financial

    market participants of a negative externality--the costs generated by

    systemically risky behavior on the part of market participants, which

    had previously been internalized by the taxpaying public in the form of

    government bailouts of failed financial firms that were brought down in

    part by this risky behavior.

    In analyzing the costs and benefits of this rulemaking, it is

    important to note that many elements of the rule are mandated by Dodd-

    Frank Act and are thus outside the Commission's discretion. For

    example:

    Information about all swaps, cleared or uncleared, must

    be reported to a registered SDR (or, in the event that a swap is not

    is not accepted by an SDR, to the Commission).

    The Commission must prescribe consistent data element

    standards for SDRs, registered entities, and reporting

    counterparties.

    The Commission must determine the hierarchy of

    reporting responsibility for uncleared swaps.

    3. Recordkeeping

    As discussed throughout this release, the CEA as amended by the

    Dodd-Frank Act establishes recordkeeping requirements for registered

    entities.

    a. Benefits of Recordkeeping

    The recordkeeping requirements of part 45 will allow the Commission

    and other regulatory agencies to develop an accurate picture of swap

    markets in a timely fashion. This serves the public interest. From an

    enforcement perspective, the recordkeeping requirements of part 45

    enable investigators and attorneys to reconstruct a comprehensive,

    sequenced record of swap transactions that will be an essential tool in

    ensuring the fairness of swap markets. The recordkeeping requirements

    of part 45 will also facilitate examinations and investigations by the

    Commission and other regulators to ensure that registered entities are

    in compliance with core principles.

    The requirement to retain records for the life of the swap plus

    five years provides be of substantial benefit to the economists

    employed by the Commission and to other regulators. In general,

    economic analysis benefits from a broader body of data; in particular,

    time-series analysis (a fundamental element of economic and statistical

    analysis in which the value of a variable is charted over time) may

    benefit from a body of data that represents a longer time horizon.

    b. Costs of Recordkeeping

    The Commission received several comments related to the costs of

    swap recordkeeping. With respect to recordkeeping by non-SD/MSP

    counterparties, the Electric Coalition recommended that the Commission

    reduce recordkeeping requirements to the minimum necessary and phase

    requirements relative to the cost of implementation. Shell Energy

    requested clarification that non-SD/MSP counterparties are not subject

    to the recordkeeping requirements. WGCEF requested that the Commission

    consider participants who transact in non-financial markets when

    adopting its recordkeeping proposals, and further evaluate the actual

    costs, availability of technology, and ability of market participants

    to deploy the technology required to comply with such requirements.

    With respect to record retention, AGA contended that requiring

    records to be kept through the life of a swap plus five years would

    impose substantive costs on end-users such as gas utilities. AGA also

    stated that the proposed three-day accessibility requirement

    effectively would require an off-site storage provider, which if

    available at all, could be cost-prohibitive. Reasoning that

    transactions between non-SD/MSP counterparties would represent only a

    small portion of regulated activity, AGA recommended that the

    Commission reduce its recordkeeping requirements for non-SD/MSPs so

    that they would only have to maintain such records for three years

    following expiration of the swap. CIEBA and WGCEF supported the

    proposed five-year post-expiration retention period, but also

    recommended not extending it further. ISDA and SIFMA requested

    clarification that the phrase ``via real-time electronic access'' does

    not mean ``instantly accessible'' which it characterized as

    impracticable given the volume of day to day reporting.

    As discussed above, the Commission has determined that the final

    rule requires SEFS, DCMs, DCOs, SDs, and MSPs to keep full, complete,

    and systematic records, together with all pertinent data and memoranda,

    of all activities relating to the business of such entities or persons

    with respect to swaps. Such records must be kept in electronic rather

    than paper form unless they are originally created and exclusively

    maintained in paper form. The final rule limits the parallel

    requirement for non-SD/MSP counterparties to full, complete, and

    systematic records, together with all pertinent data and memoranda,

    with respect to each swap in which they are a counterparty. In response

    to comments, the Commission has determined that non-SD/MSP

    counterparties may keep records in either electronic or paper form.

    With respect to record retention, the final rule provides that all

    records required to be kept by SEFS, DCMs, DCOs, SDs, and MSPs must be

    kept with respect to each swap throughout the life of the swap and for

    at least five years following final termination of the swap, or for at

    least ten years following the date of creation of the swap, whichever

    is greater. Non-SD/MSP counterparties

    [[Page 2180]]

    must keep required records throughout the existence of the swap and for

    five years following final termination of the swap.

    With respect to record retrieval, the final rule provides that

    required records maintained by SEFs, DCMs, DCOs, SDs, and MSPs must be

    readily accessible by the registered entity in question via real time

    electronic access throughout the life of the swap and for two years

    following the final termination of the swap, and must be retrievable

    within three business days throughout the remainder of the required

    retention period. Record retrieval requirements are lower in the case

    of non-SD/MSP counterparties: in response to comments, the Commission

    has determined that non-SD/MSP counterparties need only be able to

    retrieve records within five business days throughout the required

    retention period.

    As discussed above, the Commission has determined that the

    compliance date for non-SD/MSP counterparties will be six months after

    the compliance date for other registered entities and counterparties.

    The Commission has determined that compliance with the requirement to

    begin recordkeeping should not be further phased in for non-SD/MSP

    counterparties. As noted, the final rule provides lesser recordkeeping

    requirements and lesser retrieval requirements for non-SD/MSP

    counterparties, in order to reduce recordkeeping costs and burdens for

    them. The Commission believes that delaying the requirement to comply

    with recordkeeping requirements could interfere with the ability of the

    Commission and other regulators to carry out their oversight and

    enforcement responsibilities. As noted above, the Commission's

    experience with recordkeeping requirements in the context of futures

    suggests that all market participants do retain records, and that such

    recordkeeping is essential for effective oversight and prosecution of

    violations.

    The Commission anticipates that the recordkeeping requirements in

    Sec. 45.2 will present additional costs to registered entities and

    swap counterparties that currently do not retain swap records for the

    required period of time. Costs for recordkeeping costs will include

    non-recurring investments in technological systems and personnel

    associated with establishing data capture and storage systems, and

    recurring expenses associated with personnel, data storage and

    maintenance of data storage systems. The Commission has not identified

    any quantifiable costs of recordkeeping that are not associated with an

    information collection subject to the PRA. Quantifiable costs

    associated with the same are reflected in the PRA. The Commission

    believes that this cost will be substantially reduced or effectively

    eliminated for registered entities and swap counterparties that already

    engage in the recordkeeping as required by the final rule.

    The Commission anticipates that the retrieval requirements set

    forth in part 45.2 will result in additional costs to registered

    entities and swap counterparties that do not currently have the ability

    to retrieve records within the required timeframe. The Commission

    expects that this requirement will present costs to registered entities

    and swap counterparties in the form of non-recurring investments in

    technological systems and personnel associated with establishing data

    retrieval processes, and recurring expenses associated with the actual

    retrieval of swap data records. Quantifiable costs associated with the

    same are reflected in the PRA. The Commission believes that these costs

    will be substantially reduced or effectively eliminated for registered

    entities and swap counterparties with an existing infrastructure

    capable of record retrieval within the timeframe set forth in this

    requirement.

    The Commission also believes that its determination to allow non-

    SD/MSP counterparties to keep records in either electronic or paper

    form will generally reduce the cost and burden of recordkeeping for

    such counterparties. While many non-SD/MSP counterparties may choose to

    keep records in electronic form, some such counterparties that

    currently do not have electronic recordkeeping systems may prefer, as

    suggested by comments, to avoid the cost of acquiring such systems by

    continuing to maintain paper records. The Commission believes that the

    final rule provision lengthening the record retrieval period for non-

    SD/MSP counterparties to five business days will give such

    counterparties adequate time to retrieve such paper records in the

    event that the records are requested by the Commission or another

    regulator in the course of an investigation. The Commission generally

    believes that the pre-Dodd-Frank rationale for requiring Commission

    registrants to keep all records relating to their business similarly

    applies to swaps by registered entities and swap counterparties. The

    Commission requires these records to perform its regulatory function.

    Retaining readily accessible records may also improve the risk

    management practices of complying entities that wish to consult or

    analyze swap transactions as part of their proprietary risk management

    strategies.

    c. Recordkeeping Requirements in Light of CEA Section 15(a)

    The Commission has evaluated the benefits of the recordkeeping

    provisions of Sec. 45.2 in light of the specific considerations

    identified in section 15(a) of the CEA as follows:

    Protection of market participants and the public. As discussed

    above, the Commission has endeavored to limit the costs attributable to

    discretionary implementation decisions to the maximum degree consistent

    with statutory requirements and their intended benefits. The Commission

    has endeavored to match the costs of the post-implementation

    marketplace with the sizes, levels of sophistication, and levels of

    systemic importance of the affected participants, so that the

    associated benefits may be realized by the public.

    With respect to recordkeeping, the Commission believes the benefits

    include the protection of market participants and the public. The

    Commission believes that the recordkeeping requirements in the final

    rule will enable the Commission and other regulatory agencies to

    fulfill their oversight and enforcement responsibilities. The record

    retention periods in the final rule are consistent with both the

    Commission's existing retention requirement in the context of futures,

    pursuant to Commission Regulation 1.31, and with applicable statutes of

    limitation. Such record retention will give the Commission ready access

    to data essential to its mission to protect market participants and the

    public from violations of the CEA and Commission regulations. The

    build-up of systemic risk in the largely opaque swap market played a

    significant role in the financial crisis of 2007-2008; accordingly, the

    Commission believes that the introduction of transparency to these

    markets will be critical to regulators' efforts to inform and protect

    market participants and the public in the future.

    Efficiency, competiveness, and financial integrity. As discussed

    above, the Commission has endeavored to limit the costs attributable to

    discretionary implementation decisions to the maximum degree consistent

    with statutory requirements and their intended benefits. The Commission

    has endeavored to match the costs of the post-implementation

    marketplace with the sizes, levels of sophistication, and

    [[Page 2181]]

    levels of systemic importance of the affected participants, so that the

    associated benefits may be realized by the public.

    The Commission believes that the recordkeeping requirements

    provided in the final rule will serve to protect the financial

    integrity of swap markets, through increased transparency. This

    transparency will provide the Commission and other regulators enhanced

    enforcement abilities, aiding the prosecution and deterrence of market

    abuses. The Commission acknowledges the costs associated with the

    recordkeeping requirement (discussed above), and has attempted to

    minimize costs to the extent consistent with fulfillment of the

    purposes of the Dodd-Frank Act. The final rule adopts the NOPR

    provision for lesser recordkeeping requirements for non-SD/MSP

    counterparties. While other registered entities and counterparties must

    keep records of all activities relating to their businesses with

    respect to swaps, non-SD/MSP counterparties are only required to keep

    records with respect to each swap in which they are a counterparty.

    Recordkeeping by all swap counterparties, including non-SD/MSP

    counterparties, is essential to the Commission's enforcement and market

    supervision functions. The Commission also notes that current lapses in

    recordkeeping by institutions may generate implicit integrity costs to

    financial transactions and the wider public; the final rule attempts to

    mitigate these current costs through various recordkeeping requirements

    (including universal identifiers), aiding financial integrity.

    The Commission believes that, by improving the integrity of the

    U.S. swap markets in the manner described above, this final rule may

    make participation in the U.S. swap markets more appealing to entities

    that currently do not participate, and thus could enhance demand for

    access to the U.S. swap market and its participants both domestically

    and internationally. This potential increase in swap market

    participation may improve the competitiveness of the swap marketplace

    as more parties demand sources of risk transference.

    Furthermore, the Commission does not anticipate that the

    recordkeeping requirements of this final rule present any costs that

    would impede the efficiency of swap markets. Required recordkeeping may

    aid internal audits and dispute resolution. Electronic recordkeeping,

    which will aid required electronic reporting, may improve efficiency

    and reduce initiation and maintenance costs over the long run.

    Price discovery. The Commission does not believe that this

    requirement has a material effect on the price discovery process.

    Sound risk management practices. The Commission believes that the

    final rule recordkeeping requirements may serve to improve the

    soundness of the risk management practices of market participants. The

    Commission is essentially requiring the maintenance of accurate records

    in a manner such that records are readily available for reproduction to

    regulators, but the Commission anticipates an ancillary risk management

    benefit. That is, market participants will now have access to a highly

    organized and streamlined internal records system when analyzing or

    otherwise developing their risk management practices. The Commission

    does not believe that the costs associated with its discretionary

    implementation decisions are of a magnitude to impede sound risk

    management. Moreover, the cost of implementation of the recordkeeping

    rule may be partially compensated by error avoidance and the mitigation

    of internal risk.

    Other public interest considerations. As discussed throughout the

    preamble, the Commission believes that the greater market transparency,

    enhanced market monitoring, and increased systemic risk mitigation that

    will be enabled by the swap recordkeeping required by the final rule

    are in the public interest.

    4. Swap Data Reporting

    a. Benefits of Swap Data Reporting

    The Commission anticipates that the part 45 reporting requirements

    will generate several overarching, if presently unquantifiable,

    benefits to swap market participants and the general public. These

    include(i) Improved risk management; (ii) a transfer of the costs

    associated with systemic risk from the public to private entities,

    particularly to those that are better positioned to realize economies

    of scale and scope in assuming those costs; and (iii) improved

    regulatory oversight.

    The Commission believes these benefits, made possible by the timely

    reporting of comprehensive swap transaction data, will accrue to market

    participants in a number of ways:

    More robust risk monitoring and management capabilities

    for market participants as a result of the systems required under

    part 45. This will improve the monitoring of the participant's

    current swap market position.

    New tools to process transactions at a lower expense

    per transaction given the systems required under part 45. These

    tools will enable participants to handle the same or an increased

    volume of swaps at a lower marginal expense both at trade inception

    and during its life.

    More robust standards for the financial services

    industry, such as utilizing UTC and unique identifiers for products

    and legal entities.

    Transaction reporting under part 45 also benefits the general

    public by supporting the Commission's supervision of the swap market,

    as well as the broader supervisory responsibilities of U.S. financial

    regulators to protect against financial market systemic risk. The

    reporting and recordkeeping requirements provide a means for the

    Commission to gain a better understanding of the swap market--including

    the pricing patterns of certain commodities. As bespoke swaps move onto

    more standardized, and in some cases, electronic platforms, more

    numerous trade participants will likely enter these markets. Timely,

    comprehensive, and standardized regulatory reporting is especially

    crucial for successful oversight of these marketplaces.

    Transparency facilitated by transaction reporting to SDRs 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 derivatives 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.'' \106\ The ability to monitor and quantify these

    levels of risk assumption provides one additional line of defense

    against another occurrence of crippling financial costs.

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

    \106\ Mark Jickling and Kathleen Ann Ruane, Cong. Research

    Serv., The Dodd-Frank Wall Street Reform and Consumer Protection

    Act: Title VII, Derivatives 1 (2010).

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

    Pursuant to this final rule, reporting counterparties will be

    required to report allocation information when a swap is transacted by

    an agent on behalf of clients. The Commission believes that this

    requirement will enable regulators to better understand swaps in the

    context of allocation, and to more accurately assess their associated

    systemic risk, by enabling regulators to see the full record of each

    such swap all the way back to both the original transaction and the

    actual counterparties.

    The Commission believes requiring all data to be reported in the

    same SDR following the initial report from a SEF or DCM would reduce

    data fragmentation and improve regulatory

    [[Page 2182]]

    oversight. The costs and benefits of the Commission's approach are

    addressed in more detail below in the discussion of the section 15(a)

    factors. The Commission is harmonizing its initial PET data reporting

    with the part 43 real-time public reporting requirements to the extent

    possible and setting forth identical timeframes so that counterparties

    and registered entities may be able to, in most cases, submit data for

    both requirements in a single report.\107\

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

    \107\ The phase-in and implementation of these requirements may

    differ.

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

    The Commission notes that there is a cost reduction associated with

    the improved harmonization between the approach to PET data reporting

    of this final rule and the part 43 real-time public reporting

    requirements that were made by the Commission between the issuance of

    the NOPR and this final rule. These requirements have been harmonized

    to the extent possible, including the imposition of identical

    timeframes, so that counterparties and registered entities will be able

    to make one initial report. The Commission anticipates that this

    harmonization will result in a significant reduction in cost to

    counterparties and registered entities.

    The Commission believes that part 45 will yield significant

    benefits to the public and swap market participants. As discussed more

    fully below, however, the Commission is mindful of the costs of its

    rules and has carefully considered comments concerning the potential

    costs of its proposed recordkeeping and reporting rules. To the extent

    possible and consistent with the statutory and regulatory objectives of

    this rulemaking, the Commission has adopted cost-mitigating

    alternatives presented by commenters. In the following paragraphs, the

    Commission first estimates the costs of reporting and next considers

    those costs and the aforementioned benefits in light of the five public

    interest factors of CEA section 15(a).

    b. Costs of Swap Data Reporting

    As discussed in detail above, the Commission received a number of

    comments supporting the proposed reporting rules, and others suggesting

    alternatives or refinements. Commenters did not provide any

    quantitative data regarding the costs to registered entities, reporting

    counterparties and the public. The Commission addressed those comments

    above and, where deemed appropriate, the final rules reflect

    commenters' suggestions.

    Costs of Reporting Requirements

    The Commission anticipates that the direct, quantifiable costs of

    complying with the requirement for SEFs, DCMs, DCOs, and reporting

    counterparties to report creation data will take the forms of (i)

    nonrecurring expenditures in technology and personnel; and (ii)

    recurring expenses associated with systems maintenance, support, and

    compliance. Each of these quantifiable costs of swap data reporting is

    associated with an information collection subject to the PRA. These

    costs therefore have been accounted for in the information collection

    requests filed with OMB as required by the PRA.

    The Commission estimates that the initial costs for its reference

    point, a non-SD/MSP reporting counterparty that is not a ``financial

    entity'' as defined in CEA section 2(h)(7)(C), and does not contract

    with a third party to report swap data, will likely consist of (i)

    Developing an internal 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 45; and (iv) compliance with error correction

    procedures.\108\

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

    \108\ As noted above, most data reporting pursuant to Part 45

    will be performed by SDs, MSPs, SEFs, DCMs, or DCOs. However, when

    estimating costs to market participants for this final rule, the

    Commission anticipates that the technological infrastructure and

    personnel costs will likely be highest for an unsophisticated non-

    SD/MSP reporting counterparty that is not a financial entity, has no

    existing infrastructure for reporting, and does not contract with a

    third-party service provider to facilitate reporting. Accordingly

    the Commission considered costs from this perspective. The

    Commission anticipates that these costs will be lower, and in many

    cases significantly reduced or completely eliminated, for larger or

    more sophisticated entities that already have technological and

    personnel systems developed and operational.

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

    The Commission anticipates, however, that the costs of creation

    data reporting for the reporting entities and counterparties listed

    above are already largely addressed by the costs of reporting the real-

    time data stream for compliance with part 43. Accordingly, the costs of

    creation data reporting presented by part 45 should not be considered

    incremental to the costs of capturing and transmitting the real-time

    data stream pursuant to part 43 except in certain instances, which are

    addressed below. In general, the Commission estimates that the

    processes necessary for capturing and transmitting the real-time data

    stream pursuant to part 43 will encompass the costs of capturing and

    transmitting creation data pursuant to part 45. The Commission

    anticipates that a reporting entity or counterparty will use its OMS to

    capture all of the information that pertains to a given swap. This body

    of information will be used to produce the fields necessary for

    compliance with both part 43 and part 45. Therefore, the Commission

    believes that, in general, the costs of developing and maintaining an

    OMS necessary for compliance with part 45 should not be considered to

    be incremental to the costs of developing and maintaining an OMS for

    compliance with part 43.

    Similarly, under both part 43 and part 45 the reporting entity will

    be required to establish and maintain connectivity with an SDR for the

    transmission of data. The Commission anticipates that, in order to

    streamline the data reporting process, reporting entities will transmit

    both the real-time data stream and the regulatory data stream

    simultaneously to the same SDR via the same connection.\109\ The

    Commission has aligned the reporting deadlines provided in part 45 and

    the public dissemination delays set forth in part 43 in order to reduce

    costs and burdens by permitting registered entities and reporting

    counterparties to fulfill their swap data reporting obligations with

    respect to both part 45 and part 43 by transmitting a single

    report.\110\ Given simultaneous transmission of the data streams

    necessary for compliance with parts 43 and 45, the Commission believes

    that, in general, the costs of establishing and maintaining

    connectivity to an SDR in order to comply with part 45 should not be

    considered to be additional to the costs of establishing and

    maintaining connectivity to an SDR in order to comply with part 43.

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

    \109\ Should a reporting entity elect to transmit these streams

    separately, its cost to transmit data to an SDR would likely

    increase; however, it is for precisely this reason that the

    Commission anticipates that reporting entities would, in fact,

    eliminate duplicative reporting of data streams for a given swap by

    transmitting both streams simultaneously.

    \110\ For off-facility swaps that are not accepted for clearing

    within the applicable deadline for the reporting counterparty to

    report PET data, the reporting counterparty can combine required PET

    data reporting and required real time reporting in a single report,

    but would still have to report confirmation data separately if it is

    not reported along with PET data. Reporting counterparties can avoid

    the need for a separate confirmation data report by confirming their

    swaps within the applicable deadline for PET data reporting.

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

    The Commission anticipates that the same logic may be applied to

    the costs of developing written compliance policies and procedures, as

    well as the costs of developing and implementing error correction

    procedures. Because the data streams necessary for compliance with

    parts 43 and 45 for a given swap

    [[Page 2183]]

    originate from the same set of information, the Commission anticipates

    that reporting entities will likely consider the management of both

    streams when developing compliance and error correction procedures. The

    Commission therefore believes that in general, the costs of developing

    and implementing compliance and error correction procedures presented

    by part 45 should not be considered additional to the costs of

    developing and implementing compliance and error correction procedures

    presented by part 43.

    The Commission acknowledges that part 43 does not address the costs

    of reporting by DCOs. The Commission estimates that the incremental

    costs to DCOs of compliance with this final rule would be comparable to

    the costs either (a) a SEF or DCM, if the DCO makes the creation data

    report for an off-facility, cleared swap,\111\ or (b) an SDR, if the

    DCO registers as such. In the event that a DCO registers as an SDR, it

    will also incur the costs of registering as such pursuant to part 49.

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

    \111\ The costs to a DCO will be similar to those of a SEF or

    DCM in this instance because the initial report to the Commission by

    the registered entity will include the same data fields reported in

    the same timeframe; thus, the non-recurring and recurring costs to a

    DCO of processing and reporting those data should be similar, if not

    identical, to those incurred by a SEF or DCM.

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

    Costs of Reporting Timelines

    The reporting timelines and requirements established in this part

    were designed to accommodate the needs of reporting counterparties and

    registered entities of varying size and sophistication. The Commission

    believes that these reporting timelines and requirements have been

    tailored appropriately to the sizes and levels of technological and

    personnel sophistication of the affected entities, and will not impose

    any additional costs to reporting counterparties or registered entities

    above the costs associated with their reporting obligations. Costs

    associated with reporting obligations are discussed below in the

    sections addressing the costs of creation data reporting and

    continuation data reporting.

    Several commenters addressed the timeframes allotted for reporting

    creation and continuation data. The AGA requested at least 24 hours for

    PET data reports by non-SD/MSP reporting counterparties, both initially

    and when required to supplement an incomplete SEF or DCM report. AGA

    also requested more than the 24 hour timeframe allotted for PET data

    reporting for swaps that are neither electronically executed nor

    verified, because in certain instances the reports could be required

    outside normal business hours, which would increase reporting costs.

    Similarly, ABC asked the Commission to clarify that the 24 hour

    timeframe did not include non-business days, such as a national or

    state holiday or a national or state period of emergency.

    MFA commented generally that it believed that the policy benefits

    of providing swap data within minutes of execution do not outweigh the

    costs in terms of the high likelihood of errors, or the infrastructure

    costs to establish a mechanism to report swaps information in these

    short timeframes. Specifically, MFA recommended that the Commission

    define ``execution'' as being coterminous with ``confirmation'' for on-

    facility swaps. It also urged that, for swaps not executed or confirmed

    electronically, the 24-hour timeframe in the NOPR should commence

    following manual confirmation. Similarly, COPE, EEI, and IECA commented

    that the 24 hour timeframe was too short for non-SD/MSP counterparties.

    Specifically, IECA recommended weekly reports for all required creation

    data and weekly or biweekly for continuation data.

    Chatham Financial and CDEU recommended a timeline of the next

    business day following execution for electronically executed non-SD/MSP

    reportable swaps and second business day following execution for non-

    electronically executed and confirmed non-SD/MSP reportable swaps.

    The Electric Coalition recommended that non-SD/MSP reporting

    counterparties be required to report no more than quarterly, and

    generally commented that the timelines were too short for non-financial

    entities. Similarly, CDEU commented that, for valuation data (a subset

    of continuation data reporting), non-SD/MSP end-users should not be

    required no more frequently than they are required to reconcile their

    portfolios.

    As discussed above, after considering these comments, the

    Commission has determined that the final rule will adopt a streamlined

    reporting regime that requires reporting by the registered entities or

    swap counterparties with the easiest, fastest, and cheapest data access

    and those most likely to have the necessary automated systems.

    Under this reporting regime, in the case of swaps executed on a SEF

    or DCM and cleared on a DCO, and in the case of off-facility swaps

    accepted for clearing by a DCO within the deadlines for reporting

    counterparties to report PET data, reporting obligations for non-SD/MSP

    reporting counterparties are entirely eliminated, and the only

    reporting obligation for SD or MSP reporting counterparties is the

    requirement to report valuation data during the existence of the swap.

    For on-facility swaps that are not cleared, reporting

    counterparties must report only required swap continuation data,

    including reports of changes to primary economic terms of the swap made

    after occurrence of such a change, and reports of valuation data. As

    noted above, the deadlines for such reports by non-SD/MSP reporting

    counterparties have been substantially extended.

    For off-facility swaps not accepted for clearing within the

    applicable counterparty reporting deadline, but eventually cleared, SD

    or MSP reporting counterparties are required to report only PET data

    and valuation data, and non-SD/MSP reporting counterparties are

    required to report only PET data.

    A non-SD/MSP counterparty will be required to report both swap

    creation data and swap continuation data only for off-facility,

    uncleared swaps between non-SD/MSP counterparties; and this obligation

    can apply only if the non-SD/MSP counterparty is an ECP, since CEA

    section 2(e) restricts swap trading by non-ECP counterparties to on-

    facility swaps. For the extremely small number of off-facility,

    uncleared swaps for which a non-SD/MSP that is an ECP is the reporting

    counterparty, the final rule also provides reporting deadlines that are

    extended and phased in. In such cases, PET data must be reported by the

    non-SD/MSP reporting counterparty within 48 hours after execution

    during the first year of reporting, within 36 business hours after

    execution during the second year of reporting, and within 24 business

    hours after execution thereafter. Confirmation data must be reported

    within 48 hours after confirmation during the first year of reporting,

    within 36 business hours after confirmation during the second year of

    reporting, and within 24 business hours after confirmation thereafter.

    During the existence of the swap, changes to primary economic terms

    must be reported by the end of the second business day following the

    date of the change during the first year of reporting, and by the end

    of the first business day following the date of the change thereafter;

    and valuation data is only required to be reported on a quarterly

    basis.

    Finally, for off-facility, uncleared swaps, SD or MSP reporting

    counterparties must report both required swap creation data and

    required swap confirmation data. However, the reporting timeframes for

    these reports have been coordinated with the dissemination delays for

    real

    [[Page 2184]]

    time reporting, in order to permit counterparties to fulfill both real

    time and regulatory reporting obligations by making a single creation

    data report.\112\ Confirmation data reporting deadlines in this context

    have also been extended to 24 business hours in cases where

    confirmation occurs manually rather than through use of automated

    systems, due to the presence of a non-SD/MSP counterparty that lacks

    such systems.

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

    \112\ The phase-in and implementation of these requirements may

    differ.

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

    These provisions of the final rule either eliminate or

    substantially reduce the costs and burdens of swap data reporting for

    all reporting counterparties, and particularly for non-SD/MSP reporting

    counterparties, who are those least likely to have existing

    technological and personnel infrastructure for swap data reporting.

    Costs of Reporting Cleared Swaps

    The Commission notes that the final rule swap data reporting

    requirements could present costs to reporting counterparties and

    registered entities to the extent that a SEF, DCM, or reporting

    counterparty reports regulatory data to an SDR with which it does not

    have a presently existing connection, rather than to a DCO registered

    as an SDR, with which registered entity or reporting counterparty has a

    presently existing connection for clearing purposes.\113\ However, the

    Commission enumerated the costs of establishing connectivity to an SDR

    for swap data reporting in its final part 43 rules governing real-time

    reporting of swap transaction and pricing information. The costs of

    connectivity presented by this final rule are not additional to those

    costs considered in connection with part 43, and thus are not

    appropriate for evaluating costs relative to benefits in this

    rulemaking. Moreover, the Commission has not identified any

    quantifiable costs with respect to connectivity not associated with the

    part 43 information collection request, for which the Commission must

    account under the PRA.

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

    \113\ Should a DCO register as an SDR, counterparties that

    transacted through the DCO previously would have already established

    connectivity for processing those transactions, and would thus not

    have to incur new connectivity costs once the DCO began functioning

    as an SDR.

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

    Two commenters addressed cost-benefit considerations in regard to

    the reporting of cleared swaps to SDRs. CMC recommended that the

    Commission leverage existing DCOs for reporting cleared swaps, adding

    that requiring the industry to establish a redundant set of expensive

    connections with non-DCO SDRs for the purpose of making regulatory

    reports for cleared trades would be costly, inefficient and

    unnecessary. Similarly, CME recommended that the initial regulatory

    report for a cleared swap be reported to a DCO or an SDR chosen by the

    DCO, adding that this approach is the lowest cost and least burdensome

    method for implementing the regulatory reporting requirements.

    The Commission has determined to adopt the rules as they relate to

    reporting swap data for cleared trades to SDRs largely as proposed.

    While the Commission is cognizant of the cost-benefit considerations,

    section 2(a) of the CEA requires each ``swap (whether cleared or

    uncleared) * * * be reported to a registered swap data repository''

    (emphasis added). The Commission notes that section 21(a)(1)(B) allows

    DCOs to register as SDRs, and that the final rules do not preclude

    counterparties or registered entities from reporting swap data to

    existing DCOs registered as SDRs, or to SDRs chosen by DCOs, if they so

    choose for business or cost-benefit reasons.

    Costs Affected by Permitted Use of Third-Party Service Providers to

    Facilitate Reporting

    The Commission anticipates that the final rule reporting

    requirements for reporting counterparties and registered entities may

    result in costs to such counterparties and entities in the form of (i)

    personnel hours dedicated to the development and maintenance of

    reporting systems and connectivity to data repositories; and (ii) the

    development and ongoing administration of a compliance program. Such

    costs could include standardizing data or hiring new personnel to

    upgrade technology infrastructure. However, such costs could be

    affected or reduced where the reporting counterparty or registered

    entity required to report chooses to have a third-party service

    provider facilitate reporting.

    The Commission requested comment on the merits of allowing third-

    party facilitation of swap data reporting and on how it should be

    structured. Several commenters responded with comments regarding cost-

    benefit considerations. Global Forex, DTCC and WGCEF supported the NOPR

    provision allowing third-party facilitation of reporting because they

    believe it will reduce costs, particularly for non-SD/MSPs.

    As noted above, the Commission has considered these comments, and

    has determined to adopt in the final rule the NOPR provision permitting

    third-party facilitation of data reporting. The use of third-party

    service providers in the reporting phase of the regulatory data

    reporting process may also represent a likely cost reduction. Reporting

    counterparties and registered entities that elect to contract with

    third-party service providers can realize the cost savings associated

    with the comparative advantages of third-party providers specializing

    in swap data reporting services.

    Costs of Creation Data Reporting

    i. Costs to Counterparties and Registered Entities

    As discussed in more detail above, the NOPR called for two types of

    creation data reporting, namely PET data reporting and confirmation

    data reporting. The Commission anticipates that creation data reporting

    will represent costs to reporting counterparties and registered

    entities in the form of (a) significant non-recurring investments in

    technological systems and personnel; and (b) recurring expenses

    associated with systems usage and maintenance and personnel hours

    required for data reporting.

    The Commission estimates that the initial costs for its reference

    point, a non-SD/MSP reporting counterparty that is not a financial

    entity as defined in the Dodd-Frank Act and does not contract with a

    third party to report swap data, will likely consist of (i) Developing

    an internal 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.

    The Commission estimates that the recurring costs for its reference

    point, a non-SD/MSP reporting counterparty that is not a financial

    entity and does not contract with a third party to report swap data,

    will likely consist of (i) Operational support for its OMS, including

    adaptation to new products, systems upgrades and ongoing maintenance;

    (ii) maintaining connectivity with an SDR that accepts data, including

    the demands on technological systems and the burden associated with the

    personnel hours necessary to facilitate transmission of data; and (iii)

    compliance with error correction procedures, including the burden

    associated with the personnel hours necessary to monitor and report

    errors.

    The Commission notes, however, these costs should not be added to

    the costs of reporting data for real-time public reporting enumerated

    in the Commission's final rules in part 43

    [[Page 2185]]

    concerning real time reporting, insofar as they refer to PET data for

    regulatory reporting.

    Pursuant to the final rule, counterparties will be required to

    report allocation information when a swap is transacted by an agent on

    behalf of clients. The Commission does not believe that this

    requirement is likely to present a significant incremental burden to

    counterparties. Based on conversations with industry participants, the

    Commission believes that allocation reports are already transmitted

    from one counterparty to the other following a swap; therefore,

    transmitting that report to an SDR would present a negligible

    additional burden.

    The final rule provides that, should there be a swap asset class

    for which no SDR accepts swap data, swap data for a swap in that asset

    class must be reported to the Commission. This provision was set forth

    in the NOPR, and is required by CEA section 4r(b) and (c). The

    Commission anticipates that this requirement is unlikely to impose

    additional costs on registered entities and swap counterparties

    required to report swap data, since SDRs covering all existing swap

    asset classes have already applied for designation by the Commission.

    The Commission also notes that the requirements for such reporting

    differ from those for reporting to an SDR. The final rule calls for

    data for such swaps to be reported to the Commission at times announced

    by the Commission and in an electronic file in a format acceptable to

    the Commission, as determined by the Commission's Chief Information

    Officer.

    The Commission has nonetheless considered possible costs associated

    with such reporting, which would apply only in the event that there is

    an asset class for which no SDR accepts data. In such circumstances,

    reporting counterparties and registered entities required to report

    swap data would be required to incur an initial one-time cost to

    establish and test connectivity to the Commission. The Commission

    notes, however, that because reporting counterparties will already be

    required to develop and test technological systems for establishing

    connectivity to an SDR pursuant to this final rule, there will not be

    an incremental non-recurring cost presented by this requirement.

    Rather, because this cost will only be incurred by a reporting

    counterparty in the absence of an SDR that accepts data for any asset

    class, this cost should be considered to exist in the absence of,

    rather than together with, the cost of establishing connectivity to an

    SDR.

    In the event that a new asset class comes into existence for which

    no SDR immediately accepts regulatory swap data reports, the Commission

    will be required to receive data reports concerning swaps in that asset

    class until an SDR elects to receive swap data in that asset class. The

    Commission has accounted in the PRA for the cost of maintaining

    connectivity to the Commission which would be incurred by registered

    entities and reporting counterparties transacting in such an asset. The

    Commission does not believe it is feasible to estimate the likelihood

    that such an asset class will arise or the length of time for which the

    Commission will be required to receive the associated regulatory data.

    The Commission believes that this recurring burden of transmitting

    data to the Commission will represent a small percentage of the burden

    of transmitting data to a registered SDR or third-party service

    provider as required for real time reporting pursuant to part 43 and

    regulatory reporting to SDRs as required by this part. The Commission

    has determined that this percentage is not readily quantifiable,

    because the asset classes for which reporting to the Commission would

    be required, and thus the amount of data that would be required to be

    reported to the Commission, are currently unknown.

    The NOPR sought to mitigate the fragmentation of data for a single

    swap across multiple SDRs by requiring that once an initial data report

    concerning a swap is made to an SDR, all data reported for that swap

    thereafter must be reported to that same SDR.\114\ Roundtable

    participants agreed that the NOPR provision calling for all data for a

    given swap to be reported to a single SDR was essential to preventing

    fragmentation of data across multiple SDRs, something that would

    seriously impair both regulators' ability to view or aggregate all of

    the data concerning a swap and the ability of reporting entities and

    counterparties to review data reported by them. WGCEF commented that

    all swap data for a given swap should be reported to the same SDR. The

    Commission received no comments opposing this requirement.

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

    \114\ The NOPR also called for PET data to be reported promptly

    following execution of the swap.

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

    Global Forex observed that, after the initial swap data report is

    made for a swap, market participants required to make further reports

    concerning that swap would need to ensure that they can connect to the

    chosen SDR. EEI, EPSA, and WGCEF suggested that the rules should ensure

    that SDR selection by a platform, SD, or MSP is equitable and does not

    result in unreasonable costs or burdens being imposed on non-SD/MSP

    counterparties.

    WGCEF also suggested that market participants should not be

    required to report all of their swaps to the same SDR, since SDR

    competition would tend to lower fees associated with reporting. DTCC,

    ICE, and WGCEF recommended that the reporting counterparty should

    always select the SDR. ICE argued that otherwise reporting

    counterparties could incur significant expenses to build and maintain

    connections to an SDR with which they are not already connected. ABC

    and CIEBA suggest that for swaps involving a benefit plan as a

    counterparty, the SDR selection should always be made by the plan.

    The CMC and CME both recommended that the initial regulatory report

    for a cleared trade be transmitted to either a DCO or an SDR that is

    affiliated with a DCO. CMC suggested that this would reduce unnecessary

    expenses and operational difficulties, whereas it would be costly,

    inefficient and unnecessary to require industry to establish a

    redundant set of expensive connections with non-DCO SDRs for the

    purpose of making regulatory reports for cleared trades. CME stated

    that having cleared swaps reported to a DCO also registered as an SDR

    or an SDR that is affiliated with a DCO would provide the lowest cost

    and least operationally burdensome path available to meet regulatory

    requirements.

    The Commission anticipates that, because the final rule does not

    require each cleared swap to be reported to an SDR affiliated with the

    DCO that clears the swap, in some circumstances DCOs may incur some

    increased costs, relative to an environment in which all cleared swaps

    must be reported to a DCO-SDR.

    For a cleared swap executed on a SEF or DCM, and

    reported to an SDR by the SEF or DCM as required by the final rule,

    the DCO could incur incremental costs, if the SEF or DCM chooses to

    report to an SDR other than the DCO-SDR. In this circumstance, the

    DCO would be required to report confirmation data and continuation

    data to the SDR receiving the initial report, and thus to assume the

    costs necessary to establish connectivity to that SDR and transmit

    data to it. Such connectivity and transmission costs are addressed

    below. However, if the DCO chooses to register as an SDR, as

    explicitly permitted by the statute and anticipated by these

    commenters, the SEF or DCM would be able to reduce its costs by

    selecting the DCO-SDR as the SDR receiving the initial report, and

    thus avoid the need to send data separately to an SDR for regulatory

    reporting purposes and to a DCO for clearing purposes. In such an

    event, the DCO would not incur these incremental costs.

    For an off-facility, cleared swap for which the

    reporting counterparty is excused

    [[Page 2186]]

    by the final rule from reporting creation data, the DCO would not

    incur incremental costs. In this situation, the DCO would select the

    SDR to which all data is reported, by making the initial creation

    data report. The DCO could report to itself in its capacity as an

    SDR if it chooses to to register as an SDR, as explicitly permitted

    by the statute and anticipated by these commenters.

    For an off-facility, cleared swap with respect to which

    the reporting counterparty makes the initial PET data report, the

    DCO would incur incremental costs if the reporting counterparty

    chooses to report to an SDR other than the DCO-SDR. In this

    circumstance the DCO would be required to report confirmation data

    and continuation data to the SDR receiving the initial report, and

    thus to assume the costs necessary to establish connectivity to that

    SDR and transmit data to it. These costs are addressed below.

    However, if the DCO chooses to register as an SDR, as explicitly

    permitted by the statute and anticipated by these commenters, the

    reporting counterparty would be able to reduce its costs by

    selecting the DCO-SDR as the SDR receiving the initial report, and

    thus avoid the need to send data separately to an SDR for regulatory

    reporting purposes and to a DCO for clearing purposes. In such an

    event, the DCO would not incur these incremental costs.

    The Commission also anticipates that, because the final rule does

    not require each cleared swap to be reported to an SDR affiliated with

    the DCO that clears the swap, in some circumstances reporting

    counterparties may incur some increased costs, but also some increased

    benefits, relative to an environment in which all cleared swaps must be

    reported to a DCO-SDR.

    For swaps executed on a SEF or DCM, an SD or MSP

    reporting counterparty would incur the incremental costs if the SEF

    or DCM chooses to report to an SDR other than the DCO-SDR. In this

    circumstance, the SD or MSP would be required to report valuation

    data to the SDR, and thus to assume the costs necessary to establish

    connectivity to that SDR and transmit data to it. Such costs are

    addressed below. A non-SD/MSP reporting counterparty would not incur

    such incremental costs, because all continuation data would be

    reported by the DCO. However, if the DCO chooses to register as an

    SDR, as explicitly permitted by the statute and anticipated by these

    commenters, the SEF or DCM would be able to reduce its costs by

    selecting the DCO-SDR as the SDR receiving the initial report, and

    thus avoid the need to send data separately to an SDR for regulatory

    reporting purposes and to a DCO for clearing purposes. In such an

    event, the SD or MSP reporting counterparty would not incur these

    incremental costs.

    For an off-facility, cleared swap with respect to which

    the reporting counterparty is excused by the final rule from

    reporting creation data, an SD or MSP reporting counterparty would

    incur incremental costs only if the DCO chooses not to register as

    an SDR.\115\ In this situation, the DCO would select the SDR to

    which all data is reported, by making the initial creation data

    report, and could report to itself in its capacity as an SDR if it

    chooses to to register as an SDR, as explicitly permitted by the

    statute and anticipated by these commenters. The incremental costs

    for the SD or MSP reporting counterparty would be the costs

    necessary to establish connectivity to, and transmit valuation data

    to, the SDR to which the initial creation data report was made. A

    non-SD/MSP reporting counterparty would not incur such incremental

    costs, because all continuation data would be reported by the DCO.

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

    \115\ The Commission believes that a DCO registered as an SDR

    would choose to report to itself in its capacity as an SDR in this

    circumstance.

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

    For an off-facility, cleared swap with respect to which

    the reporting counterparty makes the initial PET data report, the

    reporting counterparty would not incur incremental costs, but would

    receive the benefit of being able to choose either the DCO-SDR or

    any other SDR accepting swaps in the asset class in question.

    The Commission also anticipates that, because the final rule does

    not require each cleared swap to be reported to an SDR affiliated with

    the DCO that clears the swap, SEFs and DCMs would receive benefits

    relative to an environment in which all cleared swaps must be reported

    to a DCO-SDR. Specifically, for any swap executed on a SEF or DCM, the

    facility would be able to choose either the DCO-SDR or any other SDR

    accepting swaps in the asset class in question.

    The Commission notes that DCOs are eligible to register as SDRs and

    capitalize on these existing connections, and the Commission

    anticipates that the competitive market for SDR services will dictate

    such an outcome if it is indeed cost-effective. The Commission believes

    that a competitive marketplace for SDR services presents the

    opportunity for significant reductions to the cost of swap data

    reporting.

    WGCEF and Dominion recommended that the Commission harmonize its

    PET data requirements with the reporting required by the part 43 real-

    time public reporting regulations to reduce the reporting burdens on

    counterparties.

    After considering these comments, the Commission has determined, as

    noted above, that the final rule should require that all data for a

    given swap be reported to the same SDR to which the initial report of

    swap data is made as provided in the final rule. The wide variety of

    suggestions by commenters concerning who should choose the SDR suggests

    that no single approach produces the lowest cost for all market

    participants in all circumstances, and that this decision is best left

    to the market. The final rule as adopted avoids injecting the

    Commission unnecessarily into a market decision, and leaves the choice

    of SDR to be influenced by market forces and possible market

    innovations. Requiring that all cleared swaps be reported only to DCOs

    registered as SDRs would create a non-level playing field for

    competition between DCO-SDRs and non-DCO-SDRs. Conversely, giving the

    choice of the SDR to the reporting counterparty in all cases could in

    practice give an SDR substantially owned by SDs a dominant market

    position with respect to much swap data reporting. The final rule also

    addresses the major substance of the concerns expressed by non-SD/MSP

    counterparties, since it requires the initial data report to be made by

    a non-SD/MSP counterparty only in the case of a swap executed off-

    facility between two non-SD/MSP counterparties that are ECPs. Moreover,

    in this situation, the non-SD/MSP reporting counterparty will, by

    making the initial data report, be able to select the SDR as

    recommended by comments.

    ii. Costs to SDRs

    The Commission anticipates that creation data reporting will

    present additional costs to SDRs, both in the form of non-recurring

    investments in technological systems and personnel during the

    development of the formatting procedure, and in the form of recurring

    expenses associated with data processing, systems maintenance, and

    personnel hours. However, these costs should not be considered

    independent of the costs associated with real time reporting pursuant

    to part 43, which includes the burden estimate for the data formatting

    processes that an SDR will need to employ. The Commission anticipates

    that compliance with this requirement will primarily require SDRs to

    handle additional swap data required to be reported by this part but

    not required to be reported by part 43. This part will not require SDRs

    to fulfill any of the rounding, counterparty masking, or disseminating

    requirements of real-time public reporting. Therefore, in general, the

    Commission anticipates that the recurring burden to an SDR presented by

    creation data reporting will be negligibly incremental to the costs to

    SDRs associated with real-time public reporting.

    Pursuant to the final rule, in the context of allocations, as

    discussed above, reporting of both the original swap between the

    reporting counterparty and the agent and reporting of the swaps

    resulting from allocation will be required. The only additional duty

    for SDRs in this context

    [[Page 2187]]

    is the need to map together these related swaps. SDRs will already be

    required to have automated systems and personnel capable of mapping

    together various data reports, such as mapping together different data

    reports for a single swap using the USI for the swap that is included

    in each such report. As a result of the requirement for mapping in the

    context of allocations, the Commission anticipates that SDRs will incur

    an incremental burden consisting of (a) one-time setup costs to program

    automated systems to do the required mapping in the allocation context,

    and (b) low ongoing maintenance costs associated with keeping such

    programming up to date. The Commission does not believe that this

    burden is readily quantifiable, both because the percentage of swaps

    involving allocations is currently unknown, and because the number of

    client allocations could vary greatly between swaps involving

    allocation. As noted above, SDRs must have the capacity to map together

    all data reports associated with any USI, and compliance with this

    requirement will facilitate the data mapping process in the context of

    allocations, which will also involve USIs. This should reduce the

    additional burden of linking allocation reports, or eliminate it in

    some cases. The Commission was informed by roundtable participants that

    existing trade repositories are able to accept data in multiple formats

    or data standards from different counterparties, and to map the data

    they receive into a common data standard within the repository, without

    undue difficulty, delay, or cost. Therefore, the Commission anticipates

    that SDRs will be able to perform the mapping required in the

    allocation context using existing technologies and processes.

    With regard to SDRs, the error reporting requirement of this final

    rule would require a registered SDR to develop protocols regarding the

    reporting and correction of erroneous information. This reporting

    requirement is associated with an information collection for which the

    Commission is obligated to account under the PRA. Accordingly, the

    burden estimates have been addressed in the information collection

    requests that the Commission has prepared and submitted to OMB for

    approval, as required under that statute

    Costs of Continuation Data Reporting

    The Commission received several comments on the cost-benefit

    implications of its proposed approach regarding continuation reporting.

    Several comments addressed the NOPR provisions prescribed the data

    reporting method--life cycle reporting or snapshot reporting--to be

    used in each asset class to report changes to the primary economic

    terms of the swap. TriOptima supported the NOPR's approach. ICE

    commented with respect to the other commodity asset class that the

    snapshot approach would be inefficient, create burdens, and prove

    technologically challenging, and that therefore its drawbacks would

    outweigh its benefits. Reval commented that continuation data reporting

    by either method would require significant capabilities and

    investments, and stated that snapshot reporting for interest rate,

    currency, and other commodity swaps would not lessen the burdens of

    compliance. As noted above, ISDA, SIFMA, REGIS-TR, and DTCC recommended

    having the rule not make the choice between the lifecycle and the

    snapshot reporting method for each asset class, but rather allowing

    SDRs to decide whether to accept data by either or both methods.

    Other comments addressed the impact of required frequency of

    reporting. EEI, WGCEF, and CDEU contended that daily snapshot reporting

    would be burdensome and excessive for non-SD/MSP counterparties, and

    recommended quarterly rather than daily reports. AGA stated that daily

    continuation data reporting would be unduly burdensome, and recommended

    monthly reporting instead.

    Additional comments addressed costs associated with valuation data

    reporting. Chatham Financial recommended that the Commission align the

    timing for valuation data reporting with the timing for the portfolio

    reconciliation requirements in the Commission's portfolio and

    reconciliation rulemaking, in order to reduce the burden on non-SD/MSP

    reporting counterparties. ICE suggested that only DCOs be required to

    report valuation data for cleared swaps, since requiring both DCOs and

    counterparties to report this data would drastically increase the

    number of messages transmitted to SDRs on a daily basis and

    unnecessarily burden reporting counterparties. EEI and CDEU questioned

    the Commission's regulatory authority and need for valuation data

    reporting from non-registered counterparties. ISDA and SIFMA commented

    that the implementation of any valuation methodology requires

    significant operational and infrastructure development, and called for

    further consultation before the Commission requires such a methodology.

    FHLB recommended weekly valuation reporting by non-SD/MSP reporting

    counterparties, arguing that this should be sufficient for regulatory

    purposes and would avoid forcing such counterparties to implement the

    costly infrastructure needed to generate daily valuation reports. The

    Electric Coalition recommended quarterly valuation data reporting for

    the same reason.

    The Commission anticipates that the reporting of continuation data

    will present additional costs beyond the costs of reporting required

    swap creation data as discussed above, consisting of the additional

    maintenance of an internal OMS and the additional personnel hours

    needed to maintain a compliance program in support of the OMS.

    The Commission believes that promptly submitting amended

    transaction and pricing data to the appropriate registered SDR after

    discovery of an error would impose a burden on reporting counterparties

    and registered entities. Likewise, the Commission believes that

    promptly notifying the relevant reporting counterparty or registered

    entity after discovery of an error would impose a burden on non-

    reporting counterparties.

    The Commission believes that error reporting would impose an

    initial, non-recurring burden associated with designing and building

    the reporting parties' reporting system to be capable of submitting

    amended swap transactions to a registered SDR. In addition, reporting

    parties will be required to support and maintain the error reporting

    function and registered SDRs will be required to accept the error

    reporting.

    The Commission believes that designing and building appropriate

    reporting system functionality would be a component of, and represent

    an incremental add-on to, the cost of building a reporting system and

    developing a compliance function as required by Sec. 43.3(a) (real-

    time reporting rule). With regard to non-reporting counterparties, the

    Commission believes that the error reporting requirement of this final

    rule would impose a minimal non-recurring and recurring burdens

    associated with promptly notifying the relevant reporting party after

    discovery of an error. The Commission believes, however, that swap

    counterparties already monitor their swap transactions in the ordinary

    course of business, and thus the error reporting requirement of this

    final rule would not result in any significant new burdens for these

    participants.

    Upon consideration of the comments, the Commission is adopting the

    NOPR continuation data provisions with a number of modifications that

    the

    [[Page 2188]]

    Commission believes will further reduce costs and burdens for

    registered entities and reporting counterparties, and in particular for

    non-SD/MSP reporting counterparties. If a swap is cleared, the DCO will

    report all continuation data with the exception of valuation reporting

    by SDs and MSPs. Non-SD/MSP reporting counterparties will not be

    required to report any continuation data for cleared swaps. For

    uncleared swaps, the deadlines for non-SD/MSP reporting counterparties

    to report changes to primary economic terms have been extended and

    phased in. While the NOPR required the reporting of all of the data

    elements necessary for a person to determine the current market value

    of the swap, the final rule requires only the reporting of the data

    elements necessary to describe the daily mark of the transaction. In

    addition, non-SD/MSP reporting counterparties will only be required to

    report valuation data on a quarterly basis. In part to further reduce

    continuation data reporting costs as discussed in the above comments,

    the final rule requires that continuation data be reported in a manner

    sufficient to ensure that the information in the SDR concerning the

    swap is current and accurate, and includes all changes to any of the

    primary economic terms of the swap, but will leave to the SDR and

    registered entity and reporting counterparty marketplace the choice of

    the reporting method used to meet this requirement. This approach will

    help to address commenters' concerns about the cost of daily reporting,

    since reporting counterparties would not be required to report on a

    daily basis if the SDR in question accepts life cycle reporting.\116\

    Additionally in order to reduce reporting burdens to the extent this

    can be done without impairing the purposes for which the Dodd-Frank Act

    requires swap data reporting, the Commission has determined that the

    final rule will not require reporting of contract-intrinsic events.

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

    \116\ The flexibility of this approach should also ensure

    harmonization of the final rule with SEC rules in this respect: even

    if the SEC rules specify a reporting method for reporting to

    security-based swap data repositories, SDRs that accept mixed swaps

    will be free to accept reporting by any reporting method mandated by

    the SEC.

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

    The Commission believes that the swap data reporting requirements

    of the final rule represent a reduced cost compared to the requirements

    of the NOPR. The Commission does not mandate which particular approach

    an SDR chooses, either snapshot approach or lifecycle, in the final

    rule, so long as the continuation data for a given swap are accurately

    reported. This approach will allow registered SDRs to select the method

    of continuation data reporting that is most cost-effective and most

    logical for the swap business of their reporting customers. As noted,

    costs have been reduced by elimination of required reporting of

    contract-intrinsic data. The Commission does not mandate the reporting

    of contract-intrinsic data in the final rule, a data stream that was

    required under the proposed rule. The Commission believes that this

    requirement would have presented a cost burden to reporting

    counterparties and registered entities and its elimination will present

    a cost reduction. Furthermore, allowing the clearing of a swap on a DCO

    to satisfy the continuation data reporting obligations of non-SD/MSP

    reporting counterparties represents a lowered overall cost. This

    approach eliminates duplication of the reporting requirement,

    capitalizes on the transmission pipeline from the DCO to the SDR, and

    will allow for more cost-effective reporting than a regime in which

    reporting parties entering into a cleared swap would always be

    responsible for reporting regulatory data, as the DCO will likely

    realize economies of scale in the reporting process.

    Collateral and Master Agreement Reporting

    In the NOPR, the Commission requested comment as to whether

    separate warehouse and library systems should be developed for

    collateral and master agreements. Several commenters responded with

    cost-benefit considerations regarding establishing these separate

    reporting systems. ABC supported requiring master agreement reporting

    but recommended that they be reported only once if required. SunGard

    supported the establishment of a collateral SDR that could hold credit

    support agreements and related net margin and collateral positions

    between two counterparties, adding that this would eliminate

    unnecessary costs. Chatham Financial and CDEU recommended that the

    Commission not require master agreement or collateral reporting because

    the costs of reporting would outweigh the benefits. After consideration

    of these comments, the Commission has determined not to require master

    agreement or collateral reporting at this time.

    c. Reporting Requirements in Light of CEA Section 15(a)

    The Commission has evaluated the costs and benefits of the

    reporting provisions under Sec. 45.3 in light of the specific

    considerations identified in Section 15(a) of the CEA as follows.

    Protection of market participants and the public. As discussed

    above, the Commission has endeavored to limit the costs attributable to

    discretionary implementation decisions to the maximum degree consistent

    with statutory requirements and their intended benefits. The Commission

    has endeavored to match the costs of the post-implementation

    marketplace with the sizes, levels of sophistication, and levels of

    systemic importance of the affected participants, so that the

    associated benefits may be realized by the public.

    With respect to swap data reporting, the Commission believes the

    benefits include the protection of market participants and the public.

    The Commission believes that the reporting requirement of Sec. 45.3

    will provide regulatory agencies with a wealth of previously

    unavailable data. This comprehensive data will be available in a

    unified format, greatly enhancing the ability of regulators in their

    oversight and enforcement functions. Systemic risk regulators need data

    that will enable them to monitor gross and net counterparty exposures

    wherever possible, not just notional volumes for each contract but also

    market values. Such data would make it possible to calculate the

    concentration of counterparty risk on both participant and market

    levels. Market regulators need data that helps them promote market

    fairness and competitiveness; protect market participants against

    fraud, manipulation, and abusive trading practices; enforce aggregate

    speculative position limits as adopted; and ensure the financial

    integrity of the clearing process.

    The Commission believes that important regulatory purposes of Dodd-

    Frank would be frustrated, and that regulators' ability to see

    necessary information concerning swaps could be impeded, if data

    concerning a given swap was spread over multiple SDRs.

    Efficiency, competiveness, and financial integrity. As discussed

    above, the Commission has endeavored to limit the costs attributable to

    discretionary implementation decisions to the maximum degree consistent

    with statutory requirements and their intended benefits. The Commission

    has endeavored to match the costs of the post-implementation

    marketplace with the sizes, levels of sophistication, and levels of

    systemic importance of the affected participants, so that the

    associated benefits may be realized by the public.

    [[Page 2189]]

    With respect to swap data reporting, the Commission believes the

    benefits include enhancing the financial integrity of swap markets. The

    Commission believes that final rule's streamlined reporting regime,

    including the counterparty hierarchy used to select the reporting

    counterparty, can be considered efficient in that it assigns greater

    reporting responsibility to more sophisticated entities more likely to

    be able to realize economies of scale and scope in reporting costs.

    This reporting regime may also be an incentive for the platform

    execution of swaps that might have otherwise been executed bilaterally,

    since platform execution absolves the swap counterparties of the

    majority of the reporting burden discussed in this Consideration of

    Costs and Benefits section. The Commission anticipates that this will

    increase the role of the registered entities in the market that are

    able to report data to an SDR most efficiently. Similarly, a potential

    increase in the number of participants using platform execution, due to

    this efficiency, may aid in market competition.

    The Commission believes that, by improving the integrity of the

    U.S. swap markets in the manner described above, this final rule may

    make participation in the U.S. swap markets more appealing to entities

    that currently do not participate; therefore, this final rule presents

    the potential to enhance the demand for access to the U.S. swap market

    and its participants both domestically and in the global swap

    marketplace. This potential increase in swap market participation may

    improve the competitiveness of the swap marketplace as more parties

    demand sources of risk transference.

    The Commission believes that reporting parties may be able to

    realize lower costs by means of transmitting reporting and regulatory

    data through third-party service providers. These providers will likely

    have a comparative advantage in data processing costs relative to the

    capabilities of reporting parties; as in the case of the reporting

    hierarchy, the final rule allows for the use of reporting methods

    considered more efficient by market participants themselves.

    Because the accuracy of swap data is essential for market integrity

    and regulatory oversight, the final Sec. 45.14 requires the prompt

    correction of errors. As seen during the most recent financial crisis,

    market volatility may be such that a delay in error correction, even on

    the order of a day, may be too late for effective analysis and

    response. Because of this, the Commission has considered the cost of

    error correction on market participants with regard to the effects of

    market turmoil during critical events intensified by market opacity.

    The Commission believes that the data standards provisions of the

    final rule will serve to reduce costs and burdens for registered

    entities and swap counterparties by (a) allowing reporting entities and

    counterparties to use whatever facilities, methods, or data standards

    are provided or required by the SDR to which data is reported; and (b)

    allowing SDRs to use various facilities, methods, and data standards to

    receive data, so long as the SDR can provide data to the Commission in

    the format required by the Commission. The Commission believes this

    approach is preferable to having the Commission mandate that reporting

    entities or counterparties adopt a particular format or data standard

    for reporting swap data, which in some cases could impose the

    additional burden of acquiring new technological capability different

    or more extensive that what the entity or counterparty already

    possesses. The Commission believes that, in light of this provision of

    the final rule, market competition is likely to lead SDRs to allow

    reporting entities and counterparties to report using data formats or

    standards that are easiest and least costly for them. Costs for market

    participants may also be lowered by the final rule provision

    authorizing the Commission's Chief Information Officer to require use

    of a particular data standard in order to accommodate the needs of

    different communities of users.\117\

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

    \117\ This authority could be used, for example, to require SDRs

    to accept swap data reports using a particular computer language

    already used by firms in a particular segment of the swap

    marketplace, so that they are not forced to incur additional cost by

    acquiring the capability needed to report using a different computer

    language.

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

    Furthermore, the Commission does not anticipate that the

    recordkeeping requirements of this final rule present any costs that

    would impede the efficiency of swap markets.

    Price Discovery. The Commission does not believe that the data

    reporting requirements of this final rule have a material effect on the

    price discovery process. The Commission does not believe that the costs

    associated with its discretionary implementation decisions are of a

    magnitude to impede the normal functioning of swap market participants,

    and thereby disrupt the price discovery process.

    Sound risk management practices. The Commission does not believe

    that the data reporting requirements of this final rule have a material

    effect on sound risk management practices of market participants or

    that the costs associated with its discretionary implementation

    decisions are of a magnitude to impede sound risk management. However,

    as noted in the section on recordkeeping, data which will be reported

    may be of use for internal risk management.

    Other public interest considerations. The Commission believes that

    the data reporting requirements of this final rule will allow

    regulators to readily acquire and analyze market data, thus

    streamlining the surveillance process.

    5. Unique Identifiers

    As discussed more fully above, pursuant to its authority in CEA

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

    Commission proposed requiring the use of three unique identifiers,

    which would serve as critical tools for data aggregation for the

    purposes of conducting market and financial risk surveillance,

    enforcing position limits, analyzing market data, enforcing Commission

    regulations, monitoring systemic risk, and improving market

    transparency.

    The NOPR required that each swap be identified in all swap

    recordkeeping and data reporting by a Unique Swap Identifier (``USI'').

    The NOPR took a ``first-touch'' approach to USI creation, with the USI

    created by SEFs and DCMs for platform-executed swaps, by SDs and MSPs

    for off-platform swaps in which they are the reporting counterparty,

    and by SDRs for off-platform swaps between non-SD/MSP counterparties

    (who may lack the requisite systems for USI creation). This approach

    was designed to foster efficiency by taking advantage of the

    technological sophistication and capabilities of SEFs, DCMs, SDs, MSPs,

    and SDR, while ensuring that a swap is identified by a USI from its

    inception. The provision calling for SDRs to create USIs for off-

    facility swaps between non-SD/MSP counterparties was designed to reduce

    costs and burdens for such counterparties. Non-SD/MSP counterparties

    may lack the sophistication to assign unique identifiers, whereas SDRs

    will likely be large, sophisticated entities capable of realizing

    economies of scope and scale in processing varied swap data streams;

    thus, SDRs are better suited to assign unique identifiers for off-

    facility swaps between non-SD/MSP counterparties.

    The NOPR required that each swap counterparty be identified in all

    swap recordkeeping and data reporting by a legal entity identifier

    (``LEI'') (referred to in the NOPR as a unique counterparty identifier

    or ``UCI'') approved by the Commission. The NOPR established

    [[Page 2190]]

    principles that an LEI must follow to be designated by the Commission

    as the LEI to be used in swap data recordkeeping and reporting pursuant

    to the Commission's Regulations.

    The NOPR also called for establishment of a confidential, non-

    public LEI reference database, to which each swap counterparty

    receiving an LEI would be required to report reference data that would

    be associated with its LEI. The NOPR stated the Commission's belief

    that optimum effectiveness of LEIs for achieving the systemic risk

    protection and transparency goals of the Dodd-Frank Act would come from

    a global LEI created on an international basis through an international

    voluntary-consensus standards body such as ISO. The NOPR provided that

    the Commission would determine, prior to the initial compliance date,

    whether such an LEI is available. If it were, the NOPR called for the

    Commission to designate that LEI as the LEI approved by the Commission

    for use in complying with the final rule. During such time as such an

    LEI is not available, the NOPR called swap counterparties to be

    identified by a substitute identifier created and assigned by an SDR as

    described in the NOPR.

    The NOPR required that each swap subject to CFTC jurisdiction be

    identified in all swap recordkeeping and data reporting by a unique

    product identifier (``UPI'') and a product classification system, as

    determined by the Commission, for the purpose of categorizing swaps

    with respect to the underlying products referenced in them. The NOPR

    called for the UPI and product classification system to identify both

    the swap asset class and the subtype within that asset class to which

    the swap belongs, with sufficient specificity and distinctiveness to

    enable regulators to fulfill their regulatory responsibilities and to

    facilitate real time reporting. As provided in the NOPR, UPIs would be

    assigned to swaps at a particular, asset class-specific level of the

    robust swap taxonomy used by the product classification system, and the

    use of UPIs and the classification system would enable regulators to

    aggregate and report swap activity at a variety of product type levels,

    and to prepare reports required by the Dodd-Frank Act regarding swap

    market activity.

    a. Benefits of the Unique Identifier Requirements

    The Commission anticipates that its approach regarding unique

    identifiers will generate several overarching, if presently

    unquantifiable, benefits to both swap market participants and the

    public generally, including both improved risk management and improved

    regulatory oversight. The Commission believes these benefits will

    accrue to market participants in a number of ways:

    Improved policy analysis by financial regulators

    employing legal entity reference data as the basic infrastructure

    for identifying, describing, classifying, labeling, organizing, and

    using information about trades, counterparties and market

    instruments.

    Improved identification and quantification of existing

    or altered interconnections between firms.

    Improved real time analysis across multiple financial

    markets to identify systemic risk, market stresses and potential

    contagion effects across asset classes.

    Improved financial transaction processing, internal

    recordkeeping, compliance, due diligence, and risk management by

    financial entities.

    Unique identifiers will benefit the general public by supporting

    the Commission's supervisory function over the swap market, as well as

    the broader supervisory responsibilities of U.S. financial regulators

    to protect against financial market systemic risk, enhancing the

    Commission's ability to detect anomalies in the market.

    USIs will assist fulfillment of the systemic risk mitigation,

    transparency, and market monitoring purposes of the Dodd-Frank Act, by

    enabling identification of the origins of each swap as well as events

    that affect the swap during its existence. USIs will be essential for

    collating various data reports concerning a swap into a single,

    accurate data record. They will also help to avoid double-counting of a

    swap reported to different SDRs or to foreign trade repositories,

    something that will improve data quality and accurate data aggregation.

    Substantial benefits of LEIs for the public are recognized in the CPSS-

    IOSCO Report on OTC Derivatives Data Reporting and Aggregation

    Requirement, which recommends expeditious development of a global LEI:

    [A] standard system of LEIs is an essential tool for aggregation

    of OTC derivatives data. An LEI would contribute to the ability of

    authorities to fulfill the systemic risk mitigation, transparency,

    and market abuse protection goals established by the G20 commitments

    related to OTC derivatives, and would benefit efficiency and

    transparency in many other areas. As a universally available system

    for uniquely identifying legal entities in multiple financial data

    applications, LEIs would constitute a global public good.\118\

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

    \118\ CPSS-IOSCO Report on OTC Derivatives Data Reporting and

    Aggregation Requirement, August 2011, p. 36. Publicly available at

    http://www.bis.org/publ/cpss96.pdf.

    LEIs also offer benefits to market participants. The Commission

    notes that while requiring the use of LEIs will represent a new cost to

    market participants, LEIs may also reduce the costs of entity

    identification for market participants. As noted in the CPSS-IOSCO Data

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

    Report:

    The data aggregation experience of the private sector in past

    years suggests * * * that a universal LEI would have the added

    benefit of improving the operational efficiency of firms that are

    OTC derivatives counterparties. For financial firms, the current

    absence of an industry-wide LEI standard makes tracking

    counterparties and calculating exposures across multiple data

    systems complicated and expensive, and can lead to costly errors.

    Maintaining internal identifier databases and reconciling entity

    identification with counterparties is expensive for large firms and

    may be disproportionately so for small firms. In the worst case

    scenario, identification problems can lead to transactions that are

    broken or fail to settle. Entity identification touches so many

    aspects of critical business functions that many firms have created

    their own internal identifiers, sometimes doing so on a department-

    by-department or function-by function basis. Such stop-gap measures

    can provide a measure of local relief, but ultimately they further

    aggravate and complicate the discontinuity, inconsistency, and

    incompatibility of legal entity identification systems both for

    identifying OTC derivatives counterparties and across the

    international financial sector as a whole. This makes useful data

    aggregation and analysis substantially more difficult or even

    impracticable. In addition, complete automation of back-office

    activities and ``straight through processing'' remain elusive, in

    part, because of the lack of a universal identifier for legal

    entities.\119\

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

    \119\ CPSS-IOSCO Report on OTC Derivatives Data Reporting and

    Aggregation Requirement, August 2011, p. 30. Publicly available at

    http://www.bis.org/publ/cpss96.pdf.

    UPIs may enable better assessment of systemic risk with respect to

    particular products, more effective monitoring of the positions and

    exposures of individual market participants, and greater transparency

    provided by real time reporting as well as by the availability to

    regulators of a clearer picture of the marketplace. They may also allow

    aggregation of swap data across multiple SDRs, and comparison of swap

    data with information concerning cash, equities, and futures markets.

    As noted in the CPSS-IOSCO Data Report, UPIs may also assist the back

    office and risk management processes of market participants. Much as

    LEIs may reduce the costs of entity identification in the fashion

    described above by the CPSS-IOSCO Data Report, the Commission believes

    that while requiring the use of UPIs will represent

    [[Page 2191]]

    a new cost to market participants, UPIs may lower costs for market

    participants associated with the need to develop and maintain

    proprietary product data models and systems, which many firms are

    forced to do because of the absence of a universally-accepted standard

    for describing, classifying, and identifying swap products.

    b. Costs of Unique Identifier Requirements

    Costs of USI Requirements

    As noted above, for swaps executed on a SEF or DCM, the final rule

    requires SEFs and DCMs to generate a USI at the time of execution, and

    transmit it to both counterparties, the DCO (if applicable), and the

    SDR. For off-facility swaps with an SD or MSP reporting counterparty,

    the final rule requires the SD or MSP reporting counterparty to create

    the USI at the time of execution, and to transmit it to its

    counterparty, the DCO (if applicable) and the SDR. For off-facility

    swaps between two non-SD/MSP counterparties, the SDR will assign and

    transmit the USI to both counterparties and to the DCO (if applicable).

    The Commission anticipates that this requirement will impose additional

    costs to SEFs, DCMs, SDs, MSPs and SDRs. The Commission has not

    identified any quantifiable costs of the USI requirements that are not

    associated with an information collection subject to the PRA. These

    costs therefore have been accounted for in the information collection

    requests filed with OMB as required by the PRA.

    Thomson Reuters stated that the USI proposal could impose a

    significant implementation burden on market participants because it

    requires the linkage of additional information such as tracking

    numbers. Thomson Reuters recommended a USI with no linked information

    such as embedded asset class or geographical identifiers.

    The Commission believes that, even in the absence of this

    requirement, the automated systems of SEFs, DCMs, DCOs, SDs, MSPs, and

    SDRs would in all cases create internal identifiers for swap

    transactions. Accordingly, for these entities, the cost of creating

    USIs will not constitute an incremental cost for such entities above

    costs they would already incur. Additionally, to reduce costs for off-

    facility bilateral swaps between two non-SD/MSP counterparties, the

    final rules have maintained the NOPR approach requiring SDRs to create

    and transmit USIs for such swaps.

    Costs of LEI Requirements

    The Commission anticipates that required use of LEIs will impose

    additional costs on market participants.

    The Commission received several comments regarding the cost-benefit

    implications of the NOPR's LEI provisions.

    Three commenters presented LEI proposals or alternatives they

    believed would meet the Commission's requirements in the most cost-

    effective manner. CME recommended that the Commission use its large

    trader system for futures, since this would be quicker, easier, less

    costly, and less risky than attempting to establish a new international

    method identifying legal entities. CUSIP presented its CABRE system as

    a viable and cost-effective alternative for LEIs, suggesting that it

    would help market participants realize significant cost savings much

    earlier than other options. GS1 presented itself as a potential LEI

    provider, suggesting that it could implement a LEI system at no

    additional cost to SDs and SEFs that would minimize the overall cost of

    the identification system. Two members of Congress asked that the

    Commission give full and fair consideration to GS1's proposal because

    it could make implementation less costly and burdensome for a

    significant segment of the industry.

    TriOptima commented that the LEI would require significant

    adaptation costs and could possibly delay the implementation of SDRs.

    TriOptima suggested an interim period to allow reporting institutions

    to submit their own LEI and then map this identifier to the one used by

    the SDR.

    With respect to the NOPR requirement for reporting of level two LEI

    reference data concerning the affiliations of a counterparty, AMG

    suggested that the Commission should establish a 50 percent majority

    ownership threshold, because requiring corporate affiliation

    information from companies that have less than majority ownership may

    be burdensome, and in many cases, impracticable.

    As discussed above, three commenters presented alternatives to the

    Commission's proposals regarding LEIs. The Commission has evaluated

    these proposals and will continue to weigh the cost and benefits of

    each as it prepares to implement an international industry initiative

    and designate an LEI for use in swap data reporting as provided in the

    final rule.

    The Commission has determined that costs for market participants

    are not readily quantifiable. However, the Commission understands that

    start-up costs for the LEI system may be borne at least in part by data

    service providers, SDs, and other major market participants that are

    involved in the international industry initiative now underway to

    develop LEIs. Because this process is ongoing, the Commission has

    determined that it cannot readily estimate the remaining costs to

    market participants that will be imposed by its completion, or what

    portion of the impetus for the LEI initiative can be attributed to this

    final rule rather than to a general pre-implementation industry

    initiative for a better system of legal entity identification.

    The final rule calls for the Commission to determine prior to the

    start of swap data reporting whether an LEI system meeting the

    requirements of the final rule is available. If the Commission

    determines that such a system is available, its use will be required in

    all swap data recordkeeping and reporting. If the Commission determines

    that such a system is not yet available, until such time as the

    Commission designates such a system for use in complying with the final

    rule, swap counterparties will be identified by means of a substitute

    identifier created by SDRs as specified in the final rule. Although the

    Commission anticipates that an LEI meeting the requirement of the final

    rule will be available before the commencement of swap data reporting,

    the Commission has also considered the potential costs and benefits to

    SDRs for creating, assigning and transmitting such substitute

    identifiers if they should be required. The Commission anticipates that

    if SDRs are required to create substitute identifiers, such

    requirements will impose additional costs for SDRs.

    Pursuant to this final rule, the reporting of Level Two LEI

    reference data will be limited to the identity of a swap counterparty's

    ultimate parent. This represents a reduction to the burden presented in

    the NOPR, which called for the reporting of all affiliations of each

    swap counterparty identified by an LEI. The Commission believes that

    this approach is practical and cost-effective, because it reduces the

    burden on swap counterparties, while capturing the essential level two

    LEI reference data for a given swap that will allow the Commission and

    other regulators to aggregate swap data in a way that enables effective

    monitoring of systemic risk.

    Costs of UPI requirements

    Thomson Reuters recommended that the Commission establish a pilot

    program for the development of UPI codes.

    [[Page 2192]]

    The Commission anticipates that this requirement will ultimately

    impose additional costs to market participants. The final rule provides

    that when the Commission determines that a UPI and product

    classification system acceptable to the Commission is available, the

    Commission will designate that system for use in all swap data

    recordkeeping and reporting. Until the Commission designates such a

    system, the final rule calls for swaps to be identified by the internal

    product identifier or product description used by the SDR to which a

    swap is reported. As the Commission has not set forth requirements for

    a UPI system in the final rules, and has not yet designated such a

    system for use by market participants, the Commission has not

    identified any quantifiable costs of the LEI requirements that are not

    associated with an information collection subject to the PRA. These

    costs therefore have been accounted for in the information collection

    requests filed with OMB as required by the PRA.

    c. Unique Identifiers in Light of CEA Section 15(a)

    The Commission has evaluated the benefits of the required use of

    USIs, LEIs, and UPIs in light of the specific considerations identified

    in Section 15(a) of the CEA, as follows.

    Protection of market participants and the public. As discussed

    above, the Commission has endeavored to limit the costs attributable to

    discretionary implementation decisions to the maximum degree consistent

    with statutory requirements and their intended benefits. The Commission

    has endeavored to match the costs of the post-implementation

    marketplace with the sizes, levels of sophistication, and levels of

    systemic importance of the affected participants, so that the

    associated benefits may be realized by the public.

    With respect to unique identifiers, the Commission believes the

    benefits include the protection of market participants and the public.

    USIs. The Commission believes that USIs will be a vital tool for

    regulatory agencies in analyzing swap market data for the purposes of

    identifying the positions of systemically important market participants

    and the accumulation of systemic risk, thus protecting market

    participants and the public. USIs will allow for the creation of a

    clear and unified data stream by allowing for the aggregation of

    transaction information without double-counting swaps reported to

    different SDRs or to foreign trade repositories, or reported in VSRs.

    LEIs. The Commission believes that requiring the use of LEIs will

    greatly enhance the ability of the Commission and other regulatory

    agencies to oversee swap markets by providing necessary clarity and

    cohesion to the data used for regulatory analyses. Among the benefits

    to regulators of an LEI regime, the Global Financial Markets

    Association (``GFMA'') identified more efficient data aggregation; more

    powerful modeling and risk analysis; facilitation of information

    sharing and reconciliation between regulators; better supervision of

    cross-border firms and firms whose business lines are overseen by

    multiple regulators; and facilitating identification of affiliates and

    parent companies. GFMA also called the LEI regime ``a powerful tool for

    regulators in monitoring and managing systemic risks.'' \120\ The CPSS-

    IOSCO Report on OTC Derivatives Data Reporting and Aggregation

    Requirement, which recommends expeditious development of a global LEI,

    states that:

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

    \120\ GFMA, Creating a Global Legal Entity Identifier (LEI)

    Standard, September 21, 2001, p. 10. Publicly available at http://www.sifma.org/uploadedfiles/issues/technology_and_operations/legal_entity_identifier/lei-project-summary-slides.pdf.

    [A] standard system of LEIs is an essential tool for aggregation

    of OTC derivatives data. An LEI would contribute to the ability of

    authorities to fulfill the systemic risk mitigation, transparency,

    and market abuse protection goals established by the G20 commitments

    related to OTC derivatives, and would benefit efficiency and

    transparency in many other areas. As a universally available system

    for uniquely identifying legal entities in multiple financial data

    applications, LEIs would constitute a global public good.\121\

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

    \121\ CPSS-IOSCO Report on OTC Derivatives Data Reporting and

    Aggregation Requirement, August 2011, p.36. Publicly available at

    http://www.bis.org/publ/cpss96.pdf.

    UPIs. The Commission believes that UPIs will work in conjunction

    with USIs to create an accurate, clear, and unified data record free of

    double-counting. The use of UPIs will also allow regulatory agencies to

    compare swap market data with data from the cash, equities, and futures

    markets for a given product, thus enhancing regulators' understanding

    of the roles of different financial instruments in the marketplace for

    that product.

    Efficiency, competitiveness, and financial integrity. As discussed

    above, the Commission has endeavored to limit the costs attributable to

    discretionary implementation decisions to the maximum degree consistent

    with statutory requirements and their intended benefits. The Commission

    has endeavored to match the costs of the post-implementation

    marketplace with the sizes, levels of sophistication, and levels of

    systemic importance of the affected participants, so that the

    associated benefits may be realized by the public. With respect to

    unique identifiers, the Commission believes the benefits include

    enhancements to the financial integrity of the swap market.

    The Commission believes that, by improving the integrity of the

    U.S. swap markets in the manner described above, this final rule may

    make participation in the U.S. swap markets more appealing to entities

    that currently do not participate. Therefore, this final rule presents

    the potential to enhance the demand for access to the U.S. swap market

    and its participants both domestically and in the global swap

    marketplace. This potential increase in swap market participation may

    improve the competitiveness of the swap marketplace as more parties

    demand sources of risk transference.

    Furthermore, the Commission does not anticipate that the unique

    identifier requirements of this final rule present any costs that would

    impede the efficiency of swap markets.

    USIs. The Commission believes that the benefits of USIs include

    greater transparency, improved data aggregation and cross-border

    supervision. This will improve regulatory oversight and responsiveness,

    and promote a more thorough understanding of the exposures of swap

    counterparties, which will provide more financial integrity for the

    swap market.

    The Commission believes that USIs, as well as LEIs and UPIs, will

    enable greater automation of back-office processes for reporting

    counterparties, thereby promoting efficiency and a potential source of

    cost reduction for swap market participants.

    LEIs. As stated above, the Commission believes that LEIs, along

    with USIs and UPIs, will promote greater automation of back-office

    processes for reporting counterparties, thereby improving operational

    efficiency.

    UPIs. The Commission believes that UPIs will serve to work in

    conjunction with USIs in creating an accurate, clear, and unified data

    record. UPIs will therefore promote the same benefits of greater

    transparency, data aggregation, and cross-border supervision, and

    therefore enhance the financial integrity of swap markets.

    Price discovery. The Commission does not believe that the unique

    identifier requirements will have a material impact on price discovery,

    or that the costs associated with its discretionary implementation

    decisions are of a magnitude to impede the normal functioning of swap

    market participants

    [[Page 2193]]

    and thereby disrupt the price discovery process.

    Sound risk management practices. The Commission believes that

    requiring the use of USIs, UPIs, and LEIs will also facilitate risk

    management for market participants.

    USIs. The Commission believes that the use of USIs will likely

    create a more clearly organized, readily accessible database of swap

    information for each reporting counterparty, including accurate

    information related to cross-border transactions, which may facilitate

    the internal risk management operations of the counterparty.

    LEIs. The Commission believes that LEIs will provide a number of

    benefits in the area of risk management to reporting counterparties.

    These include the benefits identified by GFMA, which are enumerated

    below.

    GFMA stated that the risk management benefits of LEIs included

    improved response times for crisis reporting and the potential for

    improved response times for sanctions monitoring; a holistic view of

    counterparty and issuer risks; and the facilitation of data

    aggregation, modeling, and analysis.\122\

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

    \122\ GFMA, Creating a Global Legal Entity Identifier (LEI)

    Standard, September 21, 2001, p. 11. Publicly available at http://www.sifma.org/uploadedfiles/issues/technology_and_operations/legal_entity_identifier/lei-project-summary-slides.pdf.

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

    GFMA also listed a number of other operational benefits to market

    participants of implementing LEIs. These include an integrated view of

    entities across divisions and subsidiaries; support for the development

    of hierarchy information; processing and settlement efficiency; an

    improved vendor feed and improved corporate actions management; support

    for new client on-boarding; and the facilitation of post-merger

    integrations.\123\

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

    \123\ GFMA, Creating a Global Legal Entity Identifier (LEI)

    Standard, September 21, 2001, p. 11. Publicly available at http://www.sifma.org/uploadedfiles/issues/technology_and_operations/legal_entity_identifier/lei-project-summary-slides.pdf.

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

    The Commission believes that the benefits of LEIs also include the

    facilitation of straight-through processing, which will promote risk

    mitigation for counterparties. As the Counterparty Risk Management

    Policy Group II (CPRMG II) noted:

    CRMPG II recommends that trade associations and market

    participants must pursue and develop straight through processing of

    OTC transactions, a critical risk mitigant in today's high volume

    markets. As a fundamental matter, disputes over the existence or the

    terms of a transaction have the potential for enormously increasing

    risk, since each party to the disputed transaction hedges and risk

    manages the disputed trade based on certain economic assumptions.

    [Straight through processing] reduces the number and frequency of

    trade disputes and maximizes market efficiency, opportunity and

    access. [Straight through processing] therefore fosters legal,

    credit, market and operational certainty.\124\

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

    \124\ Counterparty Risk Management Policy Group II, Toward

    Greater Financial Stability: A Private Sector Perspective, July 27,

    2005, p. 84. Publicly available at http://fcic-static.law.stanford.edu/cdn_media/fcic-docs/2005-07-25%20Counterparty%20Risk%20Management%20Policy%20Group-%20Toward%20Greater%20Financial%20Stability.pdf.

    UPIs. The Commission believes that UPIs will serve to work in

    conjunction with USIs in creating an accurate and unified internal data

    record for each reporting counterparty. The use of UPIs will allow a

    reporting counterparty to monitor its swap market exposures and compare

    them to its positions and to the broader market variables in analogous

    cash, equities, and futures instruments. The Commission believes that

    this will greatly enhance the ability of the reporting counterparty to

    assess the risk associated with its swap market exposures.

    Other public interest considerations. The Commission anticipates

    that unique identifiers will facilitate the efforts of academics and

    analysts employed by regulatory agencies in the course of their

    investigations by providing a clear framework for data aggregation and

    comparison across financial instruments.

    IV. Compliance Dates

    A. Proposed Rule

    Section 754 of the Dodd-Frank Act requires Title VII to be

    effective within 360 days of enactment (i.e., by July 16, 2011) or, to

    the extent a provision of Title VII requires rulemaking, not less than

    60 days after publication of final rules or regulations implementing

    such a provision of Title VII. While the final rules become effective

    sixty (60) days after Federal Register publication, the Commission has

    discretion to set forth dates to begin enforcement of regulatory

    provisions.\125\ In setting forth compliance dates the Commission has

    taken into consideration comment received and factors such as available

    resources and the Dodd-Frank Act's goals. In May 2011, the Commission

    and the SEC held a joint public roundtable to elicit comment concerning

    what implementation schedule should be set for the Commission's Dodd-

    Frank Act rules, including comment concerning the amount of time

    registered entities and counterparties will need, after issuance of the

    final rule, to prepare for the commencement of swap data reporting

    pursuant to this part. The NOPR requested comment regarding the nature

    and length of the implementation and preparation period which the

    Commission should provide prior to the start of swap data reporting,

    and concerning how the beginning of such reporting should be phased in.

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

    \125\ See Heckler v. Chaney, 470 U.S. 821 (1985).

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

    B. Comments Received

    The Commission received numerous comments from comment letters and

    roundtable participants concerning when swap data reporting should

    begin, and how the commencement of reporting should be phased in.

    1. Initial Compliance Date

    A variety of comments addressed the setting of the initial

    compliance date for reporting.

    a. Definite compliance dates. Better Markets called on the

    Commission to provide the industry with clear compliance dates for the

    start of reporting.

    b. Period for infrastructure development and testing. Roundtable

    participants, DTCC, ISDA, SIFMA, Global Forex, MFA, WGCEF, and Dominion

    Resources emphasized that reporting should not be required to begin

    until the industry has time to implement or modify and to test

    automated systems to be used for reporting. In order to allow for such

    infrastructure development and testing, commenters urged that the

    initial compliance date for reporting should be set at least six to

    nine months following issuance of the final rule.

    c. Conditions precedent to reporting. EEI, the Electric Coalition,

    and roundtable participants commented that reporting should not be

    required to begin until after issuance of all the Commission's Dodd-

    Frank Act rules, or at least of certain key rules including definitions

    of ``swap,'' ``swap dealer,'' and ``major swap participant.'' ISDA,

    SIFMA, Global Forex, MFA, and WGCEF argued that reporting should not be

    required to begin until at least one SDR accepting swaps in the asset

    class in question is fully functional, and DTCC and WGCEF suggested

    that reporting should begin only after both unique identifiers and data

    formats for reporting are finalized. MFA noted that beginning reporting

    after SDR registration and infrastructure are finalized could avoid

    giving current service providers an advantage over new entrants.

    d. Other initial reporting suggestions. ISDA and SIFMA suggested

    that the CFTC and the SEC should harmonize

    [[Page 2194]]

    when reporting will commence. Global Forex, DTCC, and Thomson Reuters

    suggested consideration of a partially voluntary, benchmark approach to

    implementation of reporting, similar to the ODSG commitment letter

    approach used to initiate existing reporting to trade repositories.

    2. Phasing in the Start of Reporting

    A number of commenters also advocated phasing in the start of

    reporting.

    a. Phasing by asset class. DTCC, Global Forex, and roundtable

    participants urged phasing in the start of reporting by asset class.

    They noted that that different swap asset classes are at different

    levels of automation and data normalization, with the credit and

    interest rate asset classes at a more advanced stage of development

    than the equity, foreign exchange, and other commodity asset classes.

    b. Phasing by counterparty type. The Electric Coalition and Chatham

    Financial advocated phasing in the start of reporting according to the

    type and sophistication of the counterparty, with end users being

    phased in last as they have the least technological sophistication.

    Global Forex suggested that the phase-in design should include a

    gradual reduction of target reporting times to allow participants to

    improve their systems over time.

    c. Phasing by product type. WGCEF and Thomson Reuters suggested

    that reporting for swaps executed on electronic platforms should be

    phased in more quickly than reporting for off-platform, bespoke

    transactions, and that the Commission should focus on the more liquid

    contracts which represent the bulk of the OTC market.

    d. Other phasing suggestions. DTCC, Global Forex, and roundtable

    participants suggested that phasing in reporting of confirmation data

    to begin several months later than the reporting of PET data would take

    into account the need for additional time to prepare for reporting of

    the relative larger amount of data involved in confirmation data

    reporting, to develop ways to represent confirmation terms in machine-

    readable form, and to normalize and create data fields for confirmation

    data. Eris Exchange suggested that voluntary reporting should precede

    mandatory reporting. MGEX called for a carefully thought out,

    staggered, and reasonable implementation schedule.

    C. Determination of Compliance Dates

    The Commission has considered the above comments, and has

    determined to provide an implementation schedule and compliance dates

    for swap data reporting incorporating many of commenters' suggestions,

    as set forth below.

    1. Initial Compliance Dates

    a. Clear compliance dates. The Commission agrees with comments

    calling for clear compliance dates for the beginning of full compliance

    with this part. The Commission has determined that each SEF, DCM, DCO,

    SDR, SD, MSP, and non-SD/MSP counterparty subject to the jurisdiction

    of the Commission must commence full compliance with this part on the

    applicable compliance date set forth below.\126\

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

    \126\ The obligations of swap counterparties with respect to

    historical swaps, i.e., swaps executed prior to the applicable

    compliance date and in existence on or after July 15, 2010, the date

    of enactment of the Dodd-Frank Act, will be as provided in part 46

    of this chapter.

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

    b. Period for infrastructure development and testing. The

    Commission agrees with commenters and roundtable participants that it

    is important to provide a period of at least six months following

    issuance of the final data recordkeeping and reporting rule, in order

    to allow necessary infrastructure development and testing in light of

    the requirements of the final rule to occur before reporting is

    required to begin. The initial compliance date for swap data reporting

    set by the final rule provides such an infrastructure development and

    testing period. The Commission believes that a six month period should

    be sufficient for this purpose, and also believes that timely

    fulfillment of the important purposes of the Dodd-Frank Act would be

    frustrated if the start of swap data reporting were further delayed. In

    order to minimize confusion concerning the commencement of both

    regulatory reporting and real time reporting, and to reduce burdens on

    registered entities and swap counterparties required to report under

    both part 45 and part 43, the Commission has determined to set the same

    date as the initial compliance date for reporting under both part 45

    and part 43.

    c. Conditions precedent to reporting. The Commission recognizes

    that adequate preparation by registered entities and swap

    counterparties for the beginning of swap data reporting would be

    difficult in the absence of final Commission rules defining ``swap,''

    ``swap dealer,'' and ``major swap participant.'' The definition of

    ``swap'' is relevant to determining what transactions must be reported,

    while the definitions of SD and MSP are relevant to determining which

    counterparty is the reporting counterparty pursuant to this part.

    Accordingly, the Commission has determined that the initial compliance

    date provided in the final rule will be the later of (1) the date

    certain listed below, or (2) 60 days following issuance of the later of

    the Commission's final rules defining swap and defining SD and MSP. The

    Commission disagrees with comments calling for swap data reporting to

    be delayed until after all Commission rules under the Dodd-Frank Act

    are issued, because it believes that important purposes of the Dodd-

    Frank Act would be frustrated by additional delay.

    d. Other initial reporting suggestions. The Commission has

    consulted extensively with the SEC concerning the Commission's swap

    data reporting rule and the SEC's security-based swap data reporting

    rule. Both Commissions have worked to coordinate and harmonize those

    rules to the extent practicable. Since the Dodd-Frank Act provides

    clear delineation of the jurisdiction of each Commission with respect

    to swaps, the Commission does not believe that it is necessary to delay

    the commencement of reporting pursuant to this part until issuance of

    the SEC's final security-based swap data reporting rule. The Commission

    disagrees with comments calling for swap data reporting pursuant to

    this part to follow the voluntary, benchmark approach to implementation

    of reporting followed previously under the ODSG commitment letter

    approach used to initiate reporting to trade repositories, or to have

    voluntary reporting precede mandatory reporting. The Commission has

    consulted with ODSG and ODRF concerning experience gained from prior

    voluntary reporting. The Commission believes, however, that a

    ``benchmark'' approach involving flexible timetables is not appropriate

    for implementation of reporting under the Dodd-Frank Act. The

    uncertainty in such a reporting regime could burden the industry, and

    make effective oversight and enforcement more difficult.

    2. Phasing in the Start of Reporting

    a. Phasing by asset class. The Commission accepts the view of many

    market participants that differences between asset classes with respect

    to both existing automation and existing data normalization are

    significant and should be taken into account in order to ensure that

    data reporting required by the final rule is practicable to achieve by

    the applicable compliance dates. The Commission also believes that

    establishing deadlines for the commencement of reporting in all asset

    classes will serve as an important

    [[Page 2195]]

    incentive for continued progress by the industry in these regards.

    Accordingly, the Commission has determined that swap data reporting

    should be phased in by asset class, with reporting for credit swaps and

    interest rate swaps beginning earlier than reporting for equity swaps,

    foreign exchange transactions, and other commodity swaps.

    b. Phasing by counterparty type. The Commission agrees with

    comments suggesting that the initial compliance date for non-SD/MSP

    reporting counterparties should take into account the fact that such

    counterparties are less likely than SEFs, DCMs, DCOs, SDs, and MSPs, to

    have sophisticated automated systems for reporting, and the possible

    need of non-SD/MSP reporting counterparties for additional time to

    prepare for reporting. The Commission has determined that swap data

    reporting should be phased in by counterparty type, with reporting by

    non-SD/MSP reporting counterparties in each asset class commencing 180

    days after the start of reporting in that asset class by SEFs, DCMs,

    DCOs, SDs, and MSPs.\127\ The Commission does not believe that

    reporting should be further phased in by registered entity or

    counterparty type. The Commission believes that SEFs, DCMs, DCOs, SDs,

    and MSPs have sufficient technological expertise to enable them to meet

    a compliance date which provides an appropriate, six-month preparation

    period, without further phase-in.

    c. Phasing by product type. In light of the phasing by asset class

    and by counterparty type to be provided in the final rule as noted

    above, the Commission does not believe that additional phasing by

    product type is necessary. The Commission does not believe that it is

    technologically necessary to delay reporting for off-facility,

    uncleared swaps. Where an SD or MSP is the reporting counterparty for a

    bespoke swap, reporting systems should be available. In the relatively

    few instances where a non-SD/MSP counterparty is the reporting

    counterparty for a bespoke swap, the final rule already provides an

    additional six-month phase-in period and extended reporting deadlines.

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

    \127\ The Commission notes that one consequence of this approach

    is that continuation data reporting by a non-SD/MSP reporting

    counterparty for an on-facility swap in some cases may begin as much

    as six months after the creation data report for that swap by the

    SEF or DCM on which the swap was executed. The Commission believes

    this is acceptable in light of the burden reduction provided to non-

    SD/MSP reporting counterparties by phasing in their swap data

    reporting.

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

    d. Other phasing suggestions. As discussed above, the Commission

    believes that confirmation data is essential to fulfilling the purposes

    of the Dodd-Frank Act, and should be reported starting with the

    applicable compliance date. However, the Commission also recognizes

    that for some swap counterparties, and particularly for non-SD/MSP

    reporting counterparties, reporting confirmation data normalized in

    data fields may not yet be technologically practicable when reporting

    begins. These considerations are less applicable in the case of swaps

    executed on a SEF or DCM or cleared by a DCO, since in such cases, as

    discussed above, execution on the SEF or DCM or clearing on the DCO

    will be required to include all terms of the confirmation of the swap.

    Therefore, as discussed above in the section addressing creation data

    reporting, the final rule provides as follows. For off-facility,

    uncleared swaps, during the first six months following the applicable

    compliance date, while PET data will have to be reported electronically

    with data normalized in data fields, reporting counterparties for whom

    reporting confirmation data normalized in data fields is not yet

    technologically practicable may report required confirmation data by

    transmitting an image of all documents recording the confirmation. This

    will allow needed additional time for development of schemas for data

    reporting and implementation by non-SD/MSP counterparties. Electronic

    reporting of all confirmation data normalized in data fields will be

    required after this six month period.

    3. Compliance Dates

    For the reasons set forth above, the Commission has determined that

    each swap execution facility, designated contract market, derivatives

    clearing organization, swap data repository, swap dealer, major swap

    participant, and non-SD/MSP counterparty subject to the jurisdiction of

    the Commission shall commence full compliance with all provisions of

    this part on the applicable compliance dates set forth below. The

    obligations of swap counterparties with respect to swaps executed prior

    to the applicable compliance date as provided in this section and in

    existence on or after July 21, 2010, the date of enactment of the Dodd-

    Frank Act, are set forth in part 46 of this chapter.

    a. Compliance Dates for Swap Execution Facilities, Designated Contract

    Markets, Derivatives Clearing Organizations, Swap Data Repositories,

    Swap Dealers, and Major Swap Participants.

    Swap execution facilities, designated contract markets, derivatives

    clearing organizations, swap data repositories, swap dealers, and major

    swap participants shall commence full compliance with all provisions of

    this part as follows:

    Credit swaps and interest rate swaps. Compliance date 1, the

    compliance date with respect to credit swaps and interest rate swaps,

    shall be the later of: July 16, 2012; or 60 calendar days after the

    publication in the Federal Register of the later of the Commission's

    final rule defining the term ``swap'' or the Commission's final rule

    defining the terms ``swap dealer'' and ``major swap participant.''

    Equity swaps, foreign exchange swaps, and other commodity swaps.

    Compliance date 2, the compliance date with respect to equity swaps,

    foreign exchange swaps, and other commodity swaps, shall be 90 calendar

    days after compliance date 1.

    Compliance date for non-SD/MSP counterparties. Non-SD/MSP

    counterparties shall commence full compliance with all provisions of

    this part for all swaps on compliance date 3, which shall be 90

    calendar days after compliance date 2.

    The phasing in of swap data reporting under the final rule is shown

    graphically in the following table.

    BILLING CODE 6351-01-P

    [[Page 2196]]

    [GRAPHIC] [TIFF OMITTED] TR13JA12.002

    [[Page 2197]]

    BILLING CODE 6351-01-C

    Final Rules

    List of Subjects in 17 CFR Part 45

    Swaps, Data recordkeeping requirements and data reporting

    requirements.

    0

    In consideration of the foregoing, and pursuant to the authority of the

    Commodity Exchange Act as amended, and in particular sections 8a(5) and

    21 of the Act, the Commission hereby adopts an amendment to Chapter 1

    of Title 17 of the Code of Federal Regulation by adding a part 45 to

    read as follows:

    PART 45--SWAP DATA RECORDKEEPING AND REPORTING REQUIREMENTS

    Sec.

    45.1 Definitions.

    45.2 Swap recordkeeping.

    45.3 Swap data reporting: Creation data.

    45.4 Swap data reporting: Continuation data.

    45.5 Unique swap identifiers.

    45.6 Legal entity identifiers.

    48.7 Unique product identifiers.

    45.8 Determination of which counterparty must report.

    45.9 Third-party facilitation of data reporting.

    45.10 Reporting to a single swap data repository.

    45.11 Data reporting for swaps in a swap asset class not accepted by

    any swap data repository.

    45.12 Voluntary supplemental reporting.

    45.13 Required data standards.

    45.14 Reporting of errors and omissions in previously reported data.

    Appendix 1 to Part 45--Tables of minimum primary economic terms

    data.

    Authority: 7 U.S.C. 6r, 7, 7a-1, 7b-3, 12a and 24, as amended

    by Title VII of the Wall Street Reform and Consumer Protection Act

    of 2010, Pub. L. 111-203, 124 Stat. 1376 (2010), unless otherwise

    noted.

    Sec. 45.1 Definitions.

    As used in this part:

    Asset class means the broad category of goods, services or

    commodities, including any ``excluded commodity'' as defined in CEA

    section 1a(19), with common characteristics underlying a swap. The

    asset classes include credit, equity, foreign exchange (excluding

    cross-currency), interest rate (including cross-currency), other

    commodity, and such other asset classes as may be determined by the

    Commission.

    Business day means the twenty-four hour day, on all days except

    Saturdays, Sundays, and legal holidays, in the location of the

    reporting counterparty or registered entity reporting data for the

    swap.

    Business hours means consecutive hours during one or more

    consecutive business days.

    Compliance date means the applicable date on which a registered

    entity or swap counterparty subject to the jurisdiction of the

    Commission is required to commence full compliance with all provisions

    of this part, as set forth in the preamble to this part.

    Confirmation (``confirming'') means the consummation

    (electronically or otherwise) of legally binding documentation

    (electronic or otherwise) that memorializes the agreement of the

    parties to all terms of a swap. A confirmation must be in writing

    (whether electronic or otherwise) and must legally supersede any

    previous agreement (electronically or otherwise).

    Confirmation data means all of the terms of a swap matched and

    agreed upon by the counterparties in confirming the swap. For cleared

    swaps, confirmation data also includes the internal identifiers

    assigned by the automated systems of the derivatives clearing

    organization to the two transactions resulting from novation to the

    clearing house.

    Credit swap means any swap that is primarily based on instruments

    of indebtedness, including, without limitation: Any swap primarily

    based on one or more broad-based indices related to instruments of

    indebtedness; and any swap that is an index credit swap or total return

    swap on one or more indices of debt instruments.

    Derivatives clearing organization has the meaning set forth in CEA

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

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

    Designated contract market has the meaning set forth in CEA section

    5, and any Commission regulation implementing that Section.

    Electronic confirmation (confirmation ``occurs electronically'')

    means confirmation that is done by means of automated electronic

    systems.

    Electronic reporting (``report electronically'') means the

    reporting of data normalized in data fields as required by the data

    standard or standards used by the swap data repository to which the

    data is reported. Except where specifically otherwise provided in this

    chapter, electronic reporting does not include submission of an image

    of a document or text file.

    Electronic verification (verification ``occurs electronically'')

    means verification that is done by means of automated electronic

    systems.

    Financial entity has the meaning set forth in CEA section

    2(h)(7)(C).

    Foreign exchange forward has the meaning set forth in CEA section

    1a(24).

    Foreign exchange instrument means an instrument that is both

    defined as a swap in part 1 of this chapter and included in the foreign

    exchange asset class. Instruments in the foreign exchange asset class

    include: Any currency option, foreign currency option, foreign exchange

    option, or foreign exchange rate option; any foreign exchange forward

    as defined in CEA section 1a(24); any foreign exchange swap as defined

    in CEA section 1a(25); and any non-deliverable forward involving

    foreign exchange.

    Foreign exchange swap has the meaning set forth in CEA section

    1a(25). It does not include swaps primarily based on rates of exchange

    between different currencies, changes in such rates, or other aspects

    of such rates (sometimes known as ``cross-currency swaps'').

    Interest rate swap means any swap which is primarily based on one

    or more interest rates, such as swaps of payments determined by fixed

    and floating interest rates; or any swap which is primarily based on

    rates of exchange between different currencies, changes in such rates,

    or other aspects of such rates (sometimes known as ``cross-currency

    swaps'').

    International swap means a swap required by U.S. law and the law of

    another jurisdiction to be reported both to a swap data repository and

    to a different trade repository registered with the other jurisdiction.

    Life cycle event means any event that would result in either a

    change to a primary economic term of a swap or to any primary economic

    terms data previously reported to a swap data repository in connection

    with a swap. Examples of such events include, without limitation, a

    counterparty change resulting from an assignment or novation; a partial

    or full termination of the swap; a change to the end date for the swap;

    a change in the cash flows or rates originally reported; availability

    of a legal entity identifier for a swap counterparty previously

    identified by name or by some other identifier; or a corporate action

    affecting a security or securities on which the swap is based (e.g., a

    merger, dividend, stock split, or bankruptcy).

    Life cycle event data means all of the data elements necessary to

    fully report any life cycle event.

    Major swap participant has the meaning set forth in CEA section

    1a(33) and in part 1 of this chapter.

    Mixed swap has the meaning set forth in CEA section 1a(47)(D), and

    refers to an instrument that is in part a swap

    [[Page 2198]]

    subject to the jurisdiction of the Commission, and in part a security-

    based swap subject to the jurisdiction of the SEC.

    Multi-asset swap means a swap that does not have one easily

    identifiable primary underlying notional item, but instead involves

    multiple underlying notional items within the Commission's jurisdiction

    that belong to different asset classes.

    Non-electronic confirmation (confirmation ``does not occur

    electronically'') means confirmation that is done manually rather than

    by means of automated electronic systems.

    Non-electronic verification (verification ``does not occur

    electronically'') means verification that is done manually rather than

    by means of automated electronic systems.

    Non-SD/MSP counterparty means a swap counterparty that is neither a

    swap dealer nor a major swap participant.

    Off-facility swap means a swap not executed on or pursuant to the

    rules of a swap execution facility or designated contract market.

    Other commodity swap means any swap not included in the credit,

    equity, foreign exchange, or interest rate asset classes, including,

    without limitation, any swap for which the primary underlying item is a

    physical commodity or the price or any other aspect of a physical

    commodity.

    Primary economic terms means all of the terms of a swap matched or

    affirmed by the counterparties in verifying the swap, including at a

    minimum each of the terms included in the most recent Federal Register

    release by the Commission listing minimum primary economic terms for

    swaps in the swap asset class in question. The Commission's current

    lists of minimum primary economic terms for swaps in each swap asset

    class are found in Appendix 1 to Part 45.

    Primary economic terms data means all of the data elements

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

    in the swap asset class of the swap in question.

    Quarterly reporting (``reported quarterly'') means reporting four

    times each fiscal year, following the end of each fiscal year quarter,

    making each quarterly report within 30 calendar days of the end of the

    fiscal year quarter.

    Reporting counterparty means the counterparty required to report

    swap data pursuant to this part, selected as provided in Sec. 45.8.

    Required swap continuation data means all of the data elements that

    must be reported during the existence of a swap to ensure that all data

    concerning the swap in the swap data repository remains current and

    accurate, and includes all changes to the primary economic terms of the

    swap occurring during the existence of the swap. For this purpose,

    required swap continuation data includes:

    (1) All life cycle event data for the swap if the swap is reported

    using the life cycle reporting method, or all state data for the swap

    if the swap is reported using the snapshot reporting method; and

    (2) All valuation data for the swap.

    Required swap creation data means all primary economic terms data

    for a swap in the swap asset class in question, and all confirmation

    data for the swap.

    State data means all of the data elements necessary to provide a

    snapshot view, on a daily basis, of all of the primary economic terms

    of a swap in the swap asset class of the swap in question, including

    any change to any primary economic term or to any previously-reported

    primary economic terms data since the last snapshot. At a minimum,

    state data must include each of the terms included in the most recent

    Federal Register release by the Commission listing minimum primary

    economic terms for swaps in the swap asset class in question. The

    Commission's current lists of minimum primary economic terms for swaps

    in each swap asset class are found in Appendix 1 to Part 45.

    Swap data repository has the meaning set forth in CEA section

    1a(48), and in part 49 of this chapter.

    Swap dealer has the meaning set forth in CEA section 1a(49), and in

    part 1 of this chapter.

    Swap execution facility has the meaning set forth in CEA section

    1a(50) and in part 37 of this chapter.

    Valuation data means all of the data elements necessary to fully

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

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

    Verification (``verify,'' ``verified,'' or ``verifying'') means the

    matching by the counterparties to a swap of each of the primary

    economic terms of a swap, at or shortly after the time the swap is

    executed.

    Sec. 45.2 Swap recordkeeping.

    (a) Recordkeeping by swap execution facilities, designated contract

    markets, derivatives clearing organizations, swap dealers, and major

    swap participants. Each swap execution facility, designated contract

    market, derivatives clearing organization, swap dealer, and major swap

    participant subject to the jurisdiction of the Commission shall keep

    full, complete, and systematic records, together with all pertinent

    data and memoranda, of all activities relating to the business of such

    entity or person with respect to swaps, as prescribed by the

    Commission. Such records shall include, without limitation, the

    following:

    (1) For swap execution facilities, all records required by part 37

    of this chapter.

    (2) For designated contract markets, all records required by part

    38 of this chapter.

    (3) For derivatives clearing organizations, all records required by

    part 39 of this chapter.

    (4) For swap dealers and major swap participants, all records

    required by part 23 of this chapter, and all records demonstrating that

    they are entitled, with respect to any swap, to elect the clearing

    requirement exception pursuant to CEA section 2(h)(7).

    (b) Recordkeeping by non-SD/MSP counterparties. All non-SD/MSP

    counterparties subject to the jurisdiction of the Commission shall keep

    full, complete, and systematic records, together with all pertinent

    data and memoranda, with respect to each swap in which they are a

    counterparty, including, without limitation, all records demonstrating

    that they are entitled, with respect to any swap, to elect the clearing

    requirement exception in CEA section 2(h)(7).

    (c) Record retention. All records required to be kept pursuant to

    this section shall be retained with respect to each swap throughout the

    life of the swap and for a period of at least five years following the

    final termination of the swap.

    (d) Retention form. Records required to be kept pursuant to this

    section must be kept as required by paragraph (d)(1) or (2) of this

    section, as applicable.

    (1) Records required to be kept by swap execution facilities,

    designated contract markets, derivatives clearing organizations, swap

    dealers, or major swap participants may be kept in electronic form, or

    kept in paper form if originally created and exclusively maintained in

    paper form, so long as they are retrievable, and information in them is

    reportable, as required by this section.

    (2) Records required to be kept by non-SD/MSP counterparties may be

    kept in either electronic or paper form, so long as they are

    retrievable, and information in them is reportable, as required by this

    section.

    (e) Record retrievability. Records required to be kept by swap

    execution facilities, designated contract markets, derivatives clearing

    organizations, or swap counterparties pursuant to this

    [[Page 2199]]

    section shall be retrievable as provided in paragraphs (e)(1) and (2)

    of this section, as applicable.

    (1) Each record required by this section or any other section of

    the CEA to be kept by a swap execution facility, designated contract

    market, derivatives clearing organization, swap dealer, or major swap

    participant shall be readily accessible via real time electronic access

    by the registrant throughout the life of the swap and for two years

    following the final termination of the swap, and shall be retrievable

    by the registrant within three business days through the remainder of

    the period following final termination of the swap during which it is

    required to be kept.

    (2) Each record required by this section or any other section of

    the CEA to be kept by a non-SD/MSP counterparty shall be retrievable by

    that counterparty within five business days throughout the period

    during which it is required to be kept.

    (f) Recordkeeping by swap data repositories. Each swap data

    repository registered with the Commission shall keep full, complete,

    and systematic records, together with all pertinent data and memoranda,

    of all activities relating to the business of the swap data repository

    and all swap data reported to the swap data repository, as prescribed

    by the Commission. Such records shall include, without limitation, all

    records required by part 49 of this chapter.

    (g) Record retention and retrievability by swap data repositories.

    All records required to be kept by a swap data repository pursuant to

    this section must be kept by the swap data repository both:

    (1) Throughout the existence of the swap and for five years

    following final termination of the swap, during which time the records

    must be readily accessible by the swap data repository and available to

    the Commission via real time electronic access; and

    (2) Thereafter, for a period of at least ten additional years in

    archival storage from which they are retrievable by the swap data

    repository within three business days.

    (h) Record inspection. All records required to be kept pursuant to

    this section by any registrant or its affiliates or by any non-SD/MSP

    counterparty subject to the jurisdiction of the Commission shall be

    open to inspection upon request by any representative of the

    Commission, the United States Department of Justice, or the Securities

    and Exchange Commission, or by any representative of a prudential

    regulator as authorized by the Commission. Copies of all such records

    shall be provided, at the expense of the entity or person required to

    keep the record, to any representative of the Commission upon request.

    Copies of records required to be kept by any registrant shall be

    provided either by electronic means, in hard copy, or both, as

    requested by the Commission, with the sole exception that copies of

    records originally created and exclusively maintained in paper form may

    be provided in hard copy only. Copies of records required to be kept by

    any non-SD/MSP counterparty subject to the jurisdiction of the

    Commission that is not a Commission registrant shall be provided in the

    form, whether electronic or paper, in which the records are kept.

    Sec. 45.3 Swap data reporting: creation data.

    Registered entities and swap counterparties must report required

    swap creation data electronically to a swap data repository as set

    forth in this Section. This obligation commences on the applicable

    compliance date set forth in the preamble to this part. The reporting

    obligations of swap counterparties with respect to swaps executed prior

    to the applicable compliance date and in existence on or after July 21,

    2010, the date of enactment of the Dodd-Frank Act, are set forth in

    part 46 of this chapter. This section and Sec. 45.4 establish the

    general swap data reporting obligations of swap dealers, major swap

    participants, non-SD/MSP counterparties, swap execution facilities,

    designated contract markets, and derivatives clearing organizations to

    report swap data to a swap data repository. In addition to the

    reporting obligations set forth in this section and Sec. 45.4,

    registered entities and swap counterparties are subject to other

    reporting obligations set forth in this chapter, including, without

    limitation, the following: Swap dealers, major swap participants, and

    non-SD/MSP counterparties are also subject to the reporting obligations

    with respect to corporate affiliations reporting set forth in Sec.

    45.6; swap execution facilities, designated contract markets, swap

    dealers, major swap participants, and non-SD/MSP counterparties are

    subject to the reporting obligations with respect to real time

    reporting of swap data set forth in part 43 of this chapter;

    counterparties to a swap for which the clearing requirement exception

    in CEA section 2(h)(7) has been elected are subject to the reporting

    obligations set forth in part 39 of this chapter; and, where

    applicable, swap dealers, major swap participants, and non-SD/MSP

    counterparties are subject to the reporting obligations with respect to

    large traders set forth in parts 17 and 18 of this chapter.

    (a) Swaps executed on or pursuant to the rules of a swap execution

    facility or designated contract market. (1) For each swap executed on

    or pursuant to the rules of a swap execution facility or designated

    contract market, the swap execution facility or designated contract

    market must report all required swap creation data, as soon as

    technologically practicable after execution of the swap. This report

    must include all confirmation data for the swap, as defined in part 23

    and in Sec. 45.1, and all primary economic terms data for the swap, as

    defined in Sec. 45.1.

    (2) If such a swap is accepted for clearing by a derivatives

    clearing organization, the derivatives clearing organization must

    report all confirmation data for the swap, as defined in part 39 and in

    Sec. 45.1, as soon as technologically practicable after clearing. The

    derivatives clearing organization shall fulfill this requirement by

    reporting all confirmation data for the swap, as defined in part 39 and

    in this Sec. 45.1, which must include all primary economic terms data

    for the swap as defined in Sec. 45.1, and must include the internal

    identifiers assigned by the automated systems of the derivatives

    clearing organization to the two transactions resulting from novation

    to the clearing house.

    (b) Off-facility swaps subject to mandatory clearing. For all off-

    facility swaps subject to the mandatory clearing requirement, except

    for those off-facility swaps excepted from that requirement pursuant to

    CEA section 2(h)(7) and those off-facility swaps covered by CEA section

    2(a)(13)(C)(iv), required swap creation data must be reported as

    provided in paragraph (b) of this section.

    (1) The reporting counterparty, as determined pursuant to Sec.

    45.8, must report all primary economic terms data for the swap, within

    the applicable reporting deadline set forth in paragraph (b)(1)(i) or

    (ii) of this section. However, if the swap is voluntarily submitted for

    clearing and accepted for clearing by a derivatives clearing

    organization before the applicable reporting deadline set forth in

    paragraphs (b)(1)(i) or (ii) of this section, and if the swap is

    accepted for clearing before the reporting counterparty reports any

    primary economic terms data to a swap data repository, then the

    reporting counterparty is excused from reporting required swap creation

    data for the swap.

    (i) If the reporting counterparty is a swap dealer or a major swap

    participant, the reporting counterparty must report all primary

    economic terms data for the

    [[Page 2200]]

    swap as soon as technologically practicable after execution, but no

    later than: 30 minutes after execution during the first year following

    the compliance date; and 15 minutes after execution thereafter.

    (ii) If the reporting counterparty is a non-SD/MSP counterparty,

    the reporting counterparty must report all primary economic terms data

    for the swap as soon as technologically practicable after execution,

    but no later than: four business hours after execution during the first

    year following the compliance date; two business hours after execution

    during the second year following the compliance date; and one business

    hour after execution thereafter.

    (2) If the swap is accepted for clearing by a derivatives clearing

    organization, the derivatives clearing organization must report all

    confirmation data for the swap, as defined in part 39 and in Sec.

    45.1, as soon as technologically practicable after clearing. The

    derivatives clearing organization shall fulfill this requirement by

    reporting all confirmation data for the swap, as defined in part 39 and

    in this Sec. 45.1, which must include all primary economic terms data

    for the swap as defined in Sec. 45.1, and must include the internal

    identifiers assigned by the automated systems of the derivatives

    clearing organization to the two transactions resulting from novation

    to the clearing house.

    (3) If the swap is not accepted for clearing, the reporting

    counterparty must report all confirmation data for the swap, as defined

    in Sec. 45.1, within the applicable reporting deadline set forth in

    paragraph (b)(3)(i) or (ii) of this section. During the first 180

    calendar days following the compliance date, if reporting confirmation

    data normalized in data fields is not yet technologically practicable

    for the reporting counterparty, the reporting counterparty may report

    confirmation data to the swap data repository by transmitting to the

    swap data repository an image of the document or documents constituting

    the confirmation, until such time as electronic reporting of

    confirmation data is technologically practicable for the reporting

    counterparty. Beginning 180 days after the compliance date, the

    reporting counterparty must report all confirmation data to the swap

    data repository electronically.

    (i) If the reporting counterparty is a swap dealer or major swap

    participant, the reporting counterparty must report all confirmation

    data as soon as technologically practicable following confirmation, but

    no later than: 30 minutes after confirmation if confirmation occurs

    electronically; or 24 business hours after confirmation if confirmation

    does not occur electronically.

    (ii) If the reporting counterparty is a non-SD/MSP counterparty,

    the reporting counterparty must report all confirmation data as soon as

    technologically practicable following confirmation, but no later than:

    the end of the second business day after the date of confirmation

    during the first year following the compliance date; and the end of the

    first business day after the date of confirmation thereafter.

    (c) Off-facility swaps not subject to mandatory clearing, with a

    swap dealer or major swap participant reporting counterparty. For all

    off-facility swaps not subject to the mandatory clearing requirement

    set forth in CEA section 2(h), all off-facility swaps for which the

    clearing requirement exception in CEA section 2(h)(7) has been elected,

    and all off-facility swaps covered by CEA section 2(a)(13)(C)(iv), for

    which a swap dealer or major swap participant is the reporting

    counterparty, required swap creation data must be reported as provided

    in paragraph (c) of this section.

    (1) Credit, equity, foreign exchange, and interest rate swaps. For

    each such credit swap, equity swap, foreign exchange instrument, or

    interest rate swap:

    (i) The reporting counterparty, as determined pursuant to Sec.

    45.8, must report all primary economic terms data for the swap, within

    the applicable reporting deadline set forth in paragraph (c)(1)(i)(A)

    or (B) of this section. However, if the swap is voluntarily submitted

    for clearing and accepted for clearing by a derivatives clearing

    organization before the applicable reporting deadline set forth in

    paragraphs (c)(1)(i)(A) or (B) of this section, and if the swap is

    accepted for clearing before the reporting counterparty reports any

    primary economic terms data to a swap data repository, then the

    reporting counterparty is excused from reporting required swap creation

    data for the swap.

    (A) If the non-reporting counterparty is a swap dealer, a major

    swap participant, or a non-SD/MSP counterparty that is a financial

    entity as defined in CEA section 2(h)(7)(C), or if the non-reporting

    counterparty is a non-SD/MSP counterparty that is not a financial

    entity as defined in CEA section 2(h)(7)(C) and verification of primary

    economic terms occurs electronically, then the reporting counterparty

    must report all primary economic terms data for the swap as soon as

    technologically practicable after execution, but no later than: one

    hour after execution during the first year following the compliance

    date; and 30 minutes after execution thereafter.

    (B) If the non-reporting counterparty is a non-SD/MSP counterparty

    that is not a financial entity as defined in CEA section 2(h)(7)(C),

    and if verification of primary economic terms does not occur

    electronically, then the reporting counterparty must report all primary

    economic terms data for the swap as soon as technologically practicable

    after execution, but no later than: 24 business hours after execution

    during the first year following the compliance date; 12 business hours

    after execution during the second year following the compliance date;

    and 30 minutes after execution thereafter.

    (ii) If the swap is accepted for clearing by a derivatives clearing

    organization, the derivatives clearing organization must report all

    confirmation data for the swap, as defined in part 39 and in Sec.

    45.1, as soon as technologically practicable after clearing. The

    derivatives clearing organization shall fulfill this requirement by

    reporting all confirmation data for the swap, as defined in part 39 and

    in this Sec. 45.1, which must include all primary economic terms data

    for the swap as defined in Sec. 45.1, and must include the internal

    identifiers assigned by the automated systems of the derivatives

    clearing organization to the two transactions resulting from novation

    to the clearing house.

    (iii) If the swap is not voluntarily submitted for clearing, the

    reporting counterparty must report all confirmation data for the swap,

    as defined in Sec. 45.1, as soon as technologically practicable after

    confirmation, but no later than: 30 minutes after confirmation if

    confirmation occurs electronically; or 24 business hours after

    confirmation if confirmation does not occur electronically. During the

    first 180 calendar days following the compliance date, if reporting

    confirmation data normalized in data fields is not yet technologically

    practicable for the reporting counterparty, the reporting counterparty

    may report confirmation data to the swap data repository by

    transmitting to the swap data repository an image of the document or

    documents constituting the confirmation, until such time as electronic

    reporting of confirmation data is technologically practicable for the

    reporting counterparty. Beginning 180 days after the compliance date,

    the reporting counterparty must report all confirmation data to the

    swap data repository electronically.

    [[Page 2201]]

    (2) Other commodity swaps. For each such other commodity swap:

    (i) The reporting counterparty, as determined pursuant to Sec.

    45.8, must report all primary economic terms data for the swap, within

    the applicable reporting deadline set forth in paragraph (c)(2)(i)(A)

    or (B) of this section. However, if the swap is voluntarily submitted

    for clearing and accepted for clearing by a derivatives clearing

    organization before the applicable reporting deadline set forth in

    paragraphs (c)(2)(i)(A) or (B) of this section, and if the swap is

    accepted for clearing before the reporting counterparty reports any

    primary economic terms data to a swap data repository, then the

    reporting counterparty is excused from reporting required swap creation

    data for the swap.

    (A) If the non-reporting counterparty is a swap dealer, a major

    swap participant, or a non-SD/MSP counterparty that is a financial

    entity as defined in CEA section 2(h)(7)(C), or if the non-reporting

    counterparty is a non-SD/MSP counterparty that is not a financial

    entity as defined in CEA section 2(h)(7)(C) and verification of primary

    economic terms occurs electronically, then the reporting counterparty

    must report all primary economic terms data for the swap as soon as

    technologically practicable after execution, but no later than: four

    hours after execution during the first year following the compliance

    date; and two hours after execution thereafter.

    (B) If the non-reporting counterparty is a non-SD/MSP counterparty

    that is not a financial entity as defined in CEA section 2(h)(7)(C),

    and if verification of primary economic terms does not occur

    electronically, then the reporting counterparty must report all primary

    economic terms data for the swap as soon as technologically practicable

    after execution, but no later than: 48 business hours after execution

    during the first year following the compliance date; 24 business hours

    after execution during the second year following the compliance date;

    and two hours after execution thereafter.

    (ii) If the swap is accepted for clearing by a derivatives clearing

    organization, the derivatives clearing organization must report all

    confirmation data for the swap, as defined in part 39 and in Sec.

    45.1, as soon as technologically practicable after clearing. The

    derivatives clearing organization shall fulfill this requirement by

    reporting all confirmation data for the swap, as defined in part 39 and

    in this Sec. 45.1, which must include all primary economic terms data

    for the swap as defined in Sec. 45.1, and must include the internal

    identifiers assigned by the automated systems of the derivatives

    clearing organization to the two transactions resulting from novation

    to the clearing house.

    (iii) If the swap is not voluntarily submitted for clearing, the

    reporting counterparty must report all confirmation data for the swap,

    as defined in Sec. 45.1, as soon as technologically practicable after

    confirmation, but no later than: 30 minutes after confirmation if

    confirmation occurs electronically; or 24 business hours after

    confirmation if confirmation does not occur electronically. During the

    first 180 calendar days following the compliance date, if reporting

    confirmation data normalized in data fields is not yet technologically

    practicable for the reporting counterparty, the reporting counterparty

    may report confirmation data to the swap data repository by

    transmitting to the swap data repository an image of the document or

    documents constituting the confirmation, until such time as electronic

    reporting of confirmation data is technologically practicable for the

    reporting counterparty. Beginning 180 days after the compliance date,

    the reporting counterparty must report all confirmation data to the

    swap data repository electronically.

    (d) Off-facility swaps not subject to mandatory clearing, with a

    non-SD/MSP reporting counterparty. For all off-facility swaps not

    subject to the mandatory clearing requirement set forth in CEA section

    2(h), all off-facility swaps for which the clearing requirement

    exception in CEA section 2(h)(7) has been elected, and all off-facility

    swaps covered by CEA section 2(a)(13)(C)(iv), in all asset classes, for

    which a non-SD/MSP counterparty is the reporting counterparty, required

    swap creation data must be reported as provided in this paragraph (d).

    (1) The reporting counterparty, as determined pursuant to Sec.

    45.8, must report all primary economic terms data for the swap, as soon

    as technologically practicable after execution, but no later than: 48

    business hours after execution during the first year following the

    compliance date; 36 business hours after execution during the second

    year following the compliance date; and 24 business hours after

    execution thereafter. However, if the swap is voluntarily submitted for

    clearing and accepted for clearing by a derivatives clearing

    organization before the applicable reporting deadline set forth in this

    paragraph (d)(1), and if the swap is accepted for clearing before the

    reporting counterparty reports any primary economic terms data to a

    swap data repository, then the reporting counterparty is excused from

    reporting required swap creation data for the swap.

    (2) If the swap is accepted for clearing by a derivatives clearing

    organization, the derivatives clearing organization must report all

    confirmation data for the swap, as defined in part 39 and in Sec.

    45.1, as soon as technologically practicable after clearing. The

    derivatives clearing organization shall fulfill this requirement by

    reporting all confirmation data for the swap, as defined in part 39 and

    in this Sec. 45.1, which must include all primary economic terms data

    for the swap as defined in Sec. 45.1, and must include the internal

    identifiers assigned by the automated systems of the derivatives

    clearing organization to the two transactions resulting from novation

    to the clearing house.

    (3) If the swap is not voluntarily submitted for clearing, the

    reporting counterparty must report all confirmation data for the swap,

    as defined in Sec. 45.1, as soon as technologically practicable after

    confirmation, but no later than: 48 business hours after confirmation

    during the first year following the compliance date; 36 business hours

    after confirmation during the second year following the compliance

    date; and 24 business hours after confirmation thereafter. During the

    first 180 calendar days following the compliance date, if reporting

    confirmation data normalized in data fields is not yet technologically

    practicable for the reporting counterparty, the reporting counterparty

    may report confirmation data to the swap data repository by

    transmitting to the swap data repository an image of the document or

    documents constituting the confirmation, until such time as electronic

    reporting of confirmation data is technologically practicable for the

    reporting counterparty. Beginning 180 days after the compliance date,

    the reporting counterparty must report all confirmation data to the

    swap data repository electronically.

    (e) Allocations. For swaps involving allocation, required swap

    creation data shall be reported to a single swap data repository as

    follows.

    (i) Initial swap between reporting counterparty and agent. The

    initial swap transaction between the reporting counterparty and the

    agent shall be reported as required by Sec. 45.3(a) through (d) of

    this part. A unique swap identifier for the initial swap transaction

    must be created as provided in Sec. 45.5 of this part.

    [[Page 2202]]

    (ii) Post-allocation swaps. (A) Duties of the agent. In accordance

    with this section, the agent shall inform the reporting counterparty of

    the identities of the reporting counterparty's actual counterparties

    resulting from allocation, as soon as technologically practicable after

    execution, but not later than eight business hours after execution.

    (B) Duties of the reporting counterparty. The reporting

    counterparty must report all required swap creation data for each swap

    resulting from allocation, to the same swap data repository to which

    the initial swap transaction is reported, as soon as technologically

    practicable after it is informed by the agent of the identities of its

    actual counterparties. The reporting counterparty must create a unique

    swap identifier for each such swap as required in Sec. 45.5 of this

    part.

    (C) Duties of the swap data repository. The swap data repository to

    which the initial swap transaction and the post-allocation swaps are

    reported must map together the unique swap identifiers of the original

    swap transaction and of each of the post-allocation swaps.

    (f) Multi-asset swaps. For each multi-asset swap, required swap

    creation data and required swap continuation data shall be reported to

    a single swap data repository that accepts swaps in the asset class

    treated as the primary asset class involved in the swap by the swap

    execution facility, designated contract market, or reporting

    counterparty making the first report of required swap creation data

    pursuant to this section. The registered entity or reporting

    counterparty making the first report of required swap creation data

    pursuant to this section shall report all primary economic terms for

    each asset class involved in the swap.

    (g) Mixed swaps. (1) For each mixed swap, required swap creation

    data and required swap continuation data shall be reported to a swap

    data repository registered with the Commission and to a security-based

    swap data repository registered with the Securities and Exchange

    Commission. This requirement may be satisfied by reporting the mixed

    swap to a swap data repository or security-based swap data repository

    registered with both Commissions.

    (2) The registered entity or reporting counterparty making the

    first report of required swap creation data pursuant to this section

    shall ensure that the same unique swap identifier is recorded for the

    swap in both the swap data repository and the security-based swap data

    repository.

    (h) International swaps. For each international swap, the reporting

    counterparty shall report as soon as practicable to the swap data

    repository the identity of the non-U.S. trade repository not registered

    with the Commission to which the swap is also reported and the swap

    identifier used by the non-U.S. trade repository to identify the swap.

    If necessary, the reporting counterparty shall obtain this information

    from the non-reporting counterparty.

    Sec. 45.4 Swap data reporting: continuation data.

    Registered entities and swap counterparties must report required

    swap continuation data electronically to a swap data repository as set

    forth in this section. This obligation commences on the applicable

    compliance date set forth in the preamble to this part. The reporting

    obligations of registered entities and swap counterparties with respect

    to swaps executed prior to the applicable compliance date and in

    existence on or after July 21, 2010, the date of enactment of the Dodd-

    Frank Act, are set forth in part 46 of this chapter. This section and

    Sec. 45.3 establish the general swap data reporting obligations of

    swap dealers, major swap participants, non-SD/MSP counterparties, swap

    execution facilities, designated contract markets, and derivatives

    clearing organizations to report swap data to a swap data repository.

    In addition to the reporting obligations set forth in this section and

    Sec. 45.3, registered entities and swap counterparties are subject to

    other reporting obligations set forth in this chapter, including,

    without limitation, the following: Swap dealers, major swap

    participants, and non-SD/MSP counterparties are also subject to the

    reporting obligations with respect to corporate affiliations reporting

    set forth in Sec. 45.6; swap execution facilities, designated contract

    markets, swap dealers, major swap participants, and non-SD/MSP

    counterparties are subject to the reporting obligations with respect to

    real time reporting of swap data set forth in part 43 of this chapter;

    and, where applicable, swap dealers, major swap participants, and non-

    SD/MSP counterparties are subject to the reporting obligations with

    respect to large traders set forth in parts 17 and 18 of this chapter.

    (a) Continuation data reporting method. For each swap, regardless

    of asset class, reporting counterparties and derivatives clearing

    organizations required to report swap continuation data must do so in a

    manner sufficient to ensure that all data in the swap data repository

    concerning the swap remains current and accurate, and includes all

    changes to the primary economic terms of the swap occurring during the

    existence of the swap. Reporting entities and counterparties fulfill

    this obligation by reporting either life cycle event data or state data

    for the swap within the applicable deadlines set forth in this section.

    Reporting counterparties and derivatives clearing organizations

    required to report swap continuation data for a swap may fulfill their

    obligation to report either life cycle event data or state data by

    reporting:

    (1) Life cycle event data to a swap data repository that accepts

    only life cycle event data reporting;

    (2) State data to a swap data repository that accepts only state

    data reporting; or

    (3) Either life cycle event data or state data to a swap data

    repository that accepts both life cycle event data and state data

    reporting.

    (b) Continuation data reporting for cleared swaps. For all swaps

    cleared by a derivatives clearing organization, required continuation

    data must be reported as provided in this section.

    (1) Life cycle event data or state data reporting. The derivatives

    clearing organization must report to the swap data repository either:

    (i) All life cycle event data for the swap, reported on the same

    day that any life cycle event occurs with respect to the swap; or

    (ii) All state data for the swap, reported daily.

    (2) Valuation data reporting. Valuation data for the swap must be

    reported as follows:

    (i) By the derivatives clearing organization, daily; and

    (ii) If the reporting counterparty is a swap dealer or major swap

    participant, by the reporting counterparty, daily. Non-SD/MSP reporting

    counterparties are not required to report valuation data for cleared

    swaps.

    (c) Continuation data reporting for uncleared swaps. For all swaps

    that are not cleared by a derivatives clearing organization, the

    reporting counterparty must report all required swap continuation data

    as provided in this section.

    (1) Life cycle event data or state data reporting. The reporting

    counterparty for the swap must report to the swap data repository

    either all life cycle event data for the swap or all state data for the

    swap, within the applicable deadline set forth in paragraphs (c)(1)(i)

    or (ii) of this section.

    (i) If the reporting counterparty is a swap dealer or major swap

    participant:

    (A) Life cycle event data must be reported on the same day that any

    life cycle event occurs, with the sole

    [[Page 2203]]

    exception that life cycle event data relating to a corporate event of

    the non-reporting counterparty must be reported no later than the

    second business day after the day on which such event occurs.

    (B) State data must be reported daily.

    (ii) If the reporting counterparty is a non-SD/MSP counterparty:

    (A) Life cycle event data must be reported no later than: the end

    of the second business day following the date of any life cycle event

    during the first year after the applicable compliance date; and the end

    of the first business day following the date of any life cycle event

    thereafter; with the sole exception that life cycle event data relating

    to a corporate event of the non-reporting counterparty must be reported

    no later than the end of the third business day following the date of

    such event during the first year after the compliance date, and no

    later than the end of the second business day following such event

    thereafter.

    (B) State data must be reported daily.

    (2) Valuation data reporting. Valuation data for the swap must be

    reported by the reporting counterparty for the swap as follows:

    (i) If the reporting counterparty is a swap dealer or major swap

    participant, the reporting counterparty must report all valuation data

    for the swap, daily.

    (ii) If the reporting counterparty is a non-SD/MSP counterparty,

    the reporting counterparty must report the current daily mark of the

    transaction as of the last day of each fiscal quarter. This report must

    be transmitted to the swap data repository within 30 calendar days of

    the end of each fiscal quarter. If a daily mark of the transaction is

    not available for the swap, the reporting counterparty satisfies this

    requirement by reporting the current valuation of the swap recorded on

    its books in accordance with applicable accounting standards.

    Sec. 45.5 Unique swap identifiers.

    Each swap subject to the jurisdiction of the Commission shall be

    identified in all recordkeeping and all swap data reporting pursuant to

    this part by the use of a unique swap identifier, which shall be

    created, transmitted, and used for each swap as provided in paragraphs

    (a) through (c) of this section.

    (a) Swaps executed on a swap execution facility or designated

    contract market. For each swap executed on a swap execution facility or

    designated contract market, the swap execution facility or designated

    contract market shall create and transmit a unique swap identifier as

    provided in paragraphs (a)(1) and (2) of this section.

    (1) Creation. The swap execution facility or designated contract

    market shall generate and assign a unique swap identifier at, or as

    soon as technologically practicable following, the time of execution of

    the swap, and prior to the reporting of required swap creation data.

    The unique swap identifier shall consist of a single data field that

    contains two components:

    (i) The unique alphanumeric code assigned to the swap execution

    facility or designated contract market by the Commission for the

    purpose of identifying the swap execution facility or designated

    contract market with respect to unique swap identifier creation; and

    (ii) An alphanumeric code generated and assigned to that swap by

    the automated systems of the swap execution facility or designated

    contract market, which shall be unique with respect to all such codes

    generated and assigned by that swap execution facility or designated

    contract market.

    (2) Transmission. The swap execution facility or designated

    contract market shall transmit the unique swap identifier

    electronically as follows:

    (i) To the swap data repository to which the swap execution

    facility or designated contract market reports required swap creation

    data for the swap, as part of that report;

    (ii) To each counterparty to the swap, as soon as technologically

    practicable after execution of the swap;

    (iii) To the derivatives clearing organization, if any, to which

    the swap is submitted for clearing, as part of the required swap

    creation data transmitted to the derivatives clearing organization for

    clearing purposes.

    (b) Off-facility swaps with a swap dealer or major swap participant

    reporting counterparty. For each off-facility swap where the reporting

    counterparty is a swap dealer or major swap participant, the reporting

    counterparty shall create and transmit a unique swap identifier as

    provided in paragraphs (b)(1) and (2) of this section.

    (1) Creation. The reporting counterparty shall generate and assign

    a unique swap identifier as soon as technologically practicable after

    execution of the swap and prior to both the reporting of required swap

    creation data and the transmission of data to a derivatives clearing

    organization if the swap is to be cleared. The unique swap identifier

    shall consist of a single data field that contains two components:

    (i) The unique alphanumeric code assigned to the swap dealer or

    major swap participant by the Commission at the time of its

    registration as such, for the purpose of identifying the swap dealer or

    major swap participant with respect to unique swap identifier creation;

    and

    (ii) An alphanumeric code generated and assigned to that swap by

    the automated systems of the swap dealer or major swap participant,

    which shall be unique with respect to all such codes generated and

    assigned by that swap dealer or major swap participant.

    (2) Transmission. The reporting counterparty shall transmit the

    unique swap identifier electronically as follows:

    (i) To the swap data repository to which the reporting counterparty

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

    report;

    (ii) To the non-reporting counterparty to the swap, as soon as

    technologically practicable after execution of the swap; and

    (iii) To the derivatives clearing organization, if any, to which

    the swap is submitted for clearing, as part of the required swap

    creation data transmitted to the derivatives clearing organization for

    clearing purposes.

    (c) Off-facility swaps with a non-SD/MSP reporting counterparty.

    For each off-facility swap for which the reporting counterparty is a

    non-SD/MSP counterparty, the swap data repository to which primary

    economic terms data is reported shall create and transmit a unique swap

    identifier as provided in paragraphs (c)(1) and (2) of this section.

    (1) Creation. The swap data repository shall generate and assign a

    unique swap identifier as soon as technologically practicable following

    receipt of the first report of required swap creation data concerning

    the swap. The unique swap identifier shall consist of a single data

    field that contains two components:

    (i) The unique alphanumeric code assigned to the swap data

    repository by the Commission at the time of its registration as such,

    for the purpose of identifying the swap data repository with respect to

    unique swap identifier creation; and

    (ii) An alphanumeric code generated and assigned to that swap by

    the automated systems of the swap data repository, which shall be

    unique with respect to all such codes generated and assigned by that

    swap data repository.

    (2) Transmission. The swap data repository shall transmit the

    unique swap identifier electronically as follows:

    (i) To the counterparties to the swap, as soon as technologically

    practicable following creation of the unique swap identifier; and

    (ii) To the derivatives clearing organization, if any, to which the

    swap is submitted for clearing, as soon as technologically practicable

    following creation of the unique swap identifier.

    [[Page 2204]]

    (d) Allocations. For swaps involving allocation, unique swap

    identifiers shall be created and transmitted as follows.

    (1) Initial swap between reporting counterparty and agent. The

    unique swap identifier for the initial swap transaction between the

    reporting counterparty and the agent shall be created as required by

    paragraph (a) through (c) of this section, and shall be transmitted as

    follows:

    (i) If the unique swap identifier is created by a swap execution

    facility or designated contract market, the swap execution facility or

    designated contract market must include the unique swap identifier in

    its swap creation data report to the swap data repository, and must

    transmit the unique identifier to the reporting counterparty and to the

    agent.

    (ii) If the unique swap identifier is created by the reporting

    counterparty, the reporting counterparty must include the unique swap

    identifier in its swap creation data report to the swap data

    repository, and must transmit the unique identifier to the agent.

    (2) Post-allocation swaps. The reporting counterparty must create a

    unique swap identifier for each of the individual swaps resulting from

    allocation, as soon as technologically practicable after it is informed

    by the agent of the identities of its actual counterparties, and must

    transmit each such unique swap identifier to:

    (i) The non-reporting counterparty for the swap in question.

    (ii) The agent.

    (iii) The derivatives clearing organization, if any, to which the

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

    data transmitted to the derivatives clearing organization for clearing

    purposes.

    (iv) The same swap data repository to which the initial swap

    transaction is reported, as part of the report of required swap

    creation data to the swap data repository.

    (e) Use. Each registered entity or swap counterparty subject to the

    jurisdiction of the Commission shall include the unique swap identifier

    for a swap in all of its records and all of its swap data reporting

    concerning that swap, from the time it creates or receives the unique

    swap identifier as provided in this section, throughout the existence

    of the swap and for as long as any records are required by the CEA or

    Commission regulations to be kept by that registered entity or

    counterparty concerning the swap, regardless of any life cycle events

    or any changes to state data concerning the swap, including, without

    limitation, any changes with respect to the counterparties to or the

    ownership of the swap. This requirement shall not prohibit the use by a

    registered entity or swap counterparty in its own records of any

    additional identifier or identifiers internally generated by the

    automated systems of the registered entity or swap counterparty, or the

    reporting to a swap data repository, the Commission, or another

    regulator of such internally generated identifiers in addition to the

    reporting of the unique swap identifier.

    Sec. 45.6 Legal entity identifiers

    Each counterparty to any swap subject to the jurisdiction of the

    Commission shall be identified in all recordkeeping and all swap data

    reporting pursuant to this part by means of a single legal entity

    identifier as specified in this section.

    (a) Definitions. As used in this section:

    Control (``controlling,'' ``controlled by,'' ``under common control

    with'') means, for the purposes of Sec. 45.6, the possession, direct

    or indirect, of the power to direct or cause the direction of the

    management and policies of a person, whether through the ownership of

    voting interest, by contract, or otherwise. A person is presumed to

    control another person if the person: is a director, general partner or

    officer exercising executive responsibility (or having similar status

    or functions); directly or indirectly has the right to vote 25 percent

    or more of a class of voting interest or has the power to sell or

    direct the sale of 25 percent or more of a class of voting interest;

    or, in the case of a partnership, has the right to receive upon

    dissolution, or has contributed, 25 percent or more of the capital.

    Legal identifier system means an LEI utility conforming with the

    requirements of this section that issues or is capable of issuing an

    LEI conforming with the requirements of this section, and is capable of

    maintaining LEI reference data as required by this section.

    Level one reference data means the minimum information needed to

    identify, on a verifiable basis, the legal entity to which a legal

    entity identifier is assigned. Level one reference data shall include,

    without limitation, all of the data elements included in ISO Standard

    17442. Examples of level one reference data include, without

    limitation, a legal entity's official legal name, its place of

    incorporation, and the address and contact information of its corporate

    headquarters.

    Level two reference data means information concerning the corporate

    affiliations or company hierarchy relationships of the legal entity to

    which a legal entity identifier is assigned. Examples of level two

    reference data include, without limitation, the identity of the legal

    entity's ultimate parent.

    Parent means, for the purposes of Sec. 45.6, a legal person that

    controls a counterparty to a swap required to be reported pursuant to

    this section, or that controls a legal entity identified or to be

    identified by a legal entity identifier provided by the legal

    identifier system designated by the Commission pursuant to this

    section.

    Self-registration means submission by a legal entity of its own

    level one or level two reference data, as applicable.

    Third-party registration means submission of level one or level two

    reference data, as applicable, for a legal entity that is or may become

    a swap counterparty, made by an entity or organization other than the

    legal entity identified by the submitted reference data. Examples of

    third-party registration include, without limitation, submission by a

    swap dealer or major swap participant of level one or level two

    reference data for its swap counterparties, and submission by a

    national numbering agency, national registration agency, or data

    service provider of level one or level two reference data concerning

    legal entities with respect to which the agency or service provider

    maintains information.

    Ultimate parent means, for the purposes of Sec. 45.6, a legal

    person that controls a counterparty to a swap required to be reported

    pursuant to this section, or that controls a legal entity identified or

    to be identified by a legal entity identifier provided by the legal

    identifier system designated by the Commission pursuant to this

    section, and that itself has no parent.

    (b) International standard for the legal entity identifier. The

    legal entity identifier used in all recordkeeping and all swap data

    reporting required by this part, following designation of the legal

    entity identifier system as provided in paragraph (c)(2) of this

    section, shall be issued under, and shall conform to, ISO Standard

    17442, Legal Entity Identifier (LEI), issued by the International

    Organisation for Standardisation.

    (b) Technical principles for the legal entity identifier. The legal

    entity identifier used in all recordkeeping and all swap data reporting

    required by this part shall conform to the technical principles set

    forth in paragraphs (b)(1) through (6) of this section.

    (1) Uniqueness. Only one legal entity identifier shall be assigned

    to any legal entity, and no legal entity identifier shall ever be

    reused. Each entity within a corporate organization or group structure

    that acts as a counterparty in

    [[Page 2205]]

    any swap shall have its own legal entity identifier.

    (2) Neutrality. To ensure the persistence of the legal entity

    identifier, it shall have a format consisting of a single data field,

    and shall contain either no embedded intelligence or as little embedded

    intelligence as practicable. Entity characteristics of swap

    counterparties identified by legal entity identifiers shall constitute

    separate elements within a reference data system as set forth in

    paragraphs (a), (c)(2), (d), and (e) of this section.

    (3) Reliability. The legal entity identifier shall be supported by

    a trusted and auditable method of verifying the identity of the legal

    entity to which it is assigned, both initially and at appropriate

    intervals thereafter. The issuer of legal entity identifiers shall

    maintain minimum reference or identification data sufficient to verify

    that a user has been correctly identified. Issuance and maintenance of

    the legal entity identifier, and storage and maintenance of all

    associated data, shall involve robust quality assurance practices and

    system safeguards. At a minimum, such system safeguards shall include

    the system safeguards applied to swap data repositories by part 49 of

    this chapter.

    (4) Open Source. The schema for the legal entity identifier shall

    have an open standard that ensures to the greatest extent practicable

    that the legal entity identifier is compatible with existing automated

    systems of financial market infrastructures, market participants, and

    regulators.

    (5) Extensibility. The legal entity identifier shall be capable of

    becoming the single international standard for unique identification of

    legal entities across the financial sector on a global basis.

    Therefore, it shall be sufficiently extensible to cover all existing

    and potential future legal entities of all types that may be

    counterparties to swap, OTC derivative, or other financial

    transactions; that may be involved in any aspect of the financial

    issuance and transactions process; or that may be subject to required

    due diligence by financial sector entities.

    (6) Persistence. The legal entity identifier assigned to an entity

    shall persist despite all corporate events. When a corporate event

    results in a new entity, the new entity shall receive a new legal

    entity identifier, while the previous legal entity identifier or

    identifiers continue to identify the predecessor entity or entities in

    the record.

    (c) Governance principles for the legal entity identifier. The

    legal entity identifier used in all recordkeeping and all swap data

    reporting required by this part shall conform to the governance

    principles set forth in paragraphs (c)(1) through (4) of this section.

    (1) International governance. The issuance of the legal entity

    identifier used pursuant to this section, and any legal entity

    identifier utility formed for the purpose of issuing legal entity

    identifiers that are used pursuant to this section, shall be subject to

    international supervision as follows:

    (i) With respect to operations, by a governance structure that

    includes the Commission and other financial regulators in any

    jurisdiction requiring use of the legal entity identifier pursuant to

    applicable law. The governance structure shall have authority

    sufficient to ensure, and shall ensure, that issuance and maintenance

    of the legal entity identifier system adheres on an ongoing basis to

    the principles set forth in this section.

    (ii) With respect to adherence to ISO Standard 17442, by the

    International Organisation for Standardisation.

    (2) Reference data access. Access to reference data associated with

    the legal entity identifier shall enable use of the legal entity

    identifier as a public good, while respecting applicable law regarding

    data confidentiality. Accordingly:

    (i) Reference data associated with the legal entity identifier that

    is public under applicable law shall be available publicly and free of

    charge. Such data shall include, without limitation, level one

    reference data (i.e., the minimum reference data needed to verify the

    identity of the legal entity receiving each legal entity identifier),

    and a current directory of all issued legal entity identifiers.

    (ii) Collection and maintenance of, and access to, reference data

    associated with the legal entity identifier shall comply with

    applicable laws on data protection and confidentiality.

    (3) Non-profit operation and funding. Funding of both start-up and

    ongoing operation of the legal entity identifier system, including,

    without limitation, any legal entity identifier utility formed for the

    purpose of issuing legal entity identifiers that are used pursuant to

    this section, shall be conducted on a non-profit, reasonable cost-

    recovery basis, and shall be subject to international governance as

    provided in paragraph (c)(1) of this section.

    (4) Unbundling and non-restricted use. Issuance of the legal entity

    identifier shall not be tied to other services, if any, offered by the

    issuer, and information concerning the issuance process for new legal

    entity identifiers must be available publicly and free of charge.

    Restrictions shall not be imposed on use of the legal entity identifier

    by any person in its own products and services, or on use of the legal

    entity identifier and associated reference data by any financial

    regulator. Any intellectual property created as part of the legal

    entity identifier system shall be treated in a manner consistent with

    open source principles.

    (5) Commercial advantage prohibition. The legal entity identifier

    utility providing legal entity identifiers for use in compliance with

    this part shall not make any commercial or business use (other than the

    operation of the utility) of any reference data associated with the

    legal entity identifier that is not available to the public free of

    charge. This restriction shall also apply to any entity or person that

    participates in the utility, that is legally or otherwise affiliated or

    associated with the utility, or that provides third-party services to

    the utility or to any component, partner, affiliate, or associate

    thereof.

    (e) Designation of the legal entity identifier system. (1) The

    Commission shall determine, as provided in paragraphs (e)(1)(i) through

    (iii) of this section, whether a legal entity identifier system that

    satisfies the requirements set forth in this section is available to

    provide legal entity identifiers for registered entities and swap

    counterparties required to comply with this part.

    (i) In making this determination, the Commission shall consider,

    without limitation, the following factors:

    (A) Whether the LEI provided by the LEI utility is issued under,

    and conforms to, ISO Standard 17442, Legal Entity Identifier (LEI).

    (B) Whether the LEI provided by the LEI utility complies with all

    of the technical principles set forth in this rule.

    (C) Whether the LEI utility complies with all of the governance

    principles set forth in this rule.

    (D) Whether the LEI utility has demonstrated that it in fact can

    provide LEIs complying with this section for identification of swap

    counterparties in swap data reporting commencing as of the compliance

    dates set forth in Sec. 45.5.

    (E) The acceptability of the LEI utility to industry participants

    required to use the LEI in complying with this part.

    (ii) In making this determination, the Commission shall consider

    all candidates meeting the criteria set forth in paragraph (e)(1)(i) of

    this section, but shall not consider any candidate that does not

    demonstrate that it in fact can provide LEIs for identification of swap

    [[Page 2206]]

    counterparties in swap data reporting commencing as of the compliance

    dates set forth in this part.

    (iii) The Commission shall make this determination at a time it

    believes is sufficiently prior to the compliance dates set forth this

    part to enable issuance of LEIs far enough in advance of those

    compliance dates to enable compliance with this part.

    (2) If the Commission determines pursuant to paragraph (e)(1) of

    this section that such a legal entity identifier system is available,

    the Commission shall designate the legal entity identifier system as

    the provider of legal entity identifiers to be used in recordkeeping

    and swap data reporting pursuant to this part, by means of a Commission

    order that is published in the Federal Register and on the Web site of

    the Commission, as soon as practicable after such determination is

    made. The order shall include notice of this designation, the contact

    information of the LEI utility, and information concerning the

    procedure and requirements for obtaining legal entity identifiers.

    (3) If the Commission determines pursuant to paragraph (e)(1) of

    this section that such a legal entity identifier system is not yet

    available, the Commission shall publish notice of the determination in

    the Federal Register and on the Web site of the Commission, as soon as

    practicable after the determination is made. If the Commission later

    determines, pursuant to paragraphs (e)(1)(i) and (ii) of this section,

    that such a legal entity identifier system has become available, the

    Commission shall designate the legal entity identifier system as the

    provider of legal entity identifiers to be used in recordkeeping and

    swap data reporting pursuant to this part, by means of a Commission

    order that is published in the Federal Register and on the Web site of

    the Commission, as soon as practicable after such determination is

    made. The order shall include notice of this designation, the contact

    information of the LEI utility, and information concerning the

    procedure and requirements for obtaining legal entity identifiers.

    (e) Reference data reporting. (1) Reporting of level one reference

    data. Level one reference data for each counterparty to any swap

    subject to the jurisdiction of the Commission shall be reported, by

    means of self-registration, third-party registration, or both, into a

    public level one reference database maintained by the issuer of the

    legal entity identifier designated by the Commission pursuant to

    paragraph (d) of this section. Such level one reference data shall be

    reported at a time sufficient to ensure that the counterparty's legal

    entity identifier is available for inclusion in recordkeeping and swap

    data reporting as required by this section. All subsequent changes and

    corrections to level one reference data previously reported shall be

    reported to the issuer, by means of self-registration, third-party

    registration, or both, as soon as technologically practicable following

    occurrence of any such change or discovery of the need for a

    correction.

    (2) Reporting of level two reference data. (i) Level two reference

    data for each counterparty to any swap subject to the jurisdiction of

    the Commission, consisting of the identity of the counterparty's

    ultimate parent, shall be reported, by means of self-registration,

    third-party registration, or both, into a level two reference database.

    Where applicable law forbids such reporting, that fact and the citation

    of the law in question shall be reported in place of the data to which

    such law applies.

    (ii) All non-public level two reference data reported to the level

    two reference database shall be confidential, non-public, and available

    only to financial regulators in any jurisdiction requiring use of the

    legal entity identifier pursuant to applicable law.

    (iii) The Commission shall determine the location of the level two

    reference database by means of a Commission order that is published in

    the Federal Register and on the Web site of the Commission, as soon as

    practicable after such determination is made. The order shall include

    notice of the location of the level two reference database, and

    information concerning the procedure and requirements for reporting

    level two reference data to the database.

    (iv) The obligation to report level two reference data does not

    apply until the Commission has determined the location of the level two

    reference database as provided in paragraph (e)(2)(iii) of this

    section.

    (v) After the Commission determines the location of the level two

    reference database pursuant to paragraph (e)(2)(iii) of this section,

    required level two reference data shall be reported at a time

    sufficient to ensure that it is included in the database when the

    counterparty's legal entity identifier is included in recordkeeping and

    swap data reporting as required by this section.

    (vi) All subsequent changes and corrections to required level two

    reference data previously reported shall be reported into the level two

    reference database, by means of self-registration, third-party

    registration, or both, as soon as technologically practicable following

    occurrence of any such change or discovery of the need for a

    correction.

    (f) Use of the legal entity identifier system by registered

    entities and swap counterparties. (1) When a legal entity identifier

    system has been designated by the Commission pursuant to paragraph (e)

    of this section, each registered entity and swap counterparty shall use

    the legal entity identifier provided by that system in all

    recordkeeping and swap data reporting pursuant to this part.

    (2) Before a legal entity identifier system has been designated by

    the Commission, each registered entity and swap counterparty shall use

    a substitute counterparty identifier created and assigned by a swap

    data repository in all recordkeeping and swap data reporting pursuant

    to this part, as follows:

    (i) When a swap involving one or more counterparties for which no

    substitute counterparty identifier has yet been created and assigned is

    reported to a swap data repository, the swap data repository shall

    create a substitute counterparty identifier for each such counterparty

    as provided in paragraph (f)(2)(ii) of this section, and assign the

    substitute counterparty identifier to that counterparty, as soon as

    technologically practicable after that swap is first reported to the

    swap data repository. In lieu of creating a substitute identifier as

    provided in paragraph (f)(2)(ii), the swap data repository may assign a

    unique substitute identifier provided by a third party service

    provider, if such identifier complies with all of the principles for

    LEIs set forth in this part.

    (ii) Each such substitute counterparty identifier created by a swap

    data repository shall consist of a single data field that contains two

    components, including:

    (A) The unique alphanumeric code assigned to the swap data

    repository by the Commission for the purpose of identifying the swap

    data repository; and

    (B) An alphanumeric code generated and assigned to that

    counterparty by the automated systems of the swap data repository,

    which shall be unique with respect to all such substitute counterparty

    identifier codes generated and assigned by that swap data repository.

    (iii) The swap data repository shall transmit each substitute

    counterparty identifier thus created to each counterparty to the swap,

    to each other registered entity associated with the swap, to each

    registered entity or swap counterparty who has made any report of any

    swap data to the swap data repository, and to each swap data repository

    registered with the

    [[Page 2207]]

    Commission, as soon as technologically practicable after creation and

    assignment of the substitute counterparty identifier.

    (iv) Once any swap data repository has created and assigned such a

    substitute counterparty identifier to a swap counterparty and has

    transmitted it as required by paragraph (f)(2)(iii) of this section,

    all registered entities and swap counterparties shall use that

    substitute counterparty identifier to identify that counterparty in all

    swap data recordkeeping and reporting, until such time as the

    Commission designates a legal entity identifier system pursuant to

    paragraph (e) of this section.

    (3) For swaps reported pursuant to this part prior to Commission

    designation of a legal entity identifier system, after such designation

    each swap data repository shall map the legal entity identifiers for

    the counterparties to the substitute counterparty identifiers in the

    record for each such swap.

    (4) Prior to October 15, 2012, if a legal entity identifier system

    has been designated by the Commission as provided in this section, but

    a reporting counterparty's automated systems are not yet prepared to

    include legal entity identifiers in recordkeeping and swap data

    reporting pursuant to this part, the counterparty shall be excused from

    complying with paragraph (f)(1) of this section, and shall instead

    comply with paragraph (f)(2) of this section, until its automated

    systems are prepared with respect to legal entity identifiers, at which

    time it must commence compliance with paragraph (f)(1) of this section.

    This paragraph shall have no effect on or after October 15, 2012.

    Sec. 45.7 Unique product identifiers.

    Each swap subject to the jurisdiction of the Commission shall be

    identified in all recordkeeping and all swap data reporting pursuant to

    this part by means of a unique product identifier and product

    classification system as specified in this section. Each swap

    sufficiently standardized to receive a unique product identifier shall

    be identified by a unique product identifier. Each swap not

    sufficiently standardized for this purpose shall be identified by its

    description using the product classification system.

    (a) Requirements for the unique product identifier and product

    classification system. The unique product identifier and product

    classification system shall identify and describe the swap asset class

    and the sub-type within that asset class to which the swap belongs, and

    the underlying product for the swap, with sufficient distinctiveness

    and specificity to enable the Commission and other financial regulators

    to fulfill their regulatory responsibilities and to assist in real time

    reporting of swaps as provided in the Act and part 43 of this chapter.

    The level of distinctiveness and specificity which the unique product

    identifier will provide shall be determined separately for each swap

    asset class.

    (b) Designation of the unique product identifier and product

    classification system. (1) The Commission shall determine when a unique

    product identifier and product classification system that is acceptable

    to the Commission and satisfies the requirements set forth in this

    section is available for use in compliance with this section.

    (2) When the Commission determines that such a unique product

    identifier and product classification system is available, the

    Commission shall designate the unique product identifier and product

    classification system to be used in recordkeeping and swap data

    reporting pursuant to this part, by means of a Commission order that is

    published in the Federal Register and on the Web site of the

    Commission, as soon as practicable after such determination is made.

    The order shall include notice of this designation, the contact

    information of the issuer of such unique product identifiers, and

    information concerning the procedure and requirements for obtaining

    unique product identifiers and using the product classification system.

    (c) Use of the unique product identifier and product classification

    system by registered entities and swap counterparties. (1) When a

    unique product identifier and product classification system has been

    designated by the Commission pursuant to paragraph (b) of this section,

    each registered entity and swap counterparty shall use the unique

    product identifier and product classification system in all

    recordkeeping and swap data reporting pursuant to this part.

    (2) Before a unique product identifier and product classification

    system has been designated by the Commission, each registered entity

    and swap counterparty shall use the internal product identifier or

    product description used by the swap data repository to which a swap is

    reported in all recordkeeping and swap data reporting pursuant to this

    part.

    Sec. 45.8 Determination of which counterparty must report.

    The determination of which counterparty is the reporting

    counterparty for a swap shall be made as provided in this section.

    (a) If only one counterparty is a swap dealer, the swap dealer

    shall be the reporting counterparty.

    (b) If neither counterparty is a swap dealer, and only one

    counterparty is a major swap participant, the major swap participant

    shall be the reporting counterparty.

    (c) If both counterparties are non-SD/MSP counterparties, and only

    one counterparty is a financial entity as defined in CEA section

    2(h)(7)(C), the counterparty that is a financial entity shall be the

    reporting counterparty.

    (d) If both counterparties are swap dealers, or both counterparties

    are major swap participants, or both counterparties are non-SD/MSP

    counterparties that are financial entities as defined in CEA section

    2(h)(7)(C), or both counterparties are non-SD/MSP counterparties and

    neither counterparty is a financial entity as defined in CEA section

    2(h)(7)(C):

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

    execution facility or designated contract market, the counterparties

    shall agree which counterparty shall be the reporting counterparty. The

    counterparties shall make this agreement after the swap execution

    facility or designated contract market notifies the counterparties, as

    provided in paragraph (h)(2) of this section, that paragraph (d) of

    this section applies to them, and not later than the end of the first

    business day following the date of execution of the swap. After this

    agreement is reached, the reporting counterparty shall report to the

    swap data repository that it is the reporting counterparty.

    (2) For an off-facility swap, the counterparties shall agree as one

    term of their swap which counterparty shall be the reporting

    counterparty.

    (e) Notwithstanding the provisions of paragraphs (a) through (d) of

    this section, if both counterparties to a swap are non-SD/MSP

    counterparties and only one counterparty is a U.S. person, that

    counterparty shall be the reporting counterparty.

    (f) Notwithstanding the provisions of paragraphs (a) through (e) of

    this section, if neither counterparty to a swap is a U.S. person, but

    the swap is executed on a swap execution facility or designated

    contract market or otherwise executed in the United States, or is

    cleared by a derivatives clearing organization:

    (1) For such a swap executed on or pursuant to the rules of a swap

    execution facility or designated contract market, the counterparties

    shall agree which counterparty shall be the reporting counterparty. The

    [[Page 2208]]

    counterparties shall make this agreement after the swap execution

    facility or designated contract market notifies the counterparties, as

    provided in paragraph (h)(2) of this section, that neither counterparty

    is a U.S. person, and not later than the end of the first business day

    following the date of execution of the swap. After this agreement is

    reached, the reporting counterparty shall report to the swap data

    repository that it is the reporting counterparty.

    (2) For an off-facility swap, the counterparties shall agree as one

    term of their swap which counterparty shall be the reporting

    counterparty.

    (g) If a reporting counterparty selected pursuant to paragraphs (a)

    through (f) of this section ceases to be a counterparty to a swap due

    to an assignment or novation, the reporting counterparty for reporting

    of required swap continuation data following the assignment or novation

    shall be selected from the two current counterparties as provided in

    paragraphs (g)(1) through (4) of this section.

    (1) If only one counterparty is a swap dealer, the swap dealer

    shall be the reporting counterparty and shall fulfill all counterparty

    reporting obligations.

    (2) If neither counterparty is a swap dealer, and only one

    counterparty is a major swap participant, the major swap participant

    shall be the reporting counterparty and shall fulfill all counterparty

    reporting obligations.

    (3) If both counterparties are non-SD/MSP counterparties, and only

    one counterparty is a U.S. person, that counterparty shall be the

    reporting counterparty and shall fulfill all counterparty reporting

    obligations.

    (4) In all other cases, the counterparty that replaced the previous

    reporting counterparty by reason of the assignment or novation shall be

    the reporting counterparty, unless otherwise agreed by the

    counterparties.

    (h) For all swaps executed on or pursuant to the rules of a swap

    execution facility or designated contract market, the rules of the swap

    execution facility or designated contract market must require each swap

    counterparty to provide sufficient information to the swap execution

    facility or designated contract market to enable the swap execution

    facility or designated contract market to report all swap creation data

    as provided in this part.

    (1) To achieve this, the rules of the swap execution facility or

    designated contract market must require each market participant placing

    an order with respect to any swap traded on the swap execution facility

    or designated contract market to include in the order, without

    limitation:

    (i) The legal entity identifier of the market participant placing

    the order, if available.

    (ii) A yes/no indication of whether the market participant is a

    swap dealer with respect to the product with respect to which the order

    is placed.

    (iii) A yes/no indication of whether the market participant is a

    major swap participant with respect to the product with respect to

    which the order is placed.

    (iv) A yes/no indication of whether the market participant is a

    financial entity as defined in CEA section (2)(h)(7)(C).

    (v) A yes/no indication of whether the market participant is a U.S.

    person.

    (vi) If applicable, an indication that the market participant will

    elect the clearing requirement exception in CEA section (2)(h)(7) for

    any swap resulting from the order.

    (vii) If the swap will be allocated:

    (A) An indication that the swap will be allocated.

    (B) The legal entity identifier of the agent.

    (C) An indication of whether the swap is a post-allocation swap.

    (D) If the swap is a post-allocation swap, the unique swap

    identifier of the original transaction between the reporting

    counterparty and the agent.

    (2) To achieve this, the swap execution facility or designated

    contract market must use the information obtained pursuant to paragraph

    (h)(1) of this section to identify the counterparty that is the

    reporting counterparty pursuant to the CEA and this section, wherever

    possible. If the swap execution facility or designated contract market

    cannot identify the reporting counterparty from the information

    available to it as specified in paragraph (h) of this section, the swap

    execution facility or designated contract market shall:

    (i) Notify each counterparty, as soon as technologically

    practicable after execution of the swap, that it cannot identify

    whether that counterparty is the reporting counterparty, and, if

    applicable, that neither counterparty is a U.S. person; and

    (ii) Transmit to each counterparty the LEI (or substitute

    identifier as provided in this section) of the other counterparty.

    Sec. 45.9 Third-party facilitation of data reporting.

    Registered entities and swap counterparties required by this part

    to report required swap creation data or required swap continuation

    data, while remaining fully responsible for reporting as required by

    this part, may contract with third-party service providers to

    facilitate reporting.

    Sec. 45.10 Reporting to a single swap data repository.

    All swap data for a given swap must be reported to a single swap

    data repository, which shall be the swap data repository to which the

    first report of required swap creation data is made pursuant to this

    part.

    (a) Swaps executed on a swap execution facility or designated

    contract market. To ensure that all swap data for a swap executed on or

    pursuant to the rules of a swap execution facility or designated

    contract market is reported to a single swap data repository:

    (1) The swap execution facility or designated contract market that

    reports required swap creation data as required by Sec. 45.3 shall

    report all such data to a single swap data repository. As soon as

    technologically practicable after execution, the swap execution

    facility or designated contract market shall transmit to both

    counterparties to the swap, and to the derivatives clearing

    organization, if any, that will clear the swap, both:

    (i) The identity of the swap data repository to which required swap

    creation data is reported by the swap execution facility or designated

    contract market; and

    (ii) The unique swap identifier for the swap, created pursuant to

    Sec. 45.5.

    (2) Thereafter, all required swap creation data and all required

    swap continuation data reported for the swap reported by any registered

    entity or counterparty shall be reported to that same swap data

    repository (or to its successor in the event that it ceases to operate,

    as provided in part 49 of this chapter).

    (b) Off-facility swaps with a swap dealer or major swap participant

    reporting counterparty. To ensure that all swap data for such swaps is

    reported to a single swap data repository:

    (1) If the reporting counterparty reports primary economic terms

    data to a swap data repository as required by Sec. 45.3:

    (i) The reporting counterparty shall report primary economic terms

    data to a single swap data repository.

    (ii) As soon as technologically practicable after execution, but no

    later than as required pursuant to Sec. 45.3, the reporting

    counterparty shall transmit to the other counterparty to the swap both

    the identity of the swap data repository to which primary economic

    terms data is reported by the reporting counterparty, and the unique

    swap

    [[Page 2209]]

    identifier for the swap created pursuant to Sec. 45.5.

    (iii) If the swap will be cleared, the reporting counterparty shall

    transmit to the derivatives clearing organization at the time the swap

    is submitted for clearing both the identity of the swap data repository

    to which primary economic terms data is reported by the reporting

    counterparty, and the unique swap identifier for the swap created

    pursuant to Sec. 45.5.

    (2) If the reporting counterparty is excused from reporting primary

    economic terms data as provided in Sec. 45.3(b) or (c):

    (i) Paragraph (b)(1) of this section shall not apply.

    (ii) At the time the swap is submitted for clearing, the reporting

    counterparty shall transmit to the derivatives clearing organization

    the unique swap identifier for the swap created pursuant to Sec. 45.5,

    and notify the derivatives clearing organization that the reporting

    counterparty has not reported any required swap creation data for the

    swap to a swap data repository.

    (iii) The derivatives clearing organization shall report all

    required swap creation data for the swap to a single swap data

    repository. As soon as technologically practicable after clearing, the

    derivatives clearing organization shall transmit to both counterparties

    to the swap the identity of the swap data repository to which required

    swap creation data is reported by the derivatives clearing

    organization, and shall transmit to the non-reporting counterparty the

    unique swap identifier for the swap.

    (3) Thereafter, all required swap creation data and all required

    swap continuation data reported for the swap, by any registered entity

    or counterparty, shall be reported to the swap data repository to which

    swap data has been reported pursuant to paragraph (b)(1) or (b)(2) of

    this section (or to its successor in the event that it ceases to

    operate, as provided in part 49 of this chapter).

    (c) Off-facility swaps with a non-SD/MSP reporting counterparty. To

    ensure that all swap data for such swaps is reported to a single swap

    data repository:

    (1) If the reporting counterparty reports primary economic terms

    data to a swap data repository as required by Sec. 45.3:

    (i) The reporting counterparty shall report primary economic terms

    data to a single swap data repository.

    (ii) As soon as technologically practicable after execution, but no

    later than as required pursuant to Sec. 45.3, the reporting

    counterparty shall transmit to the other counterparty to the swap the

    identity of the swap data repository to which primary economic terms

    data was reported by the reporting counterparty.

    (iii) If the swap will be cleared, the reporting counterparty shall

    transmit to the derivatives clearing organization at the time the swap

    is submitted for clearing the identity of the swap data repository to

    which primary economic terms data was reported by the reporting

    counterparty.

    (2) If the reporting counterparty will be excused from reporting

    primary economic terms data as provided in Sec. 45.3(b) or (c):

    (i) Paragraph (c)(1) of this section shall not apply.

    (ii) At the time the swap is submitted for clearing, the reporting

    counterparty shall notify the derivatives clearing organization that

    the reporting counterparty has not reported any required swap creation

    data for the swap to a swap data repository.

    (iii) The derivatives clearing organization shall report all

    required swap creation data for the swap to a single swap data

    repository. As soon as technologically practicable after clearing, the

    derivatives clearing organization shall transmit to both counterparties

    to the swap the identity of the swap data repository to which required

    swap creation data is reported by the derivatives clearing

    organization.

    (3) The swap data repository to which the swap is reported as

    provided in paragraph (c) of this section shall transmit the unique

    swap identifier created pursuant to Sec. 45.5 to both counterparties

    and to the derivatives clearing organization, if any, as soon as

    technologically practicable after creation of the unique swap

    identifier.

    (4) Thereafter, all required swap creation data and all required

    swap continuation data reported for the swap, by any registered entity

    or counterparty, shall be reported to the swap data repository to which

    swap data has been reported pursuant to paragraph (c)(1) or (2) of this

    section (or to its successor in the event that it ceases to operate, as

    provided in part 49 of this chapter).

    Sec. 45.11 Data reporting for swaps in a swap asset class not

    accepted by any swap data repository.

    (a) Should there be a swap asset class for which no swap data

    repository registered with the Commission currently accepts swap data,

    each registered entity or counterparty required by this part to report

    any required swap creation data or required swap continuation data with

    respect to a swap in that asset class must report that same data to the

    Commission.

    (b) Data reported to the Commission pursuant to this section shall

    be reported at times announced by the Commission and in an electronic

    file in a format acceptable to the Commission.

    (c) Delegation of authority to the Chief Information Officer: The

    Commission hereby delegates to its Chief Information Officer, until the

    Commission orders otherwise, the authority set forth in paragraph (c)

    of this section, to be exercised by the Chief Information Officer or by

    such other employee or employees of the Commission as may be designated

    from time to time by the Chief Information Officer. The Chief

    Information Officer may submit to the Commission for its consideration

    any matter which has been delegated in this paragraph. Nothing in this

    paragraph prohibits the Commission, at its election, from exercising

    the authority delegated in this paragraph. The authority delegated to

    the Chief Information Officer by paragraph (c) of this section shall

    include:

    (1) The authority to determine the manner, format, coding

    structure, and electronic data transmission standards and procedures

    acceptable to the Commission for the purposes of paragraphs (a) and (b)

    of this section.

    (2) The authority to determine whether the Commission may permit or

    require use by reporting entities or counterparties in reporting

    pursuant to this section of one or more particular data standards (such

    as FIX, FpML, ISO 20022, or some other standard), in order to

    accommodate the needs of different communities of users.

    (3) The dates and times at which required swap creation data or

    required swap continuation data shall be reported pursuant to this

    section.

    (d) The Chief Information Officer shall publish from time to time

    in the Federal Register and on the Web site of the Commission the

    format, data schema, electronic data transmission methods and

    procedures, and dates and times for reporting acceptable to the

    Commission with respect to swap data reporting pursuant to this

    section.

    Sec. 45.12 Voluntary supplemental reporting

    (a) For purposes of this section, the term voluntary, supplemental

    report means any report of swap data to a swap data repository that is

    not required to be made pursuant to this part or any other part in this

    chapter.

    (b) A voluntary, supplemental report may be made only by a

    counterparty to the swap in connection with which the voluntary,

    supplemental report is made, or by a third-party service provider

    acting on behalf of a counterparty to the swap.

    [[Page 2210]]

    (c) A voluntary, supplemental report may be made either to the swap

    data repository to which all required swap creation data and all

    required swap continuation data is reported for the swap pursuant to

    Sec. Sec. 45.3 and 45.10, or to a different swap data repository.

    (d) A voluntary, supplemental report must contain:

    (1) An indication that the report is a voluntary, supplemental

    report.

    (2) The unique swap identifier created pursuant to Sec. Sec. 45.5

    and 45.9. Therefore, no voluntary, supplemental report may be made

    until after the unique swap identifier has been created pursuant to

    Sec. Sec. 45.5 and 45.9 and has been transmitted to the counterparty

    making the voluntary, supplemental report.

    (3) The identity of the swap data repository to which all required

    swap creation data and all required swap continuation data is reported

    for the swap pursuant to Sec. Sec. 45.3 and 45.10, if the voluntary

    supplemental report is made to a different swap data repository.

    (4) The legal entity identifier (or substitute identifier) required

    by Sec. 45.6 for the counterparty making the voluntary, supplemental

    report.

    (5) If applicable, an indication that the voluntary, supplemental

    report is made pursuant to the laws or regulations of any jurisdiction

    outside the United States.

    (e) If a counterparty that has made a voluntary, supplemental

    report discovers any errors in the swap data included in the voluntary,

    supplemental report, the counterparty must report a correction of each

    such error to the swap data repository to which the voluntary,

    supplemental report was made, as soon as technologically practicable

    after discovery of any such error.

    Sec. 45.13 Required data standards.

    (a) Data maintained and furnished to the commission by swap data

    repositories. A swap data repository shall maintain all swap data

    reported to it in a format acceptable to the Commission, and shall

    transmit all swap data requested by the Commission to the Commission in

    an electronic file in a format acceptable to the Commission.

    (b) Data reported to swap data repositories. In reporting swap data

    to a swap data repository as required by this part, each reporting

    entity or counterparty shall use the facilities, methods, or data

    standards provided or required by the swap data repository to which the

    entity or counterparty reports the data. A swap data repository may

    permit reporting entities and counterparties to use various facilities,

    methods, or data standards, provided that its requirements in this

    regard enable it to meet the requirements of paragraph (a) of this

    section with respect to maintenance and transmission of swap data.

    (c) Delegation of authority to the Chief Information Officer. The

    Commission hereby delegates to its Chief Information Officer, until the

    Commission orders otherwise, the authority set forth in this paragraph

    (c), to be exercised by the Chief Information Officer or by such other

    employee or employees of the Commission as may be designated from time

    to time by the Chief Information Officer. The Chief Information Officer

    may submit to the Commission for its consideration any matter which has

    been delegated in this paragraph (c). Nothing in this paragraph

    prohibits the Commission, at its election, from exercising the

    authority delegated in this paragraph. The authority delegated to the

    Chief Information Officer by this paragraph (c) shall include:

    (1) The authority to determine the manner, format, coding

    structure, and electronic data transmission standards and procedures

    acceptable to the Commission for the purposes of paragraph (a) of this

    section.

    (2) The authority to determine whether the Commission may permit or

    require use by reporting entities or counterparties, or by swap data

    repositories, of one or more particular data standards (such as FIX,

    FpML, ISO 20022, or some other standard), in order to accommodate the

    needs of different communities of users, or to enable swap data

    repositories to comply with paragraph (a) of this section.

    (d) The Chief Information Officer shall publish from time to time

    in the Federal Register and on the Web site of the Commission the

    format, data schema, and electronic data transmission methods and

    procedures acceptable to the Commission.

    Sec. 45.14 Reporting of errors and omissions in previously reported

    data.

    (a) Each registered entity and swap counterparty required by this

    part to report swap data to a swap data repository, to any other

    registered entity or swap counterparty, or to the Commission shall

    report any errors and omissions in the data so reported. Corrections of

    errors or omissions shall be reported as soon as technologically

    practicable after discovery of any such error or omission. With respect

    to swaps for which required swap continuation data is reported using

    the snapshot reporting method, reporting counterparties fulfill the

    requirement to report errors or omissions in state data previously

    reported by making appropriate corrections in their next daily report

    of state data as required by this part.

    (b) Each counterparty to a swap that is not the reporting

    counterparty as determined pursuant to Sec. 45.8, and that discovers

    any error or omission with respect to any swap data reported to a swap

    data repository for that swap, shall promptly notify the reporting

    counterparty of each such error or omission. Upon receiving such

    notice, the reporting counterparty shall report a correction of each

    such error or omission to the swap data repository as provided in

    paragraph (a) of this section.

    (c) Unless otherwise approved by the Commission, or by the Chief

    Information Officer pursuant to Sec. 45.13, each registered entity or

    swap counterparty reporting corrections to errors or omissions in data

    previously reported as required by this section shall report such

    corrections in the same format as it reported the erroneous or omitted

    data. Unless otherwise approved by the Commission, or by the Chief

    Information Officer pursuant to Sec. 45.13, a swap data repository

    shall transmit corrections to errors or omission in data previously

    transmitted to the Commission in the same format as it transmitted the

    erroneous or omitted data.

    BILLING CODE 6351-01-P

    Appendix 1 to Part 45--Tables of Minimum Primary Economic Terms Data

    [[Page 2211]]

    [GRAPHIC] [TIFF OMITTED] TR13JA12.003

    [[Page 2212]]

    [GRAPHIC] [TIFF OMITTED] TR13JA12.004

    [[Page 2213]]

    [GRAPHIC] [TIFF OMITTED] TR13JA12.005

    [[Page 2214]]

    [GRAPHIC] [TIFF OMITTED] TR13JA12.006

    [[Page 2215]]

    [GRAPHIC] [TIFF OMITTED] TR13JA12.007

    [[Page 2216]]

    [GRAPHIC] [TIFF OMITTED] TR13JA12.008

    [[Page 2217]]

    [GRAPHIC] [TIFF OMITTED] TR13JA12.009

    [[Page 2218]]

    [GRAPHIC] [TIFF OMITTED] TR13JA12.010

    [[Page 2219]]

    [GRAPHIC] [TIFF OMITTED] TR13JA12.011

    [[Page 2220]]

    [GRAPHIC] [TIFF OMITTED] TR13JA12.012

    [[Page 2221]]

    [GRAPHIC] [TIFF OMITTED] TR13JA12.013

    [[Page 2222]]

    [GRAPHIC] [TIFF OMITTED] TR13JA12.014

    [[Page 2223]]

    [GRAPHIC] [TIFF OMITTED] TR13JA12.015

    [[Page 2224]]

    BILLING CODE 6351-01-C

    Issued in Washington, DC, on December 20, 2011, by the

    Commission.

    David A. Stawick,

    Secretary of the Commission.

    Appendices To Swap Data Recordkeeping and Reporting Requirements--

    Commission Voting Summary and Statements of Commissioners

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

    Federal Regulations

    Appendix 1--Commission Voting Summary

    On this matter, Chairman Gensler and Commissioners 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 establishing swap data recordkeeping

    and reporting requirements for registered entities and

    counterparties involved in swaps transactions. The final rule will

    ensure that complete, timely, and accurate data on all swaps is

    available to the Commodity Futures Trading Commission and other

    regulators.

    The final rule requires that data be consistently maintained and

    reported to swap data repositories (SDRs) by swap execution

    facilities, designated contract markets, derivatives clearing

    organizations, swap dealers, major swap participants, and other swap

    counterparties. It requires reporting when the transaction is

    executed and over the lifetime of the swap.

    The rule has a streamlined data reporting regime--the entities

    with the easiest, fastest, and cheapest access to the data will

    report to SDRs. It also extends and phases in reporting deadlines,

    particularly for counterparties that are not swap dealers or major

    swap participants.

    The rule's Legal Entity Identifier, Unique Swap Identifier and

    Unique Product Identifier regimes will be crucial regulatory tools

    for linking data together across counterparties, asset classes,

    repositories, and transactions. They also will improve risk

    management, operational efficiency, and data processing for market

    participants. The rule phases in the start of compliance by both

    asset class and counterparty type.

    [FR Doc. 2011-33199 Filed 1-12-12; 8:45 am]

    BILLING CODE 6351-01-P

    Last Updated: January 13, 2012